ICAI panel to look at rules for Multinational Audit Firms

A recent Supreme Court order has prompted the Institute of Chartered Accountants of India (ICAI) to set up a nine-member committee to examine the legal framework for the entry and exit of multinational audit firms in the country.

ICAI vice-president Prafulla P Chhajed has been appointed as the convener of the committee that will suggest measures for “effective implementation” of the SC judgment. The panel has been tasked with suggesting changes to the government and regulators, apart from being mandated to examine the impact of the Sebi order, which banned Price Waterhouse from auditing listed companies for two years.

Last month, following a petition alleging illegal operation of global audit firms with Indian chartered accountants, the Supreme Court had asked for the establishment of a three-member expert panel. The order had put the spotlight on the Big Four audit firms — EY, Price Waterhouse, Deloitte and KPMG — which operate through a network of Indian firms in India. 

While a large number of Indian chartered accountants are part of the network, which offers both consulting and audit services, a very strong Swadeshi group within ICAI has opposed the presence of global firms for long, accusing them of entering the country through the back door. CAs, apart from lawyers and architects, have been vocal opponents of global players entering the country, although they are willing to open up on a reciprocal basis.

In fact, a powerful section of ICAI had petitioned the government to mandate joint audit of Indian companies, a move that was rejected as it was seen to be cumbersome and was expected to push up the cost.

The focus on Sebi ruling on Price Waterhouse is crucial given that ICAI has for long wanted powers to regulate firms to expand its mandate beyond chartered accountants. While the government had refused to give it powers, it recently decided to give the powers to National Financial Reporting Authority that will deal with listed companies and large unlisted companies.

Separately, ICAI has also set up another group to suggest a road map for a global presence of Indian CAs. #casansaar (Source - ICAI, Times of India)