The CA Act 1949 lays down the rules and regulations for chartered accountancy. It's the rule book advocating for fair practices among chartered accountants and is maintained by the Institute of Chartered Accountants of India (ICAI).
This act governs the entire finance domain, stating laws to conduct arbitration, banking, economics, equity, investment and tax management. Individuals allowed to perform the above responsibilities must qualify as chartered accountants from the ICFAI.
Aim of the CA Act 1949
The CA Act 1949 was effective from 1st May 1949 to bring in provisions required to regulate practices of professional chartered accountants in India.
Provisions Under the CA Act 1949
The CA Act 1949 comprises the following chapters:
- I: Preliminary (commencement and interpretation)
- II: The Institute of Chartered Accountants of India
- III: Council of the Institutes
- IV: Register of Members
- V: Misconduct
- VI: Regional Councils
- VII: Penalties
- VII-A: Quality Review Board
- VIII: Miscellaneous
These chapters discuss the framework of chartered accountancy practice in India. They also highlight the hierarchy that ensures ideal practices to prevent audit fraud and balance sheet mismatch, the most common methods of financial embezzlement.
Benefits of the CA Act 1949
The CA Act 1949 was the first step to laying down the independent guidelines post-1947, superseding the Companies Act 1913. It was a crucial step to nurture a corporate culture for economic development in India.
- It led to the foundation of ICAI, the only statutory financial body allowed to certify chartered accountants to carry out licensed audits.
- The establishment of the Quality Review Board through the CA (Amendment) Act 2006 to measure the services provided by its certified members.
- Established the concept of a financial year (from 1st April till 31st March)
Limitations of the CA Act 1949
The CA Act 1949 comprises the following limitations:
- Lack of external oversight (being an autonomous body)
- Insufficient approach to investigation to curb leading financial scams
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Role of the CA Act 1949 and ICAI
The ICAI was established under the Chartered Accountants Act 1949. It conducts selection, imparts training, and certifies professional chartered accountants. The ICAI is a single institute under the Ministry of Corporate Affairs (MCA), having the statutory monopoly under the act to regulate chartered accountancy practice. The highlights of ICAI include:
- No organisations except ICAI can certify chartered accountants.
- Made of 40 members council (32 get elected through internal voting and the rest through nomination from the GoI)
- The ICAI council comprises standing (4) and non-standing (37) committees.
- They supervise and undertake matters pending investigation or assist the government in making informed decisions across various organisations like CAG, RBI, SEBI, GST council, Ministry of Finance (MoF), Ministry of Corporate Affairs (MCA), etc.
The CA Act 1949 aimed to enforce government and corporate holdings to perform transparent audits related to financial management. Besides, the creation of ICAI helped produce world-class professional chartered accountants. This act has undergone multiple amendments to include stringent measures necessary to safeguard the audit system in India.
FAQs on CA Act 1949
Q.1. Who is liable under the CA Act 1949?
The CA Act 1949 holds chartered accountants responsible for performing transparent audits.
Q.2. Is there any new bill to amend the CA Act 1949?
Yes, a new CA Act 1949 amendment bill comprising the CAs, C&WA, and CS (Amendment) Bill was passed in both Lok Sabha and Rajya Sabha.
Q.3. Which sectors get covered under the CA Act 1949?
All financial sectors comprising auditing, finance (corporate), investment banking, equity research, credit monitoring, financial consultancy, risk management, and tax evaluation are covered under the CA Act 1949.
Q.4. What is the future of the CA Act 1949?
The CA Act 1949 was further amended through flooring the Chartered Accountants, Cost and Works Accountants and the Companies Secretaries (Amendment) Bill 2021.
Q.5. Which finance minister passed the CA Act 1949?
Jawaharlal Nehru was the contemporary finance minister when the CA Act 1949 bill was cleared.