Unilateral Recognition - Does it enhance the quality of CA Education in Nepal ?

The Institute of Chartered Accountants of Nepal (ICAN), sole regulatory authority to regulate accounting profession and entrusted by Government of Nepal to produce required number of Professional Accountants for public practice, recently backed away from the unilateral recognition of foreign qualified professional accountants. The move came as a result of pressure from locally qualified professional accountants and students and is looked as part of improvement in ICAN’s mindset.

To start with the pros and cons of the move of ICAN, we have to look back to the history of professional accountant’s development and audit regulation in Nepal. In this blog, I am trying to enlighten the facts that has led to the evolution of professional accounting degree in Nepal’s soil.

Evolution of Audit Profession in Nepal
Audit profession evolved from the requirement of auditing of expenditures and revenue and is modified as per the evolution of business, needs and technological advancements. Nepal, first, adopted the global good practice of setting up its own accounting body in B.S. 2053 (1997) only. The first Chartered Accountant (professional accountant) was produced by ICAN in 2003 only.

Accounting Practice & Professional Accountants until 2003
Office of Auditors General (OAG) was the sole auditing body until 2021 B.S. The Companies Act of 2021 opened the door of non-governmental auditing agency to audit the Companies. OAG grant license to different persons under following three criteria to act as a Company Auditor under the powers conferred by Sec. 97 and 98 of Companies Act 2021:
Having professional accounting degree,
Having academic accounting degree or
Having certain experience on auditing or accounting field

In 2031 B.S., Auditors’ Act was promulgated and the Act came into effect from early 2032 B.S., which provides exclusive right to OAG to grant audit license to various people having qualifications laid down in Sec. 4 of the Act. The regulation (Auditors’ Regulation 2032), which came into effect from 23rd Ashad 2032 classified auditors into following four categories:
“A” Class Auditors, who are Professional Accountants having more than five years experience
“B” Class Auditors, who may be Professional Accountants with up to five years experience or having more than five years experience in auditing or accounting after completing Bachelors’ Degree in Commerce

“C” Class Auditors, who has five years experience in auditing or accounting after completing Bachelors’ Degree in Commerce or who is Gazetted Officer of GON with five years experience in auditing or accounting
“D” Class Auditors, who is Non-Gazetted Officer of GON with five years experience in auditing or accounting or does not have qualifications as specified above but are already licensed under Companies Act, 2021

With the promulgation of Auditors’ Act, Sec. 97 and 98 of Companies Act 2021 was repealed.

The licensing of auditors until 2059 B.S. was carried out under Auditors’ Act and ICAN took over the licensing of accounting professionals and started licensing such professional accountants under Nepal Chartered Accountants Act 2053.

The Compulsion to chose Foreign Accounting Body until 1997: The myth of all leaders being Foreign Qualified Accountants

The aspirants, who chose to become a Professional Accountant, did not have any option than choosing the foreign accounting body until the establishment of ICAN. It was the era when the accounting practice was not developed in Nepal. This means, the professional accountants who are father/mother to the establishment of ICAN, though are de-jure professional accountants from foreign accounting bodies, but are de-facto professional accountants from Nepal. Similarly, those who started pursuing professional accounting degree before the establishment of ICAN or after its establishment but due to availability of information that professional accountancy degree are taught in Nepal, are de-facto professional accountants from ICAN.

Defaming the respectful professional accountants as specified above (by, for e.g., if you are derecognizing derecognize yourselves and derecognize the first CA of Nepal) for emotional, business or political reason and dragging their name in the name of derecognition (which, in fact, is not derecognition and is part of development of accounting profession of Nepal as expressed in this blog) is sheer disrespect towards such respectful guardians and no more.

The professional accountants (our respectful seniors) at that time imparted their valuable time and skills of negotiation and lobbied with parliamentarians to establish ICAN. There are two functions of ICAN as envisioned by our seniors, one is regulating the accounting profession and the other is CA Education. If the mere objective of ICAN was regulation of accounting profession, why would education be an agenda? If education are agendas, why would ICAN continue to unilaterally recognize foreign professional accounting body?

Before the establishment of ICAN, not only professionals qualified from ICAI are given audit license but also the members of ACCA in the capacity of Chartered Accountants. But ICAN restricted ACCA, and continue giving audit license to ICAI qualifieds with stricter provisions as the accounting professions develop in Nepal.

