Welcome to Accountancy Portal

1. CMA India Portal: The CMA Portal was given the final shape with the efforts of CMA B V Prabhakar, RV, Ramesh Joshi, Devarajan, Ashutosh and many more. Today the portal has 770 members which includes members from other profession and business. The focus of the portal has been quality discussions and actions, particularly discussing business events in India and globe. The members who are active are likely to be known in the accounting fraternity. Readers will be benefitted from the discussions.
2. CMA India Portal on Linkedin: This was suggested by CMA Devarajan so that we would be able to connect to other professionals. A profile on linkedin is a passport for networking. and ideal substitute for a website. I would suggest you create your profile on linkedin and join CMA India Portal Linkedin. Today the membership is 29 and will definitely grow. This will ensure that you are always connected with us some way or other.
3. Management Accountant Blog: The blog moved on to it own domain www.managementaccountant.in and I have a personalised email id associated with the domain name. The alexa ranking today is 678,162. I will strive for ranking around 100,000 which is an indicator of how the blog is ranked in the search engine results. I will look forward to your support to use various social networking tools like digg, stumbleupon or yahoo buzz on the articles posted.

Being a member of ICWAI, I am proud to say ICWAI has achieved a lot in the last year. Some of them are

1. Number of seminars hosted by ICWAI has increased and this should bring our institute closer with the industry,  members and other stakeholders.
2. ICWAI website has been improved a lot. Few suggestions I have made are implemented. I would sending them suggestions on a regular basis.
3. ICWAI signs MOU with CIMA, UK: This is a good indicator of qualification going global. The MOU will definitely help to the members to work globally without being to explain everytime who they are. This agreement will serve to both strengthen the professional accounting links between two of the world’s leading economies and provide highly skilled professional accountants for the global labour market enabling both institutes to work together to enhance recognition of the profession and their professional bodies.

My New Year Resolution 2009

1. iPhone and look alikes: The reason iPhone/iPod is a marketing success is because it does what you want with the touch on its screen. It is user friendly, innovative and people like it because of positive experience using it. I would be focussing on articles that will bring you more closer to business.
2. Business and Social Networking: This resolution will continue. My efforts will be to connect all the management accountants with the business. The objective is the management accountants should be the first choice for the business.
3. New Technologies on the internet: It is said, one who controls the technology ,controls the world. Romans dominated the world because they built roads, British dominated because they built ships and Americans dominate the world as they have advanced technology on weapons. Management Accountant of today has to follow a similar route in  the workplace. This will include in depth knowledge on ERP solution, Business Processes, Office applications and usage of tools on the internet to gain knowledge and provide solutions to the business . E.g. Social networking sites Twitter, Facebook and linkedin were considered to be joke on the internet when they started. They are now  a disruptive technologies which are very popular. Join me on Twitter . Use add-on on your Firefox browser to keep in tune with the latest. I will be focussing on some of the technologies on the internet.

Just as last year, please post your comments and views.

Wish You and Your Family a Very Happy and Prosperous New Year 2009

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I am reading the article on the BBC website “Lehman Brothers Bank Collapse” dt 16-Sep-2008.

The company is an investment bank that specialises in big and complex deals and investments.

Despite this, Lehman’s collapse and the troubles of other financial institutions will probably be felt by millions of people around the world - at least indirectly.

Most of our banks and pension funds have dealings with Lehman, or with firms like hedge funds that traded extensively with Lehman.

Unwinding Lehman’s complex deals will take months if not years. During that time the global financial system will be snarled up. Many banks won’t know for sure how much they are exposed to Lehman, and will have difficulty freeing up the money in those deals.

This in turn is likely to intensify the credit crunch, with potentially dire consequences for businesses and consumers.

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The other article “Three deadly sins of portfolio credit risk management” published in June 2002.

Prem Sikka in his article “The Auditors have failed” in Guardian explains how the top audit firms had given a clean chit to the companies whose survival today is doubtful. Moreover the audit firms have charged an atrocious amount of fees for performing the job. The directors also had fat cheques to take home.

