Monday, April 4, 2016

Provision allowing auditing by CMAs under Karnataka Societies Act doesn't encroach on CA profession

Karnataka Co-operative Societies Act, 1959 : Karnataka High Court rejected writ petition filed by 'Karnataka State Chartered Accountants Association' challenging the amendment to the Karnataka Co-operative Societies Act, 1959 (KCS) which allowed auditing of accounts by Cost Accountant or Cost Accountants Firm saying it to be statutorily governed and denied to interfere with same.

• Amendment to the definition of Auditor under the Karnataka Co-operative Societies Act, 1959 to include a Cost accountant, within the meaning of Cost and Works Accountants Act, 1959 couldn't be said to null and void and ultra-vires the Constitution of India and Central Legislatures as it did not result in encroachment on the profession of Chartered Accountants.

Facts:
(a)

Karnataka State Chartered Accountants Association filed writ petition challenging amendment to the Karnataka Co-operative Societies Act, 1959 (KCS) which allowed auditing of accounts by Cost Accountant or Cost Accountants Firm.
(b)

The Chartered Accountants association alleged that Government succumbed to the "pressure of lobbying and political pressure," by the cost accountants' fraternity and when the law was amended, the definition of 'auditor' was enlarged to include cost accountants. Otherwise, only Chartered Accountants or a CA firm could audit accounts thereby encroaching on profession of CAs
(c)

The Govt. contended that in co-operative sector in Karnataka included spinning mills, sugar factories and industrial societies which required costing work to be done by cost accountants. It also said that the syllabus studied by the two professions were very similar and there was a shortage of professionals, and it was found to be a dire need to bring cost accountant firms within the meaning of 'auditor and auditing firms'.



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