AdminIndian audit firms, that informally work as the audit arms of big foreign accounting firms, may soon have to sever their foreign affiliations, if accounting and auditing rule maker ICAI has its way.
In what could be a fall-out of the Satyam account fabrication episode, the Institute of Chartered Accountants of India (ICAI) has started pitching for restraining all foreign firms from associating with domestic firms that do statutory audits in India.
Since foreign accounting firms cannot do audit work in India because the country has not yet opened up this sector to foreign firms under WTO discussions, they tie up with a local audit firm to offer this service to their clients. Another reason for the tie-up is that an audit firm that advises a client, cannot do statutory audit for the same client due to conflict of interest issues.
The ICAI’s proposal, if vetted by the government, may create a major turn-around in the operations of the so-called Big Four league of audit consultancy firms in India — a group which comprises Ernst and Young, KPMG, Deloitte and Price WaterhouseCoopers (PwC). Even as the Big Four league does not do audit in their names, ICAI wants to put an end to such business associations. “What cannot be done directly, should not be done indirectly,
