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Big-Four’s dominance has regulator worried

March 7, 2024

The concentration of power with the Big 4 has started to worry the National Financial Reporting Authority (NFRA) and the auditing industry.

At the two-day conference of NFRA, Smita Jhingran, member of NFRA, said that Big 4 auditing firms have a significant share in the auditing business of the top 100 companies listed on the BSE.

“In the auditing profession, we find that the market is skewed. Though we have around 12 firms listed in Public Company Accounting Oversight Board (PCAOB), we cannot boast of having a homegrown audit firm making a mark in the global space. The prime minister has expressed his concern as to why there are no Indian auditing firms in the global arena,” said Jhingran.

PCAOB is a private-sector, nonprofit corporation created to oversee auditors of public companies in the US.

The panelists at the conference felt that there’s need to relook at the regulations so that smaller firms can gain a bigger share in the auditing pie. “The regulations made by the institute are stringent, and the time has come to ease some of the restrictions so that the homegrown firms can grow,” said Ranjeet Kumar Agarwal, president of The Institute of Chartered Accountants of India (ICAI).

In order to compete with the Big 4, ICAI has recently formed a committee to bring together smaller firms and pool their resources so that they can compete with the larger firms globally. “We are aware of the challenges, and therefore, we have come out with the aggregation of CA firms,” Agarwal said.

Meanwhile, small and mid-size audit firms have asked the regulator NFRA to create a level-playing field for them to compete with large firms. “The size of Big 4 is quite large in terms of people, offices and presence across the world. It’s difficult for homegrown firms to match their investments in areas like tech and research. Branding plays a crucial role for the Big 4 to get new business. (We are evaluating as to) how the regulations can help us in create brands,” said Vikas Kumar, CEO, T R Chadha & Co LLP.

[The Financial Express]

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