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The question is

whether auditors should rely on management representation while commenting on true and fair view of the Balance Sheet ? Or do they have go further to investigate in the dealing to see whether they have any material impact on the financial statements ?

The reason for the fall of Lehman Brothers only became known when the bank collapsed. Who knows how many such caskets will opened to know the magnitude of damage. Should the auditors gone into the trail of the dealings to confirm the representations made by the management is correct !!!

Or to protect themselves from neglience, should the auditor insist on the management for an expert opinion in all aspect of the Balance Sheet. E.g.

• Bad Debts Provision - Assessment from the legal department of the company
• Brand value and goodwill - Expert opinion from valuerers
• Fixed Assets - Report of the surveryor
• so on and forth.

Just like how a jury relies on the experts opinions and finding on a case, should the auditor follow a similar trace. Top firms, I am sure, they should be following the convention. I don’t understand how does collapse of such magnitude is trigged every 4 years.

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The other question that is raised frequently is the audit fees are exhorbitant. Big 4 firms audit more than 80% of the fortune 1000 companies in the world.

The question is will such auditors be impartial while auditing the companies ?

Regards,

Santosh Puthran

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This is a guest post by Mr. V R Kedia B.com FICWA. He is a practising Cost & Management Accountant from Mumbai

Shape of the things to come

• Effect of LPG – Liberalisation, Privatisation, and Globalisation – Global competition, Fittest will survive, sub – optimal units have to die.

• Size, strong balance sheets and a history of achievements are no longer guarantees of continued success.

• Global competition – strategic alliance networks and massive engineering efforts place new demand on all professionals.

• Many of old hierarchies will be replaced by flat structures.

• Every organisation is undergoing a process of internal churning.

• Employees will be judged by their delivery of agreed output and level of services, not on spending 8 hours a day attending their place of work.

• Financial information will be considered as only one portion of the balanced scorecard of measures used in organisational decision making.

• Knowledge will replace physical and financial capital as an organisations primary resource.

• Knowledge and application of knowledge will create competitive advantage.

• People will have to be accustomed to work in permanent stage of emergency.

• More empowerment at the individual level.

• Adoption of team based organisation.

• Internet is rapidly transitioning businesses into real time.

Source: Megapixel

Present role of Management Accountants – Conceptions & Misconceptions

• Cost and Management accounting system had often become of little importance to managers. Many regarded them as minor routine belonging to the accountants, used to evaluate stocks and prepare monthly results speedily.

• There are all the obvious things to do: Statutory and Financial accounting, Taxation compliance, Funding, Management reporting and so on. All of this tends to be in the background; it just has to happen in any event. Management Accountants have not yet progressed more towards bridging the gap between managers and accountants and they have yet to concern more with looking towards the future – at where business is going and what is going to happen.

• Very few conceptual modifications have been brought in, in the cost and management accounting in the last 40 years.

• Cost is too important to be left to the cost and management accountant.

Futuristic role of Management Accountants

• Most of us will be doing the job, which we have never learnt and quite different from what we have been doing so far

• The illiterate of the 21^st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn.

• We have to undergo the process of “Learning, Un-learning and re-learning” more frequently.

• Industry will be requiring “learning” professional rather than “learned” professional.

• Future will be “knowledge era”. So obsolesce of knowledge will be very fast and more visible among accounting professionals.

• Management Accountant must re-orient its capabilities, otherwise he will be overtaken by other professionals.

• Management Accountant has to be futuristic instead of provider of historic or current information. He should ask “how better” and help management in decision-making level and for performance improvement.

• ‘Imagination is more important than knowledge’. – Albert Einstein.

• The responsibility of the management accountant is less on forecasting the future and more on contributing to its creation.

• Management Accountant will more often play the role of a catalyst / changing agent rather than an accountant.

• Management accountant will have to be more adaptable to be a versatile professional rather than an accounting specialist.

