The right time to have an accounting body

TN Manoharan has always been a household name in the investing fraternity of non-resident Indians (NRIs) in the Gulf for the past more than five years. The reputed accountancy firm, Manohar Chowdhry & Associates (MCA), founded by him in India and where he is still a partner, has recently set up its branch operations in Dubai. One of the most respected Indian chartered accountants, Manoharan has recently been conferred with Padmashree, a top-order civilian award in India. Manoharan, who currently sits on the reconstituted board of Mahindra Satyam, holds a strong view that the UAE should have its own professional body for the accountancy profession. In his interview with Emirates Business, he shared his views on different aspects of the profession and what he looks forward to see in the UAE in the future.

Can you explain how you happened to associate with Satyam?

Soon after the 'Satyam scam', involving billions of rupees was uncovered, the [Indian] Government dissolved the board and nominated a six-member board with leading professionals from different fields to revive the company. I was nominated as the only finance professional to the newly constituted board. There were also professionals from banking, industrialist and IT on the new board. Our first task was to restore the financial stability of the company and motivate the employees and customers to continue to patronise the firm. We were able to accomplish the responsibility entrusted with us and facilitate the leading corporate group Mahindras to take over the firm. Thus it got the new name – Mahindra Satyam.

What really went wrong with Satyam?

I think we will have to leave that issue aside. The investigators are still working on the issue to find an answer for this.

What lessons you learnt from Satyam scam as an outside finance professional and what message you want to send to the corporates here in Satyam's context?

I would underline the need to strengthen corporate governance for the long-term benefits. Having said that, let me tell you the Satyam scam was an exception. Satyam could be a well-planned and well-designed fraud because in Satyam, the system was well in place.

How do you see the disclosure standards in this part of the world?

The new phenomenon is that things have now moved from a 'no-disclosure scenario to plethora of disclosures'. The International Financial Reporting Standards (IFRS) require a whole lot of disclosures that give the stake-holders all sort of information regarding their company and the business.

My question refers to this region. Can you explain?

I believe there could be a fine-tuning on the disclosures to the 'related-party-transactions'. This is an area which is quite relevant to this region as people at the helm-of-affairs are largely involved in other businesses too. The fine-tuning of this disclosure will help the stakeholders to get to know that all these transactions are not prejudicial to the interests of the company. This will prove to them that these transactions are done at arm's length price and hence their interests are not compromised by the management. I also think more needs to be done to define who a related party is and what all transactions can be brought under the scope of related party transactions, etc.

What suggestions you want to make in this area?

Broadly, you can categorise these transactions into three – transactions relating to goods, services and provisions of facilities to the company and among the 'related parties'. There could be more transparency and disclosures on these areas in order to make sure that no parties involved make an undue benefit through any of such transactions.

What is your view on stimulus packages in the light of the recession?

World over, we have been seeing several stimulus packages being introduced by the governments and central banks. These have helped the people and corporates to have better financial stability and enhancing their purchasing power.

The UAE can be proud of what the government or Central Bank has done on this count. A sum of Dh50 billion was deposited by Central Bank in all banks proportional to their asset base; Dh70bn was made accessible to the banks by the Federal Government; and five Abu Dhabi banks got another Dh16bn as Tier 1 capital. Central Bank has also kept open other funding schemes for the banks on attractive terms.

What will be your suggestions to the UAE's accountancy profession?

I strongly believe this is the right time to look at establishing an accountancy body, and I am sure, handholding can be received from Indian chartered accountants who have got a strong professional body.

There are many advantages to be accrued by establishing an autonomous accounting body under the supervision of the government. This will lead to a better reporting system which will result in better investor confidence which would pave the way to the establishment of a strong capital market culture in the country.

Most banks in this country are audited by the 'Big Four'. Does it mean that the other audit firms are not qualified for taking up this job?

The suggestion that I just made has a bearing on this question. Once the accountants are brought under a regulatory body, the required compliance will be ensured and the activities of accountants are properly monitored. This will help the profession gain respect, irrespective of whether the firm is big or small.

Do you recommend a separate set of accounting standards for the UAE or GCC as a whole?

Once you set up the autonomous body of accountants, it can have dedicated cells to look after different aspects of the profession. There could be a cell that can assess the specific accounting standards that suit the region and could make suggestions accordingly.

PROFILE: TN Manoharan Partner, Manohar Chowdhry & Associates

Manoharan is the former president of the Institute of Chartered Accountants of India (ICAI). He is a post- graduate in commerce and a law graduate from Madras University. A member of the ICAI with 23 years of standing, he has served on all standing committees and various non-standing committees of the ICAI.

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