2019-10-29 17:45:52Accountants and BookkeepersEnglishAccounting profession is highly regulated to protect public interest. This article is a complete guide on how to start an accounting firm...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2019/10/How-To-Start-an-Accounting-Firm-In-India.jpghttps://quickbooks.intuit.com/in/resources/accountants-and-bookkeepers/start-accounting-firm/How To Start An Accounting Firm in India?

How To Start An Accounting Firm in India?

13 min read

Overview

Accountancy is an important component in the entire cycle of manufacturing goods or offering services to consumers.

Perhaps, it plays an extremely crucial role in carrying out financial regulatory requirements as well as other prudential demands.

Thus, to carry out such requirements, an accounting firm undertakes a wide range of services for its clients. These services include core activities as well as some additional services.

The core activities embarked upon by accounting firms include accounting, bookkeeping and auditing services. Whereas, additional services include merger audits, insolvency services, tax advice, investment services and management consulting.

Thus, we can say that the accounting services are not just restricted to producing, processing, analyzing or auditing of financial information. These also extend to areas such as taxation and management consulting.

Regulation, Qualification and Licensing Issues

The accounting profession is highly regulated in order to protect the public interest. Such a regulation is achieved by formulating standards of competence and integrity.

Besides this, there are two other important issues that relate to the accounting profession. These include local qualification and licensing requirements.

The qualification requirements for Chartered Accountants vary between countries depending upon the national regulatory regime and type of qualification desired.

Such requirements include three to five years of higher education as well as a specified period of practical experience.

As for licensing requirements, every Chartered Accountant is required to get a license whether working as an individual or through a partnership firm.

The requirements in such a case generally include proof:

  • of education and training,
  • that the applicant does not have a criminal record, etc. and
  • of membership in the relevant professional organization.

So, let’s understand what is an accounting firm and how to start an accounting firm in India.

What is an Accounting Firm?

As per section 2(2) of Chapter I of the “The Chartered Accountants Act, 1949”, the member of the Institute of Chartered Accountants of India is considered “to be in practice” when he:

  • engages himself in the practice of accountancy; or
  • offers to perform or performs services involving:
    • auditing or verification of financial transactions, books, accounts or records, or
    • the preparation, verification or certification of financial accounting and related statements or
    • by holding himself out to the public as an accountant; or
  • renders professional services or assistance in or about principle matters relating to accounting procedure or the recording, presentation or certification of financial facts or data; or
  • renders such other services as are or may be rendered by a chartered accountant

Therefore, an accounting firm refers to a firm of chartered accountants in practice offering professional accountancy services to clients. Such services are offered either individually as sole practitioners or in partnership.

For the purpose of this definition,  a“sole proprietor accountant” is the one who engages himself in the practice of accountancy or offers to perform services as mentioned above.

And ‘partnership’ refers to a:

  • partnership as defined in section 4 of the Indian Partnership Act, 1932 ; or
  • limited liability partnership which has no company as its partner

How To Start An Accounting Firm?

There are a host of things that you need to undertake or do in order to start an accounting firm in India.

1. Qualify As A Chartered Accountant

The first step to starting an accounting firm in India is to qualify as a Chartered Accountant.

So, to qualify as a Chartered Accountant in India, you can undertake two routes: (i) Foundation Examination Route or (ii) Direct Entry Route.

a. Foundation Examination Route or Common Proficiency Test (CPT) Route

The first route is through Foundation Examination, also known as Common Proficiency Test. This is an entry to the CA Course for the candidates who have appeared for class XII examinations.

If candidates choose to pursue Chartered Accountancy Course through this route, they have to undertake the following procedure.

Procedure
  • Appear for Foundation Examination or the Common Proficiency Test (CPT)
  • Register with Board of Studies (BoS) for Intermediate Course or the Integrated Professional Competence Course (IPCC) on qualifying CPT
  • Appear and Pass in either or both Groups of Intermediate Course
  • Complete Four Weeks Integrated Course on Information Technology and Soft Skills (ICITSS) before commencement of the Practical Training.
  • Register for three year Practical Training on passing either or both the Groups of Intermediate Course
  • Register for the Final Course after qualifying both the Groups of Intermediate Course
  • Complete Four Week Advanced Integrated Course on Information Technology and Soft Skills (AICITSS) during the last two years of Practical Training but before appearing for Final Examination
  • Appear in Final examination during the last six months of practical training
  • Complete Practical Training
  • Qualify both groups of Final Course
  • Become Member with ICAI

b. Direct Route

ICAI allows candidates to enter directly to its Intermediate Course through this route.