• Quality of “leadership” will be more in demand than that of a “manager” or an accountant.

• Out –cost ascertainment, product costing and cost control. In –cost management, activity-costing etc.

• Re-positioning of the management accountant – make it more relevant and useful to the organisation.

• Management accountant to change the “Accountant” from their name to information manager/Cost manager.

• Shift from “informational” role to an “influential” role.

• To develop alliance with- finance, MIS/IT, industrial engineering, corporate planning.

• To actively participate along with managers in decision making and strategy implementation.

• Change in mind-set from product profitability to customer profitability analysis.

• No more a scorer of the cricket match – but to be manager advisor to develop appropriate strategy to win the match.

• Management accountant needs to lead the effort in training managers to use accounting information along with balancing it with other key data sources.

• FOREX and Treasury function will be important profit centres.

Training needs

• “If you want to remain employed, you have to remain employable” – Jack Welch, CEO-GE.

• Dilemma for the management accountant will be to either change or cease to exist.

• Management accountant must learn fast, forget even faster and focus on winning.

• Management accountant requires very different skills from those that accountants needed to fill the narrow role that has been adopted by many finance professionals over the last three decades.

• Continuing Professional Education (CPE) programme be made compulsory by the institute for skill upgradation and aquiring the latest technology.

• Able to work well under pressure.

• Development of multi-disciplinary skill.

• Good communication skill – oral, written and presentation and a team player.

• Ability and drive to work against strict deadlines and targets.

• Ability to work with minimum supervision and a busy and dynamic work environment.

• Ability to prioritise multiple urgent tasks.

• Possessing good public relations skill.

• Adding a new skill to executive skill-set, every few years.

• To develop expertise in new ‘Green Field’ projects like-

• Infrastructure sector (Energy, Transport etc.)

• Information and Communication sector

• Service sector

• Agro based industries

Source: National Geographic

Changes in tools and techniques

• Target costing v/s. Historical costing.

• Life cycle costing.

• Activity Based Costing (ABC) – ABM.

• Total Cost Management (TCM)

• Business Process Re-engineering (BPR)

• Benchmarking.

• Kaizen costing.

• EVA / CVA

• Total Quality Management / ISO.

• Cycle time reduction (time compression).

• Supply chain management (SCM).

• Just in time (JIT).

• Elimination of dysfunctional activities.

• Out sourcing and co-sourcing activities.

• Defect prevention v/s. fault rectification.

• Zero Based budgeting.

• Traditional budgeting v/s. New budgeting (comparative Table enclosed).

• Full year budget exercise v/s reactive rolling forecast (computer generated budgets are obsolete the minute they are printed).

• Dis-continuity of time cycle – month end and year end- and to invent information system to handle multiple time horizons simultaneously.

• Radical change in IT/MIS e.g.

• Integrated database that meet the total business requirements (like ERP Software).

• MIS that is accessible and easy to use by all staff.

• Rich supply of information in the form of a variety of report.

• MIS for decision-making.

‘It is never safe to look into the future with eyes of fear’. – E. H. Harriman.

‘My interest is in the future, because I am going to spend the rest of my life there.’ –

C. F. Kettering.

You can contact Mr V R Kedia on +9193241 80717 or email vrkedia@vsnl.com

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I was trying to analyze  the definition of words Profession, Professional Body and Professionalism on www.reference.com.  (These words are interchangeable used when the Accountants discuss among themselves.)

Profession:

A profession is an occupation, vocation or career where specialized knowledge of a subject, field, or science is applied. It is usually applied to occupations that involve prolonged academic training and a formal qualification. It is axiomatic that "professional activity involves systematic knowledge and proficiency." Professions are usually regulated by professional bodies that may set examinations of competence, act as a licensing authority for practitioners, and enforce adherence to an ethical code of practice.

