Mumbai, March 2, 2017
The committee constituted to opine on the viability of simultaneously engaging two auditors to examine one company’s books is set to be announced in March, say sources.
An expert panel led by the former competition regulator has already submitted its recommendations to the government recently.
The Ashok Chawla-headed committee’s recommendations to the Ministry of Corporate Affairs (MCA) are set to impact many stakeholders: Chief Financial Officers of India Inc, local; audit firms and the Big Four auditors.
As per the current regulations Indian companies are required to choose a new auditor by March end as part of audit rotation. The companies are required to form audit committees in their companies to choose the new auditor.
It is expected that in many cases some of the largest Indian companies would move from their Indian auditors they have had for several years to one of the big four—Deloitte, PwC, EY and KPMG. Many Indian audit firms are set to lose out as most of them tend to depend on one company for most of their revenues.
These Indian audit firms have been pushing for joint audits. Joint audits would mean that Indian companies would be required to hire two auditors.
In auditing space, Deloitte has traditionally been one of the largest players followed by the other three.
If the committee rules in the favour of joint audit many Indian firms could rejoice as they may still hold on to some of the new work. In July, last year, leaders from top Indian audit firms met in Mumbai to discuss ways to combat the increasing influence of multinational audit firms.
In their representations to the committee, some CFOs and business leaders representing industry groupings, such as CII, FICCI and Assocham, have said that the choice of the auditor should be left to the company’s discretion. They said joint audits could lead to higher costs, and a host of administrative issues pertaining to proper division of responsibility and accountability would crop up.
[The Economic Times]