Auditors can save time by using tools like ChatGPT.
The newly-elected president of The Institute of Chartered Accountants of India (ICAI), Ranjeet Kumar Agarwal has his task cut out. Apart from upskilling the existing members (about 0.4 million) of the institute, he also wants to increase the number of qualifying CAs every year. While the National Financial Reporting Authority is clamping down on auditors, including the Big Four for assorted accounting lapses, the ICAI president told Manu Kaushik that gross violations by auditors were bound to attract penalties.
An ICAI paper is learnt to have recommended a strategy to increase India’s tax-to-GDP ratio from (just 3% for corporate tax and under 12% for all taxes at the federal level) to match that of the developed countries.
Agarwal: We have a research committee for this project. We will be doing surveys as well. We have the financial data that can be used for policy making. This data captures the tax compliance as far as citizens and industries are concerned. We have formulated various parameters. Out of 1.4 billion population, there are only 9o million taxpayers, (which is far from potential). The idea is to enhance the tax collections, and buoyancy.
Q: What is your view on the rising instances of auditors getting penalised?
Agarwal: We are suggesting our members to discharge their duties based on the education and guidance that we give. If the members are grossly negligent, we have no issues with them getting penalised or reprimanded by the regulators. We are especially concerned where the negligence is not so gross, but the member is getting subjected to the hassle of many proceedings. We will approach the respective regulator (NFRA) on how to take care of such a situation. CAs have to be vigilant. We are continuously making our members aware of then need to maintain audit quality and follow robust accounting practices through seminars, certification courses, and technological tools so that the instances of violations would come down.
Q: Do you take disciplinary actions against erring members?
Agarwal: In the last four years, 65 million certifications are done by various CAs. It works out over 15 million certifications per year. Typically, we receive about 500 complaints every year, of which about 400 pertain to minor issues. So, in about 100 cases, the members are not discharging their duties as per the rules.
Q: You are focusing on artificial intelligence for auditing and accounting practices, but what are its potential pitfalls?
Agarwal: Auditors can save time by using tools like ChatGPT. If a tool is there to assist, they can make better decisions. AI’s accuracy is still 90-95%. We have our own systems of sampling and test-checking which we are not getting done through AI. We have robust accounting standards which cannot be overlooked just because AI is there.
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Q: What is the progress in areas like ESG and carbon accounting?
Agarwal: From the perspective of the COP28 agreement, Paris pact, and India’s zero net emission target for 2070, we are looking at how the ICAI can comprehensively give solutions for green financing and green auditing.
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