Mumbai, March 9, 2017

As the compulsory audit rotation exercise enter the final phase, many of many professional services firms may be looking to up the ante and poach teams from rivals, say industry trackers.

Even as poaching from rivals has been increasing in last one year, professionals in the auditing teams of professional services firms have largely stayed away from it.

The big four—Deloitte, PwC, KPMG and EY—are expected to increase their market share in the auditing space. According to a study by PRIME Database, audit related changes were made in 152 listed companies (out of 1,520 NSE-listed companies) from FY16 to FY17. Some of the other major firms including, Grant Thornton, BDO, Mazars and Baker Tilly too would try and increase their presence in the auditing space.

Industry experts say that many firms may not have expert partners and executives that can executive a particular audit, even if they win it. Due to this, in 2017, poaching partners and executives from rivals may increase.

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.

 Section 139(2) of the new Companies Act, 2013 says all public and designated private companies, with a few exceptions, will have to change their audit firms after two terms of 5 years each. The auditors have to be given a break of 5 years after two consecutive tenures.

 While the rules mandate that audit firm has to be changed, it remains silent on the audit partner or executives. Industry experts say that in many cases it may happen that the audit partner auditing a company in one firm, may join rival firm. But even in the rival firm he or she may continue to audit the same company. Experts point out that most of the bigger players are consciously trying to avoid such a situation fearing regulatory issues.

[The Economic Times]