Professional Accountants after 2003
After 2003 A.D., ICAN is the only authority to provide audit license, which is generally termed as Certificate of Practice. Only the professional accountants are eligible to obtain COP as per Nepal Chartered Accountants Act and there are two class of auditors today, CA and Registered Auditors.

The persons, who obtained license from OAG until the provisions of Auditors’ Act 2031 was repealed, are the Registered Auditors members of ICAN except those who were licensed in the capacity of CA.

ICAN stopped providing license to ACCA from 2005 A.D.

ICAN started taking examinations on taxation and laws for ICAI qualified accountants from 2006 A.D.

Providing license to foreign qualified accountants was viewed as transitional provision, but it has been standing provision until now.

ICAN made it mandatory for foreign qualified accountants to have additional one year experience and is currently in force. There is ACCA paper exemption procedures for ACCA members to enroll CA- CAP III directly and become member of ICAN.

Every year, almost 100 CAs are qualified from ICAN and the registration of students in ICAN crosses the mark of 14,000 and will soon cross 15,000.

Is ICAN move a derecognition? 
ICAN move is part of development of accounting profession in Nepal. It is not derecognition. It had not derecognized ACCA degree when it discontinued granting membership to ACCA, nor is it derecognizing CA degree of India barring professionals qualified from ICAI who is going to enroll there after certain cut-off time.

As OAG was the sole regulating authority of auditing profession and ICAN took over regulation of accounting profession for private practice and the establishment of ICAN was not referred as derecognition of the role of OAG, this move of ICAN is expected to increase the focus of ICAN members to increase the quality of materials and student support provided by ICAN.

Reciprocity: International Best Practice
Reciprocity is international best practice, all round the globe. ICAN has reciprocal arrangement with the Institute of Chartered Accountants of England and Wales (ICAEW), world’s oldest professional accounting body and is recognized by CPA- Australia. This fact signifies the standard of qualification of professional accountants qualified from ICAN.

It is noteworthy that ICAI, until early 1990, unilaterally recognized ICAEW qualified professional accountants. But it stopped unilateral recognition in 90s and the effect is it has bilateral recognition agreement with ICAEW in 2006. The reason to discontinue unilateral recognition was lack of reciprocity.

The proposals are tabled in ICAN and ICAEW for twinning arrangement, whereby ICAN syllabus will be made as par with ICAEW. Some professional accountants dissenting the move of ICAN to discontinue unilateral recognition are also dissenting the idea of twinning arrangements. While they are referring the quality of ICAN when it comes to discontinuity of Unilateral Recognition, they turn their face away from quality approach when it comes to twinning proposals.

Question on Quality of ICAN
The questions always haunted me and I had undergone introspection many times regarding what determines the quality of any Educational Institution.

So far my prudence and soul answered, Quality of an Educational Institution is determined by the quality of its syllabus and the competitiveness of its product.

ICAN syllabus is determined based on International Federation of Accountants (IFAC) guidelines, as ICAN is full member body of IFAC. If its syllabus does not follow the quality assurance framework of IFAC, it may be removed from IFAC’s membership. Since, ICAI is also IFAC member body, I strongly believe that ICAI also follows IFAC guidelines to prepare its syllabus. The syllabus of ICAN is of international standard and no one can challenge this fact.

So far as the competitiveness of ICAN product is concerned, no one can point a finger against the quality of service provided by ICAN product, be it in Nepal or abroad. I don’t want to name the professionals in this blog, but a simple research on the whereabouts of ICAN products will easily prove the competitiveness of the products abroad.

Any way, competitiveness of a person is also influenced by the personal capability.

Student Support in ICAN and quality of Materials provided by ICAN
I agree on the point that student support in ICAN is not up to the standard. It collects a huge chunk of money from students and spends less. Its financial statements shows that it has up to 90% surplus in Examination Activities only. But the quality of questions asked in the examination are often questioned. Sometimes, the questions are copied and pasted from foreign bodies’ and sometimes, the questions are set from out syllabus. Mostly the questions on taxation and auditing are ambiguous and students are required to assume certain aspect to answer the questions.

But does it signify the quality of ICAN? No, as already expressed quality is the function of syllabus and competitiveness of the products.
Similarly, the study material published by ICAN are not complete and error free. There are demands from NCASA regarding the improvement in Examination System, study materials, and Student support and they are less heard and often not being the agenda of ICAN Council. These are even not the agenda of those all who are protesting the recent move of ICAN. We have not heard of their ideas to improve the quality of student support and examination system; neither in the public nor in the private talks. 

