The challenges Indian professional accountants in business face for lifelong continual professional education

All professional institutes hold out to the public that their members besides being technically qualified, are well regulated and obliged to update their knowledge. Towards this effect, these institutes (and where allowed, private bodies) conduct initiatives to improve knowledge by structured ways(seminars, courses) and unstructured(articles, teaching, self study). However, the core challenge to the PAIB(or CAs in service/CAs not in practice as we call them in India) is as follows

1. CPE Program timings conflicting with working hours: CPE programs are often targetted at CAs in practice instead of CAs in service who might not be able to take leave/off. Same holds true for talks from 5pm-8pm or so.
2. CPE Industry Study circles barriers: CPE study circles of members in industry appear more of an effort to recognize internal KMS than open it to outsiders. That is why study circles like Reliance/Castrol conduct programs but often open only to their employees. This is understandable due to security issues in tech parks etc, but outsiders have a less chance
3. Journal articles focus on traditional areas like audit, law, tax with very less focus on corporate finance, management accounting and other industry interest areas
4. Journal articles quality: The quality of articles vary-with many just being a regurgiation of laws/standards, with less incisive. 
5. Research Practice Gap: Research is not easily dissiminated and there is no central portal for business research. So those in service need to visit multiple sites and/or subscribe to many journals just to keep up. And lesser said about 'peer review' and 'ivory tower' research, the better.

So what to do? It is easy to criticize but difficult to implement. So without much ado, here are some useful suggestions

1. Track the regional council website for relevant seminars/conferences. Some are targeted at members in industry and may be relevant
2. Form your own CPE study circle centred around areas of common interest(eg project finance, excel, tax). Exchange faculty with like minded professionals
3. Use startups like Breathingrom. co to get venues on demand with seating capacity ~50-100. This would help plan events on short notice also
4. Devote some time each month to professional development(journal writing/KMS). It will go a long way
5. Use study circle to share expenses such as relevant books, hiring trainer etc. It is useful
6. Use study circle as a sounding board to share/discuss experiences and professional plans. It would help get perspectives.

I will implement many of these in the next year. Do drop me an email on andy161161 at gmail dot com with the subject line 'CPE' if you are residing in Mumbai and interested. 

What is your signature worth-some musings as a professional

Recently, I was reading a book by Parag Saigaonkar wherein the below passage struck me-it relates to the author being asked to certify homework completion of his son, and his asking to see the homework before certifying. The author muses that

Reflecting on this incident, I realized that I do sign off on a lot of other things as well, especially at work – one of the responsibilities I have as a principal in the firm. As a firm signatory, I have the ‘privilege’ of signing a lot of important documents …… at least they look impressive. What does it mean to lend my signature to business-critical documents? What weight does my signature bear? What are the consequences of not reading in detail every legal word? What value do I put on my signature?

SAIGAONKAR, PARAG. THE PERFECT STORM (Kindle Locations 1682-1685). Westland. Kindle Edition.

As finance professionals, whether it is signing an audit report, letter of representation, approving an expense, greenlighting a project etc, we often need to rely extensively on work done by others.  For this, we need to ensure we are through in every aspect and review the critical points, to avoid devaluing our signature. 
At the same time, we should remember our role as internal consultants and not be bureaucratic in holding up decisions because we want to tick all the boxes all the time. 

As Vaibhav Manek puts it in his BCAS presentation on 'Aligning Human Capital-people as strategic assets'
http://www.bcasonline.org/files/res_material/resfiles/PPT-Aligning%20HumanCapital_%20VaibhavManek.pdf

1. “We exist because of our clients; The customer is not an interruption of our work; he’s the purpose of it”- Mahatma Gandhi 
2. Professionals must have “a connect” with the client • To win a client’s confidence, give him the chance to talk to you, person to person, about his needs and his expectations • Make it easy and comfortable for the clients to share his secrets • 
3. Professionals must adapt a mindset of joint problem solving, instead of trying to win or prevail
4. People with different views must learn from each other
5.  Make effective decisions, conform to an execution framework, focus on priorities, have a growth orientation, think with a solution mindset and multitask between production and management. 
6. Technically brilliant people should be respectful to their peers and must share their knowledge and expertise 
7. Sharing of ones’ knowledge is critical to have the team come up to terms with the thought process of the team leader 
8. Team members must have a constant quest for learning and upgrading themselves

Points 3-8 are especially relevant to facilitating smooth reviews of work. Works should be done diligently as per approved checklists with self review, and once done this way, review would be smooth. Yet, one should not lose alertness and be blindsided by a black swan.

