No fronts for global accounting firmshttps://indianexpress.com/article/news-archive/web/no-fronts-for-global-accounting-firms/

No fronts for global accounting firms

ICAI asks government to snap the nexus between unregistered global accounting firms and their local auditors

The Institute of Chartered Accountants of India (ICAI),the regulatory body for CAs in the country,has asked the government to destroy the nexus between global accounting firms such as PricewaterhouseCoopers,KPMG,Deloitte Touche and Tohmatsu and Ernst &Young and local auditors,who as the formers’ member firms provide them a front to undertake audit work.

“What cannot be done directly,should not be done indirectly,” Ved Jain,president,ICAI,told The Indian Express. Foreign firms were not allowed to carry out auditing and assurance services in India,he pointed out,but admitted that besides Price Waterhouse and Deloitte,Haskins and Sells,no foreign firm had been granted permission to audit by the ICAI in India.

The issue has come in for scrutiny again after Price Waterhouse,an audit firm registered with the ICAI,and also a member firm of the Big Four constituent PwC,failed to detect the Rs 8,000 crore accounting fraud in Satyam Computer Service Ltd,the fourth largest software company till the fraud was admitted to by its promoter B Ramalinga Raju himself. “The Satyam case will help us raise this issue and impress upon the facts to the government,” Jain said.

Claiming that in any such arrangements,“the local firm relies heavily for resources on the international firm”,Jain said the matter had gained more relevance now. To drive home the point,ICAI has asked the new board of Satyam to review its decision to appoint KPMG for the restatement of Satyam’s financials since it is not registered with the ICAI. It is hence not authorised to provide accounting and assurance services in India.

Jain said that management consultancy is a “loosely defined term” and includes a lot of functions,but cannot be used as a façade for carrying out accounting and auditing services in India through affiliations with local auditing firms. “Our commitments at the WTO do not require us to open up the sector to foreign firms,” he said.

As per a resolution under the World Trade Organisation,foreign firms are barred from carrying out auditing and assurance services in India on the basis of which ICAI had opposed the move of Satyam’s new board to appoint KPMG as the company’s new auditor.

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At present,multinational management consultants,including the Big Four,have multiple Indian affiliates to help them carry out accounting and auditing business in the country. Deloitte,apart from its own auditing arm Deloitte Haskins & Sells has CC Choksi & Co,AF Ferguson & Co,Fraser & Ross,MCA & Co and PC Hansotia as its local affiliates. Ernst & Young has SR Batliboi & Co as its affiliates. BSR & Co carries out the accounting and auditing business for KPMG while Lovelock & Lewes & RSM & Co and Dalal & Shah serve as affiliates for PwC,apart from its own auditing division Price Waterhouse & Co. Grant Thornton too has a local firm Walker Chandiok & Co as its India associate.