If the government has its way, foreign audit firms including the Big Four — Ernst & Young, KPMG, Pricewaterhouse Coopers and Deloitte — could operate in India directly without any tie-up with local partners.
The ministry of corporate affairs plans to soon invite the Institute of Chartered Accountants of India (ICAI) for talks on the issue. The ICAI currently enjoys the authority to issue licences to audit firms.
Corporate Affairs Minister Salman Khursheed told Hindustan Times that the role of auditors would be examined in detail to bring in more accountability, and the planned changes were part of the scheme. “We could look at allowing them to operate directly in India. I see no reason why they should operate through other firms, especially when we know that they are just separate legal entities,” Khursheed said.
At present, foreign firms offering audit services operate through local partnerships.
“We will call ICAI and professional chartered accountants for talks on the issue. We will have to sit down and reach at a consensus,” he said, adding that the role of the Big Four audit firms would also be reviewed.
However, the new Companies Bill which has been reintroduced in Parliament does not address the issue of auditors. “The issue relating to auditors is not part of the Companies Bill. We would examine the issue separately but it is critical and we would seek the opinion of ICAI and practising chartered accountants,” he said.
In case the proposal is accepted, ICAI would be required to grant licences to the foreign audit firms. ICAI’s president, U.P. Agarwal, could not be reached for his comments.
While E&Y operates in partnership with SR Batliboi & Co, Pricewaterhouse Coopers operates through Lovelock and Lewes, while BSR & Co is the Indian extension of KPMG.
The role of auditors came under question after B Ramalinga Raju, founder-chairman of Satyam Computer Services confessed to doctoring the audit books of the company for several years.
Kaushik Dutta, partner at Pricewaterhouse said that globalisation of the auditing profession would benefit all stakeholders.
“The move would help the Indian auditors to share the vast research-based skills that these foreign firms have developed. It would also upgrade the standard of auditing profession in the country,” Dutta said.