Does mandatory continual professional development/education really lead to lifelong learning?

I am a voracious reader and while most of that goes into fiction, a good chunk also goes into reading non fiction. In fact, my passion for finance is largely due to my vicariously living through various books and finance fiction novels of Stephen Fry etc. Having switched gears to commerce later than most people, one of the main reasons I could catch up was having read extensively, and therefore often knowing more than my peers. Even during the admission interviews for IIM Ahmedabad & IIM Bangalore, and beyond, I could impress the interviewers with my knowledge beyond 'bean counting'/'mere CA curriculum knowledge'. largely because I'd read multiple books, blogs, magazines, textbooks etc. Anyways, this post is not hagiographic so enough of my story and back to the topic! 

Be it the institute of chartered accountants, management accountants, chartered secretaries, CFAs, FRMs, doctors, actuaries and so on, every established profession imposes certain mandatory knowledge updation hours for their members. This is often more stringent for members in public practice, than for those in employment. Usually, self declarations are allowed and even the mode of fulfilling hours are flexible, with options available to professionals to achieve their target in the least possible monetary investment and time. However, i have the following issues with this process

1) Why impose different requirements for those in public practice and those in service? The competency requirements from both should not differ, and in fact those in service may be more 'specialized' and 'frogs in the well' than their counterparts in public practice. Hence, there is no rationale distinction for this, except that members in service often retain their membership with much cajoling, so making more requirements for them may drive more of them away from retaining their membership-and which organization does not need fee paying members? Members in practice have their bread and butter contingent on their profession bestowed certificate of practice, but those in service do not have those constraints. 

2) Process driven to ensure more attendance in institute organized seminars-Even though professional institute organized programs are inexpensive(around Rs 1000-2000 per day for ICAI/ICSI/ICWAI), professionals often do not want to devote an entire day to content they would rather read in a hour or two.

3) Inflexible enough to suit needs-Even though bodies do allow for 'unstructured professional development' in terms of crosswords, reading, peer group discussions; there is still a long way to go.  

4) Compliance driven process does not foster willing compliance-I have seen professionals send their interns/other employees to attend programs and fill attendance slips on their behalf. This is because 

5) Commercial interests often result in regulatory capture-When private sector is allowed to deliver programs with CPD credits as done in UK/USA etc, those private sector bodies have an incentive to lobby for more stringent CPD requirements for their programs/speciality. 

6) Little focus on organization sponsorship that ensures peer learning, networking and applying what you learn One reason why executive education programs are so popular, is their organization context, which helps executives to learn from their peers in other functions, while immediately applying their learnings on the job often in the timespan between sessions. This organization driven sponsorship is quite helpful, but often in a misconceived wish to subsidize individual members, organization sponsored fees are often higher than self sponsored one(the ICSI Mumbai scheme at CCRT being a notable exception which allows bulk corporate members) since they are felt to have deep pockets! Yet, this approach is short sighted. 

In this information overload era where we are plugged into the digital world of laptop-smartphone-TV-tablet, it is difficult to make time for self development amidst challenging careers. Indeed, mastering subjects one has not learnt at all formally earlier(imagine the plight of chartered accountants who learnt IFRS from scratch when it was introduced!) often takes much more time than say 40hrs/year, and devoting the bare minimum mandated time might give one the illusion of comfort, while actually one may be falling behind technically and technologically compared to the next few batch(es) of professionals educated under updated curriculums/delivery mechanisms. 

Not documented equals not done-leads to great quality or checkbox mentality?