This route can be adopted by those who are graduates or postgraduates or the candidates who have passed Intermediate level of Institute of Company Secretaries of India and Institute of Cost Accountants of India.

Such candidates need to undertake the following procedure.

  • Register with the BOS for the Intermediate course
  • Complete Four Week ICITSS before commencement of the Practical Training
  • Register for Three Year Practical Training
  • Appear in Intermediate Examination after Nine 12 months of Practical Training
  • Qualify Intermediate Course
  • Register for the Final Course after qualifying both Groups of Intermediate Course
    complete Four Weeks AICITSS during the last two years of Practical Training but before appearing for Final Examination
  • Appear in Final examination during the last six months of practical training
  • Complete Practical Training
  • Qualify both groups of Final Course
  • Become Member

2. Register As A Member With ICAI

To start practicing as a Chartered Accountant in India, you need to become a member of “The Institute of Chartered Accountants of India (ICAI).

Thus, to become a member, you need to enroll on the Register of Accountants maintained under the Act.

To get registered with ICAI, following are the set of provisions that you need to comply with:

I. Eligibility

A person can register as a member with ICAI only if he has:

  • completed the prescribed period of articled training
  • passed the CA final examination both the groups
  • undergone General Management and Communications Skills (GMCS)Course

Further, the applicant should not possess any of the following disabilities:

  • Is under 18 years of age
  • Has unsound mind or has been adjudged so by the competent court of law
  • Is an undischarged insolvent
  • Has not obtained Certificate from the court of law specifying that the insolvency has not been caused by any misconduct on his part
  • Is convicted of an offence involving moral turpitude in his professional capacity unless the Central government has removed the disability

II. Register As A Fellow or An Associate

You can apply for membership with ICAI either as a Fellow or as an Associate.

A. Associate Member

A candidate can apply for an Associate member of the institute if he has:

  • Passed both the Groups of Final Examination
  • Completed 3 Year Articleship

This means, after your final examination and articleship, you need to become an associate member of ICAI in order to start practicing as a Chartered Accountant.

Thus, a person registered as an Associate member can use the letters A.C.A. after his name. This is to indicate that he is an associate member of the Institute of Chartered Accountants.

B. Fellow Member

However, to become eligible for registering as a Fellow Member of ICAI, you need to:

  • Practice as a Chartered Accountant in India continuously for a period of at least 5 years Or
  • Hold one or more posts carrying duties relating to accounts, cost accounts, audit, finance, taxation, company law and or secretarial work for a continuous period of not less than 5 years in the following areas:
    • government service
    • educational institution approved by the Council
    • private or government, industrial, commercial or trading undertaking
    • Statutory Authority
    • Local Authority (Provided the local authority has a population of not less than five Lakh within its jurisdiction during each of the five years of his service)
  • Serve as a full-time paid assistant under a chartered accountant for a continuous period of not less than 5 years.

III. Application For Registration

To become a member, the eligible candidates need to make an application for membership in the following manner:

  • You need to submit an application in Form 2 as per Schedule ‘A’ of The Chartered Accountants Act, 1949 if you want to apply as an Associate Member.
  • However, an associate member who desires to be admitted as a fellow member shall submit to the Secretary an application in Form 3 as per Schedule ‘A’ of The Chartered Accountants Act, 1949.
  • This application needs to be submitted along with documentary evidence about the eligibility of the candidate for such membership and the requisite fee.
  • Demand Draft should be taken in favor of The Secretary, The Institute of Chartered Accountants of India, payable at New Delhi / Kanpur / Mumbai / Chennai / Kolkata for the requisite fee.
  • Applicants also need to furnish any other information as demanded by the Council from time to time.

