The financial reporting review board of ICAI review the financial reports of the listed enterprises. The views of FRRB play a key role in improving the practices related to financial reporting. The edtech Byju was in the news for the financial reporting and tax payment. The president says the apex body gives inputs and guidelines to protect the chartered accountants. The president says the institute will suggest valid points on the GDP ratio, tax collection and green finance. The president also declared that the government will receive the research paper of ICAI. The research is in connection to tax collection, and appreciation of the GDP ratio. In developed countries, the percentage of tax to GDP ratio is around 22 per cent. In India, the income is high, but the tax collection is not the same. The blog talks about the functioning of FRRB and the importance of GDP and tax ratio.
Byjus:
The FRRB reviews the auditor report and financial statements of enterprises to understand compliance with various norms. The congress MP Karti Chidambaram initiated the need for review. He called for the review of the ed-tech company’s financial statements. BYJU is submitting the financial statements with a delay in various quarters. The company released the 2021 financial statement with a late submission of 18 months delay. The company released the 2022 financial statement after two years. The financial statement for 2023 is yet to be published. In 2022, the auditor of BYJU declared the resignation. Deloitte is the auditor of BYJU. The net loss of BYJU in 2022 is INR 8245.2 cr. The operating revenue is growing periodically to INR 5014.6 Cr.
The dues for FY22 are nearly INR 3,800 Cr. With issues raised in terms of dues and loss, the auditors of the BYJU’s mentioned the inability to continue. BYJU was in the news with a story saying partner layoffs, employee layoffs, resignation of board members, rising losses, cash crunch and insolvency petitions in multiple numbers. On February 23, the investors of BYJU called for an extraordinary meeting. The meeting is to change the leadership team and board of the company.
Paytm:
Paytm is the payment bank that tops up the customer’s bank accounts. RBI has regulatory concerns with this bank. On January 31, 2024, the functions of Paytm were prohibited. ICAI has plans to hold a meeting in March to discuss the Paytm issue. FRRB will investigate and review the regulatory lapses and the process of payments to bank accounts. If the concern is minor, the FRRB advises the company with ample guidance. If the audit concern is due to gross negligence, the regulatory body does indulge in further detailed investigation.
Functioning of FRRB:
The structure of FRRB is technical, board review and group. The financial statement undergoes three processes to check its accuracy. FRRB is a wing of the institute ICAI. The regulatory body was constituted in the year 2002. ICAI organised FRRB in the 226th meeting. The objective of the board is to check the three following factors: inter alia, compliance, and auditing standards. In the long run, the efforts of FRRB bring quality standards to the financial reporting system. FRRB investigate the papers published by the company for general and trading purposes. FRRB take the work of checking either based on the suo motto or a note of reference from a regulatory body. The regulatory bodies like the Reserve Bank of India, SEBI, MCA, and insurance regulatory and development authority instruct FRRB to do an investigation. If the mistake is with the auditor, the FRRB inform the review details to ICAI to initiate action. If the mistake is with the enterprise, the FRRB would take it to the relevant regulatory body. The functions of FRRB are as follows:
- Check the compliances related to generally accepted accounting principles.
- Check the disclosures added by the company according to the requirements. The regulatory bodies, rules, regulations, and statutes set the material requirements of the companies.
- Check the compliances related to reporting and auditor ethics.
Tax to GDP ratio:
Mr Ranjeet Kumar Agarwal holds the respect of the 72nd president. The ICAI president said the importance of scaling up tax to GDP ratio. He says it is a crucial step in making India a developed economy by 2047. The initiatives of ICAI promote transparency in governance practices. The ICAI president said that the institute is taking ample care to track the irrelevant laws and talk about this to the government. He also said that the institute has plans to introduce a road map with artificial intelligence for the use of various stakeholders.
The tax to GDP ratio decides the borrowings and development of the Government. If the ratio is high, the financial position of the country is good. If the ratio is low, the government keep an eye and track of the borrowings. The ratio expresses the development program spending. The government can spend ample amounts on salary, military, and pension heads. The tax-to-GDP ratio of India is lower than that of some Indian companies. From 2018 to 19, the tax-to-GDP ratio was 10.90 per cent age. The expected ratio to maintain and sustain growth is 6 per cent. Payment and collection of taxes improve the tax-to-GDP ratio.
Final Thoughts:
ICAI directly and through regulatory bodies monitor the auditing profession. The challenges with the auditing system due to technology and loopholes make a point to enhance the quality. The FRRB reviews reports and research to promote the auditing profession. ICAI, auditors and regulatory bodies are the pillars of the country.