Should Chartered Accountants enter into Practice?

Current ICAI philosophy:

Over the years the ICAI has quite literally liberalized the passing out percentage to such an extent that today more than 30% students pass out every six months as qualified chartered accountants! It is good that so many CA’s are passing out, but, I repeat but – is the Institute ensuring that each freshly qualified CA is competent and based on that competency does it ensure that the fresh CA gets gainful employment?? I am a relatively small practicing CA, and I get almost 600 mails a month for article-ship and for jobs for freshly qualified CA’s. Where has this sudden flood of applications come from? Is the ICAI following a sane education policy? Does the industry have the capability to absorb so many CA’s? or are we devaluing the profession by just pushing in numbers without taking care of quality? I do not deny that there will be brilliant students – but at the same time we are also stuck with mediocre students who proudly prefix their name with ‘CA’! Today a CA can be hired for as little as Rs. 20000 per month and still one finds that CA’s are jobless! This is a much as a graduate gets in a call center! Should the ICAI not have a re-look at its policy of passing students?

No job, alternative – practice?

With CA’s flooding the market and not getting a job, the alternative is to start a practice – which is easier said than done as the cost of setting up a new practice in metros is very steep with property prices and rentals beyond the reach of most freshly qualified CA’s budgets.

I have been in practice for the last 24 years and the challenges faced in practice are phenomenal – especially if you want to follow the straight and narrow path. The clients do not like an increase in fees, traditional practice is getting redundant and does not have value - in fact it is losing monetary value! The new economy is throwing more challenges and unless the smaller firms consolidate and innovate they too will become redundant, with the big CA firms in a much better position to corner all the glory work with economies of scale and contacts at high levels. Let me run you through some traditional practice models and its revenue stream showing which will show that fees have stagnated while costs have gone through the roof.

1. Return filing

The return filing fees in 1990 was Rs.1500 and even now we cannot charge more than Rs.2000. The purchasing power of Rs 1500-2000 was far greater in 1990 whereas in 2013 it does not pay for a dinner for a family of four at a decent restaurant. The same is true for VAT.

2. Assessment hearing

The assessment proceedings have greatly reduced. In any case the same pattern. It was great value to charge Rs.2000 per hour in 1990 and we cannot increase the same by inflation rate. If Rs.2000 of 1990 has become Rs.20000 in value in 2013 we cannot charge 20000 per hour. Even if charge the client laughs to our face!

3. Audit Fees / Certification Fees

Similar pattern for audit fees and certification fees: - with much greater risk and responsibility thrown onto the auditors, the clients are loathe to increase fees. With so many CA’s flooding the market we are developing a rubber stamp culture where CA shopping is done to see who certifies at a lower rate – something like the Notary’s who run after you outside every court for getting the job done through them!

 Costs

Unfortunately CA’s have not remained immune to inflation unlike the clients’ propensity to pay appropriate and fair fees! Subscribing to knowledge based web-sites, purchase of books have all kept pace with inflation and sometimes have outrun inflation thereby disproportionately increasing operating costs. The articled clerks demand nothing less than Rs. 5000 per month, some of them protesting deduction of profession tax, which is a legal obligation on the payer! Cost of communication, power, systems, everything has gone up – but the fees remain fixed to 1990 levels!

I find that a lot of CAs who were doing very well in terms of monetary value in 1990 to 2000 are not making much money in 2013.  Today a good fresher CA gets a CTC of Rs.4-6 lacs (these are among the lucky few) and a CA with 20 years experience in practice is not far off from that figure – this leaves quite a bitter taste in the mouth.

Innovate and Evolve

We therefore must evolve.  One of the methods of evolution is that we need to find ways and means of working together and increasing revenue.  We pool together the resources and the knowledge base. Some of us must develop resources and some of us can develop knowledge base. We can then take up larger assignments in the corporate sector. We have to attune ourselves to the changing economy and business structure. We get together like minded professionals and evolve a working relationship which can sustain in long run. We need to develop a bigger brand as well.

Conclusion

If one seriously wants to pursue a career as a CA, one will have to assess the focus area of specialisation, whether one wants to go into industry or practice, etc. Unless the ICAI changes its role and becomes more of a quality educator rather than an institute which is flooding the market with ‘qualified’ CA’s who do not find jobs, it would be better to look at other career options.