IV. Registration Fee

The candidates applying for membership need to submit an annual fee as determined by the Council. The following tables showcase the applicable amount of Membership Fee:

A. Fees for all Members holding Certificate of Practice
ParticularsFee AmountTotal
Associate Membership FeeRs.1,500/-
Certificate of Practice feeRs. 3,000/-
GST@ 18%Rs. 810/-Rs.5,310/-
Fellow Membership FeeRs.3,000/-
Certificate of Practice feeRs. 4,000/-
GST@ 18%Rs. 1,260/-Rs.8,260/-
B. Fees for all Members not holding Certificate of Practice
ParticularsFee AmountTotal
Associate Membership FeeRs.1,500/-
GST@ 18%Rs. 270/-Rs.1,770/-
Fellow Membership FeeRs.3,000/-
GST@ 18%Rs. 540/-Rs.3,540/-
C. Fees for Members of the age 60 years or above (as on 01.04.2019) but not holding Certificate of Practice
ParticularsFee AmountTotal
Associate Membership FeeRs.1,100/-
GST@ 18%Rs. 198/-Rs.1,298/-
Fellow Membership FeeRs.2,300/-
GST@ 18%Rs. 414/-Rs.2,714/-

3. Take Certificate of Practice

The applicant’s name shall be entered in the Register if the application made is accepted by the Council. Consequently, a Certificate of Practice (COP) shall be issued to the applicant in an appropriate Form.

An Associate Member will be issued COP in Form 4 as per Schedule ‘A’ of The Chartered Accountants Act, 1949. Whereas, a Fellow Member shall be issued COP in Form 5 as per Schedule ‘A’ of The Chartered Accountants Act, 1949.

No member of ICAI is entitled to practice as a Chartered Accountant unless he has obtained a certificate of practice from the Council.

Furthermore, a member who has obtained Certificate of Practice needs to pay an annual membership fee as well as annual certificate fee as mentioned in the above tables.

Such a fee needs to be deposited on or before the 1st day of April in each year.

Also, such a certificate remains valid until it is cancelled under the provisions of these Regulations.

And in case an accountant ceases to be in practice, he shall inform the Council within one month from the day he ceases to practice.

Also, the Council can cancel this Certificate of Practice under the circumstances as may be prescribed.

4. Decide On The Structure of Accounting Firm

Chartered Accountants in India offer services either via a partnership firm or as a sole proprietor.

Globally, accountancy is chiefly practiced at the level of firms or partnerships rather than individuals in case of small scale firms.

As for the larger accounting firms, global networks have been formed.

These networks are formed between independent, domestically owned firms in different countries.

This is unlike the parent-subsidiary structure implemented by most of the multinational companies.

Such networks enable an established system of referring work or clients across borders.

Further, there is no need to transfer the resources subject to regulations between countries.

As a result, such a structure requires a high level of quality control to be maintained across the network.

5. Get Clients

The Institute of Chartered Accountants of India (ICAI) restricts Chartered Accountants to advertise in the competitive market.

This limits the scope for acquiring clients for Chartered Accountants and hence grow their consulting business.

They have to depend mainly on reference and contacts to promote their services.

Apart from this, Tthere are certain other strategies that help in marketing for accountants.

One of the strategies is that the Chartered Accountants can become an affiliate of the Networks of Accounting Firms approved by ICAI.

These networks are formulated by accounting firms to enhance their ability to provide professional services.

Also, Chartered Accountants can take leverage of social media platforms like LinkedIn. They can take leverage of such platforms by creating engaging content for target customers.

Further, they can also connect with tax experts and other CAs in order to increase their network.

They can even post updates and articles pertaining to accounting, tax and other related areas on a consistent basis.

Furthermore, accountants can participate in seminars, conferences and public speaking events organized by ICAI and other accounting networks.

Such events see participation of renowned experts in the area of accounting and auditing from national and international bodies.

Hence, such platforms are apt for Chartered Accountants for exchanging ideas as well as showcasing your professional skill and talent.

6. Start Practicing

Since everything is into place, accountants can start practicing. They can either start practicing as a sole proprietor or as a partner with other associates.

Once the structure of the firm is decided, the accountant needs to meet all the requirements that relate to a specific structure.

Right from selecting the name, registering the firm to getting a GST number, an accountant must meet all the requirements.

Further, to start the practice, the accountant would also require a working space. To begin with, the accountant can start practicing at home.

However, if the accountant wants a more professional environment, he can go for any of the co-working spaces.

To know more about how to start as a home based accountant, read our guide on self employed accountant.

Conclusion

To start an accounting firm or bookkeeping firm, an accountant needs to have a Certificate of Practice.

Besides that, in order to use the designation C.A. after his name, it is mandatory for him to be a member of ICAI.

Apart from these regulatory requirements, an accountant really needs to work hard on getting clients.

This becomes all the more challenging for accountant in India as they are prohibited to advertise the services of their accounting firms.

When all this is set, an accountant can start practicing on his own.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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