India’s audit space cannot have ‘one-size fits all’ approach: Corp Affairs Secy
New Delhi, Mar 15 : Asserting that “one-size fits all” approach cannot be put in place for the complex audit industry, Corporate Affairs Secretary Injeti Srinivas has said the potential of conflict of interest needs to be addressed and made it clear that whoever is practising audit in India will have to be regulated under the country’s regulations.
Amid persisting concerns that foreign audit companies might be circumventing the country’s legal provisions, he further said there has to be a method where network firms are also registered with the ICAI, which is the frontline regulator.
“Today, ICAI is registering individual members but is not registering firms. So, there are gaps and those also need to be addressed,” he told PTI in an interview.
The ICAI is the apex body of chartered accountants. Overseas audit entities operate in the country through network firms model.
The corporate affairs ministry’s efforts to bolster regulatory framework for audit industry assumes significance against the backdrop of many auditing entities and auditors coming under the regulatory scanner in connection with various corporate misdoings in recent times.
Recently, the ministry came out with a consultation paper covering various aspects related to auditing practices and would be finalising its view after taking into consideration suggestions from stakeholders.
“The entire controversy with respect to Big Four or Big Six is that foreign companies are circumventing our legal provisions and giving audit services here. The controversies have been existing for too long. We have clearly taken a stand before the Supreme Court that there is no such issue at all.
“These are network firms and they are Indian LLPs (Limited Liability Partnerships). The partners are Indian partners, who are members of the ICAI. They are part of global networking arrangements for getting the advantage of quality standards etc…,” Srinivas said.
Deloitte, PwC, EY and KPMG are referred to as the Big Four audit firms.
Talking about the current situation in the country, the secretary said small audit firms are dominant in terms of numbers but in terms of business, it is dominated by a few large firms.
“Audit industry’s structure is very complex. We will not be able to implement a ‘one-size fits all’ approach. There has to be some nuanced approach. Otherwise, it may not be equitable. We will look at it. One thing is very clear. The potential of conflict of interest has to be addressed,” he emphasised.