While reading professional standards, it struck me that the basic premise of documenting a professional services engagement is that in case the professional is sued for malpractice, the working papers will prove the extent of, and diligence put in, the work done. Of course, it has positive uses also such as helping plan the assignment, building the knowledge bank for recurring assignments, and infusing a general discipline into the whole process. Also, there is always merit in having a checklist to avoid making mistakes during complex processes. Hence, I cannot reasonably argue the merits of following a checklist/process. The only issue is whether the person performing the assignment, will consider the checklist/standard as the end of his responsibility, given the protection from negligence lawsuits filed by disgruntled clients.

So now we are at a corundum. The protection from negligence lawsuits is the trigger to motivate professions to comply with service quality standards. But senior professionals themselves write the standards, so chances are they would incorporate recent memory, and rarely include future looking requirements identified from academic research. For example, India is going through several paradigm shifts in terms of introducing IFRS/XBRL/e-filing. But while ICAI has been quick to clamour for new professional work in these areas, it has been slower to issue fresh/modified guidance. And this is not a new phenomenon. New standards are often issued after the horse has bolted from the stable(viz scams/issues/controversies). For instance, while complex financial instruments valuation made the headlines in 2008, their formal auditing guidelines were published only in Oct-11. So for mistakes done before that, the auditor could claim protection. And some standards have been issued only when the ICAI has been dragged kicking and screaming. For example,the reporting standard on segment reporting/cash flow statement needed SEBI to step in, and cut the red tape.

So how do we motivate professionals to go beyond the minimal standards? There could be a best practices repository, and the professional submitting the most/top rated ones could be awarded. Or there could be awards for uncovering the highest amount of scam, mistakes, issues(subject to client confidentiality agreements) etc. Also, the data base could have a weightage while selecting auditors for key assignments and complex work. Lets see if this idea sees the light of day in my life!

How CAs are like doctors, archaeologists and other professionals.

A practicing CA and a visiting Prof to my college Prof FCA Gokhale sparked off this thinking with his repeated analogies comparing the medical and CA professions.  That got me thinking to other analogies, and this post was born.

·         CAs and doctors:- A good doctor reads the patients symptoms(indicators) and tacitly elicits information(like management representations!).

·         CAs and archeologists:- Given that a statutory financial audit is on transactions which happened in the past, the CA does not have a time machine to go back and check that everything was done 100% in order. That is why the assurance is ‘reasonable’ not ‘absolute’, and hence the need to triangulate evidence as good archeologists do(carbon dating, historical records, land patterns..)

·          CAs and lawyers:- Despite the abundance of lawyer jokes out there, good lawyers DO exist, and they tell it to the client as it is-merits/demerits of case, chance of winning and cost-benefit analysis. Also, they generally operate on fixed fee irrespective of case outcome. That is what CAs are supposed to do in most litigation support and advisory assignments.

·         CAs and statisticians- Statistics is all about presenting data in its most relevant and useful form. And that is what adds value to plain numbers. After all, any MIS/report is ultimately numbers sliced and diced in a context. And beyond descriptive statistics, the huge data volume and resultant sampling requirement is making CAs master the nitty gritties of statistical sampling, test of hypothesis and other inferential statistics. Ultimately, all audit standards are a fine balance between Type I and Type II error

·         CAs and detectives:- Detectives(as those detective novels/CID/films would have told us) excel in finding patterns and looking for the unexpected. In case of audits, the obvious thing is the final entries/vouchers. But the invisible stuff(non J/V adjustments, cost allocation spreadsheets, computations & recomputations, reconciliations) is often more valuable, as is peer analysis.

·         CAs and historians:- Like many other things in life, financial statements audit is a path dependent process. As generations have discovered(and will doubtless discover in future), those who forget the past are bound to repeat its mistakes. Therefore, the auditor’s permanent file provides some continuity to the audit to record the cumulative learnings/client insights. 

My ideal professional reference book

After referring to many books for projects, MBA course work, CA/CMA preparation etc, I think I'm well equipped to comment to how an ideal reference book should be. Hardly 10% or fewer of books I've seen meet even 50%+ of this wishlist.Note that this does not cover books intended merely as textbooks only.