Who is responsible for poor student support?
The Council members of ICAN are largely responsible for the poor student support. There is no study on how to improve the quality of study materials provided, nor on the need to revise the system of question paper setting, which is largely the cause for poor Examination System.

ICAN’s granting of absolute autonomy towards the designated persons to set question paper, and prepare study materials, Revision Test papers, etc. and policy to keep their name secret even in the case ambiguous questions, is responsible for this. The ICAN members who takes the responsibility for these activities are responsible.

ICAN does not allow a CA involved in tutoring to set questions, and a CA can become resource person of ICAN for Examination purpose only after 5 years of becoming member of ICAN. This means, the CAs becoming members of ICAN after 2011 cannot be held responsible for such poor student support and Examination System.

Similarly, the time pressure in the name of secrecy of questions and doubting the integrity of question setter is also responsible for poor standard of questions. We can feel that the question setter is not updated about ICAN syllabus in most of the cases.

How (& Who) can quality of ICAN be improved?
Since ICAN is a member driven body and it largely depends on its members for almost all educational activities, it is the responsibility of ICAN members to improve the quality of Student support and its Examination System.

As I have expressed earlier, the CAs becoming member of ICAN after 2011 (I will not be wrong if I write 2009/10 as well) cannot be held responsible for the quality of question papers; it is worthy to note the membership composition until 2010. The CAs becoming members until 2010 are predominantly from ICAI and they are responsible for the current quality of student support of ICAN.

ICAN saw only one CA qualified from ICAN in its council from 2009-2015 and two CA from 2015-2018 Council.

So before pointing out the quality of ICAN in the name of quality of student support, the one who is on board of ICAN shall introspect themselves and answer to us on the responsibility to improve the quality of student support.

Does quality of student support indicate the quality of ICAN?
Quality of Study Material should not be a question. If student number increases, there will be more CAs writing their own book and the quality of materials will automatically increase. Let’s have a look at the materials of taxation in Nepal some 3/4 years back when there was very limited resource. Now we have ample books to refer regarding the materials on taxation. This is how the study materials are improved over time. In 90s and early 2000s, there was not much resources in India as well. But we can see a lot of resources, tutors and research fellows supporting the quality of materials of ICAI.

Similarly, ACCA does not provide any materials to students which is the case in many more professional accounting bodies too.

So, the quality of student support does not question the quality of ICAN. It must be remembered.

What about Post Qualification Courses?
This world is merchant’s world. Today I got a call from Singapore to participate a conference in Kualalumpur next month. This means, I am the market for that Singaporean Company. Why am I referring this? This is because, if we look beyond what we are looking, trust ourselves and are willing to improve our quality to international level, we can hire any professional of the world to train ourselves, revise our own syllabus from time to time and enrich ourselves for the betterment of profession and country. We are expert ourselves but we have low level of confidence in us that drags down our motivation level and our ability to lead in the international horizon.

Why unilateral recognition to India only, as there is presence of IFAC Member body, ACCA, in Nepal?

Three professional accounting bodies are popular in Nepal; ICAN, ICAI and ACCA. If we say that ICAN has no quality (?) up to international standard, why are we ignoring ACCA having recognition in 165 Plus countries? Why are we advocating ICAI only?

The move of ICAN is as part of development of Accounting Profession in Nepal. As the development progresses, the Institute shall focus more on reciprocity and development of human capital in the country. The current and future members of ICAN shall impart their time and knowledge to strengthen ICAN and to improve student support. The responsibility is more on members who are in Council of the Institute and were in the Council in past (refer ICAN’s website to identify who are repeated in the Council?). Blaming in the name of quality without valid justification and disclosures of determinants of quality is merely a blame and no more.

Apart from my views above, there is yet another thing we can look into.. that is, let’s just stop educational activities of ICAN and let’s make it sole membership granting bodies so that no other professional accountants qualified from ICAN are harassed in the name of so-called quality.

But, the question is, will ICAN and the dissenting voices take this decision? The answer is simple, i.e. NO (BIG). Because, the revenue from ICAN students is lucrative for private coaching centers they run and for their role as council members of ICAN to show the progress of the Institute where they are on board.