Demerger norm for CA firms to be relaxed

Calcutta, June 24, 2024

The move is expected to encourage amalgamation of CA firms in a competitive landscape and upgrade their practices

The Institute of Chartered Accountants of India (ICAI) is likely to take up the changes in guidelines on the merger and demerger of CA firms at its next meeting in July.

"We have come out with the exposure draft. It could come up in the next council meeting in July," said Ranjeet Kumar Agarwal, president ICAI, on Saturday.

A committee on the merger of CA firms have come out with a draft of the merger and demerger guidelines earlier this month.

A key proposal is the removal of the time limit of five years within which a firm can demerge and obtain its original trade/firm name.

The move is expected to encourage amalgamation of CA firms in a competitive landscape and upgrade their practices.

Agarwal said that a large number of the CA firms currently are small or medium in size and these firms have to become relevant in the coming years.

"There should be a specialisation horizon and these firms should have expert knowledge in various fields. One single firm cannot do justice to the entire audit of one organisation. So the firm has to be bigger and have to be able to build capacity," the ICAI president said.

"To have long-lasting mergers, we have proposed the removal of five years time limit," he said.

The ICAI on Saturday held an international conference of chartered accountancy students in Calcutta.

Last month, the Supreme Court upheld the decision of the ICAI to impose a mandatory ceiling of a maximum of 60 tax audits in a financial year by a CA.

A firm with four chartered accountants can, therefore, do 240 tax audits in a year.

[The Telegraph]