To

Comptroller & Auditor General Of India

Sub: For error/misleading facts in the report of CAG in respect of TAR signed by CAs in excess of limit prescribed by ICAI, questioning quality of report & resulting loss of faith on report of CAs of general public?

 Dear Sir,

First of all, let me thank you for the efforts taken by you to find “How many CAs have signed report in excess of limit prescribed by ICAI”.

LIMIT PRESCRIBED BY ICAI

The ICAI has prescribed limit of 45 Tax audit / partner excluding report signed u/s 44AD, 44AE etc. In case of firm , “limit of firm” will be 45 Tax audit / partner excluding report signed u/s 44AD, 44AE etc. In other words, in case of a partner, it is possible that one partner can sign on behalf of other partners also(as allowed by the Chartered accountants Act).  

ERROR IN REPORT of CAG?

1)     Had CAG considered report signed by CAs u/s 44AD, 44AE etc separately?2)     Had CAG considered the fact that a CA can sign on behalf of other partner also?

As the IT site does not take specified details separately while uploading report by a CA, we believe that these facts may have not been considered.If above facts had not been considered separately, the no of CAs signing the report within limit is expected to be deceased substantially. As per the report, about 19% CAs have signed in excess of limit. However, there could be a situation that CAs, as low as 3%, have actually signed report in excess of the limit (Please see analysis below).

IS CAG EMPOWERED TO REPORT ON LIMIT PRESCRIBED UNDER CA ACT WITHOUT CONSULTING ICAI?

CAG has reported on the limit prescribed under CA Act. The relevant questions are:

1.     Is CAG empowered to report on a limit prescribed by CA Act?

2.     If CAG empowered, should CAG not , before issuing such report, read the relevant provision in details so as to know the actual provision?

3.     Should CAG not consulted ICAI , who know the provisions, regulations etc in depth?

NEGLIGENCE OF CAG?

CAG is a big brother of the ICAI. ICAI has been formed under the Act passed by the parliament.

1)     Before coming out such report, should CAG not  read the relevant provision in details so as to know the actual provision?

2)     Before coming out such report, have CAG consulted ICAI? If not, why CAG did not consulted ICAI?

3)     How can CAG report contain such errors?

4)     This report of the CAG may have downgraded the report of CAs in general, to some extent,  without sufficient & actual facts.

5)     This report put a question mark on the report of CAs in general also. CAG knew the fact that this will be a situation, if such report is issued.

6)     How can CAG be so negligent, if CAG is so?  

 QUESTION BEFORE YOU

·         How CAG is going to compensate for “the loss of faith of public” on the report of CAs, if has so?

·         How CAG is going to compensate for “the goodwill” of CAs in general, as a result of this report, if has so?

SITUATION WHEN CAs, AS LOW AS 3% ACTUALLY SIGNED IN EXCESS OF LIMIT:

1) More than 81% CAs issued 45 or less TAR.There CAs are not culpits at all.  

2) About 16% CAs issued 45-100 TAR.As report issued u/s 44AD,44AE etc are not to be included in limit of 45 & as a partner can also sign on behalf of other partner, there is a possibility that, these CAs have signed TAR within limit. There is a possibilty that these CAs are not culpits at all.

3) It may mean that CAs, as low as only 3-5%, have actually violated limit.

4) However, as per report of CAG,18.87% CAs issued more than 45 Tax Audit Report

Table 3.1: Stratification of total TARs issued by CA for AY 2013-14

[Range of TARs issued,Total Number of Accountants,% of CAs]

1-45                53,463                     81.13%
46-100            10,838                     16.45%

above 100        1,597                         3.42% 

Total Accountants
65,898

SUGGESTION

1) Withdraw or modify report

2 "Bring 60 TAR limit/ partner in IT act so that IT dep can look into issue".

(Group of CAs)

Note: This write up has been prepared on the basis of suggestions invited from 1.5 Lakhs CAs.