1. Bridge the gap between theory and practice instead of leaning too much towards one side;-Some industry experts like Taleb critique nearly all academics, while most academics works do not refer much to practice. Hence, a book written by a professional with some academic background(to ensure proper referencing/language use) is often the middle way out.
2. The 'inaccessible' material like quant stuff is contained in an appendix/online version. This is done successfully by John Hull's landmark book on Options, Futures and Other Derivatives. This reduces the printing cost, while allowing more detail to be put online.
3. Spreadsheets/Simulations to practice the material, preferably with data also. This may be either on CD or downloadable/playable from webite. I've seen this in OM books.
4. Downloadable data tables:- Instead of giving the data in PDF/text, how about being brave enough to give that same data(especially economic ones) as a supplement? That would let the student do some checking on his own as to the conclusions. 
 

 

Meet the true professionals.

During the past two months, I have interacted with several finance & other experts. While all of them are undoubtedly experts in their fields, few would qualify to be called professionals. And the reasons are manifold.

1. Right from law firms, accountancy firms, medical practices etc, all have been tainted by the profit motive. Pro bono work is rare, and is given undue media coverage. 
2.  Earlier the conception of a professional was that of a person who would have service motto as the driver, put clients first due to which profit would follow. But now, under the guise that clients are big boys who do not place reliance in them, investment banks have made a fine art of disclaiming any fiduciary responsibility. Clients have become counter-parties. 
3. Under the guide of CRM/value based fees etc, clients who cannot pay much are relegated to the background, both quality and availability wise. Or those who work on those accounts view that as a punishment posting. 
4. The unwritten social compact for professions was that in return for sacrificing some prime years in low paid public service(articleship, rural internship, clerkship), there would be material rewards later. But now, professional aspirants wish to avoid rural medical internship, do dummy articleship or go only for premier clerkships-and still they expect that same level of status/earnings. 

Show me a 'professional' who is content with 'grunt work' and low pay, and I'll show you a liar! But I met some professionals in every sense of the word, who make life better for everyone they meet. The unfortunately small list is below.

1. Publications Counter guy at WIRC-ICAI:-This guy sits behind a counter and dispenses the ICAI books/material to those who want to buy them. But his job is not that easy. Navigating the byzantinere requests of often non English speaking people, he goes around his work with a smile
2. Those helping with probono work:- Prashant Bhushan is an excellent example of this, irrespective of what his other motives may be. 

Anonymous blogs-the best way for industry professionals to share knowledge.

During my 2 month summer internship in the Singapore branch of a UK based investment bank, I tried my best to keep myself updated-besides 'on the job updation' of course! Word documents got filled with the notes I had made during my reading, work, leisure etc. But however much I tried, the process of converting rough outlines to blog posts was much harder than it seemed. Putting pen to paper is much easier than putting finger to keyboard! And the reasons are not far to seek. When a person is in the academic domain, he may not have the information explosion of the busy trader/structurer/research person but he has the benefits of

1. No compliance limitations on what to write(eg-not on companies under live deals) and when to write(not during blackout periods etc)
2. Lesser egg shells to tread on warily. When a professional writes(specially someone in industry compared to Big4) more so on controversial issues in variance with his employer's line, it does create awkwardness for everyone concerned. 
3. No fear of divulging trade secrets-practioners must strike that fine balance between revealing enough to establish their reputation/evoke reader interest, but not so much as to lose competitive advantage.

Navigating these 3 limitations takes more time than it seems, For example, during my internship I had strong views on certain structured products. But voicing them openly on a public forum(a blog IS a public forum) would not have been the best thing, and would have been probably prohibited by some fine print nested away in that contract. Hence, those views will probably not see the light of day for quite some time.

An anonymous blog may still divulge 'trade secrets', but in the small world of finance, innovations rapidly spread through clients/pitch book forwarding/grapewine/new hires etc. So the risk of this is lower. An example of an anonymous blog is one on M&A/markets/finance in general(epicureandealmaker.blogspot.com/). It is quite widely followed. 


The benefits of these blogs are that once the professional is willing to 'come out', he may be deluged with book deals, consulting requests or merely popularity. And for blogs with active commentators(unlike this one!), the author can also learn and refine his thinking. That is why even Seeking Alpha permits this.