Professional Body:

A professional body or professional organization, also known as a professional association or professional society, is an organization, usually non-profit, that exists to further a particular profession, to protect both the public interest and the interests of professionals. The balance between these two may be a matter of opinion. On the one hand, professional bodies may act to protect the public by maintaining and enforcing standards of training and ethics in their profession. On the other hand, they may also act like a cartel or a labor union (trade union) for the members of the profession, though this description is commonly rejected by the body concerned.

Many professional bodies perform professional certification to indicate a person possesses qualifications in the subject area, and sometimes membership in a professional body is synonymous with certification, but not always. Sometimes membership in a professional body is required for one to be legally able to practice the profession; see licensure.

Professionalism

Oxford Dictionary: the competence or skill expected of a professional.

Graham Ward in IFAC website: Professionalism,  is about individual modes of behaviour that command respect and build trust. It is about excellence in service as measured by recognised standards.It is about delivering services or working to standards that meet the needs of and are expected by our clients.

Such behaviours are indeed a necessary part of belonging to a profession but almost any trade could be described as professional in these terms!

As any of us here knows, what separates the professionalism of members of a professional body from the behaviours of other types of so-named professionals, is the requirement to continually reinforce and demonstrate our professionalism, not merely assert it through a one-off qualification. And it is our membership of a professional body – one which embodies the distinguishing features I have defined – that confers on us the obligation to abide by professional standards and regulation.

Of the above three words, I had to search a lot on the word "Professionalism" to find a true meaning to suit  accountancy profession. Members of accountancy profession will be normally be expected to take actions that contribute to the public interest.

The Principle of Professional Conduct on AICPA, US website  summarizes Professionalism in a precise manner.

Section 51: These Principles of the Code of Professional Conduct of the American Institute of Certified Public Accountants express the profession’s recognition of its responsibilities to the public, to clients, and to colleagues. They guide members in the performance of their professional responsibilities and express the basic tenets of ethical and professional conduct. The Principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage.

Section 52: In carrying out their responsibilities as professionals, members should
exercise sensitive professional and moral judgments in all their activities.

Section 53: Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.

Section 54: To maintain and broaden public confidence, members should perform
all professional responsibilities with the highest sense of integrity.

Section 55: A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.

Section 56: A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.

Section 57: A member in public practice should observe the Principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.

I would like to see your comments and views on this topic. Please feel free to comment on the blog post.

Regards,

Santosh Puthran

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Cheers,

Santosh Puthran

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Recommendation

• ask business colleagues if they would recommend their accountant
• ask your bank manager or solicitor
• ask an adviser working for a Business Link (England), Local Economic Development Unit (Northern Ireland), County Enterprise Board (Republic of Ireland), Business Shop (Scotland), Business Connect (Wales) or the Chamber of Commerce.

Questions to ask the accountancy firm

• how many partners are there in the firm?
• how many clients does the firm have?
• who will undertake the work?
• what are the typical response and advice times to be expected?
• what are the scales of charges and rates for partners and staff?
• what is the firm’s estimate of fees?
• what expertise can the firm supply?
• is it possible to speak to existing clients of the firm?

Select a short list of firms

• arrange meetings with at least three firms
• present the requirements/shopping list and a brief summary of the business
• interview the firms; look for a firm that will add value to the business. Look for a firm that plans ahead, will look at future business development and will listen to and respond to business and personal aims
• having selected a firm it will then issue a letter of engagement. This document is a contract between you and the accountancy firm which details, amongst other things, your responsibilities, the firm’s responsibilities and the basis on which fees will be charged.

Source: Universe: A Matter of Perspective

Other pointers for selecting a Accounting firm for small assignments are:

1. First consider what services you might need from an accountant.
2. Determine the expertise you need, verses the knowledge you have.
3. Be realistic about your (or your organization’s) knowledge of accounting.
4. Accessibility and Service Levels. What’s right for you?
5. Don’t Underestimate the value of a Certified Professional.
6. Getting your Ducks in Line.
7. Examining your Options.
8. Make it Happen!

Source: Hunter Group

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Regards,

Santosh Puthran

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