Why India still lacks big audit firms despite rapid economic growth

By Dr (CA,CMA,CS)Ashok Haldia, Former Secretary,ICAI

Apr 26, 2026

Low audit fees, firm bias, technology gaps and regulatory hurdles continue to limit the scale and competitiveness of India's domestic audit firms

Growing economy and domestic firms- the paradox

It is ironical that India, on the threshold of becoming the third largest economy; its accounting industry is dominated by big foreign networks or their Indian affiliates.

Prominent Indian firms are dependent upon audit methodology, intellectual capital and technology platforms of foreign networks without being accountable to Indian regulators. Many firms join foreign networks for 'brand optics', giving an illusion of professional and technical collaboration.

The National Financial Reporting Authority (NFRA) has found audit deficiencies which are fundamental to audit quality in its disciplinary and inspection reports in regard to 'multi-national' audit firms. Of late, there have also been security concerns around data governance and accountability in access, use and retention in AI models and IT systems deployed by these firms for assignments undertaken for governments and entities of national importance .

Reform audit fee: under paid, under resourced and sub- optimal delivery

What ails the accounting industry in India is well known and does not need elaboration. However, underpinning all is an unviable audit fee model — leading to under-resourced teams, weakened audit efforts, inadequate audit infrastructure, poor technology adoption and adaptation, a depleting pool of high-quality talent in audit — and a 'firm bias' in favour of MNC firms by governments and large companies, ignoring otherwise capable and competent domestic firms. The debate and discussion have identified this as an issue but failed to give it the emphasis it deserves.

Regulatory and market pressure should compel companies to determine audit fees commensurate withthe nature, size and complexity involved. Sebi (Securities and Exchange Board of India) should mandate audit committees to disclose in annual reports the basis adopted for selecting the appropriate audit firm and for determining the reasonableness of the audit fee.

Authorities like NFRA, RBI and Sebi should, in their investigations or inspections, examine the process of selecting audit firms and the reasonableness of audit fees, as is being done by PCAOB in the US and FRC in the UK. A lower-than-reasonable fee should prima facie be an indication of compromise with audit quality or auditors' independence. Audit Standard on quality control provides enough guidance on this.

Eliminate firm bias- big is not bane but go by competence and not by seniority or size

Firm selection should prioritise competence and relevant experience over size, revenue or seniority.

Currently, the Big 6 handle about 65 per cent of Nifty 500 audits and cover nearly 45 per cent of NSE market capitalisation, highlighting the dominance of foreign-affiliated networks.

Selection should be based on a two-part bids model — technical qualification bid first and financial bid later, subject to a benchmark floor level of fee — rather than on criteria designed to suit pre-identified audit firms. The idea is not to demean MNC big firms but to suggest progressive localisation of high-value PSU and BFSI audits for creating demand for capable local firms and competitive pressure on MNC firms.

Scaffolding domestic firms for increasing their financial and technical capability

● Strengthening domestic firms will require structural support. This includes:

● A Development Fund to promote large domestic firms

● Fiscal incentives such as tax benefits and preferential empanelment

● Allowing private equity participation with safeguards, including majority control by Indian chartered accountants and strict conflict-of-interest norms

● Use of transformative technology has become a strategic imperative and is, at the same time, beyond the reach of domestic firms.

The Development Fund should develop a state-of-the-art integrated audit technology platform covering documentation, sampling, analytics, and standards compliance.

Considering the enormous time, effort and investment it requires, it should be deployed in phases: beginning with the top 100 firms and integrating mandatory capacity building. It can then be rolled out nationally over five years, free for smaller firms and on a user-fee model for larger ones.

Make domestic firms to think, plan and act big

One key issue, in fact a major stumbling block, that has not received attention so far is strengthening the CA curriculum and practical training, to close the gap between the individual capability of CAs and their capability to envision, plan, strategise, organise and operationalise a big firm, national network, or global network.

The CA curriculum and post-qualification CPE need to focus also on these enabling skills, apart from accounting and auditing expertise.

Ceding control over one's founder-owned firm to become part of a network of multi-disciplinary firms spread over different jurisdictions requires the ability to see a larger picture, and considerable leadership, organisational, and inter-personal skills.

Regulate not to stifle network but follow comply or explain model

While ICAI has introduced guidelines for governing networks and the government is in deliberations on various measures for facilitating MDPs, what is missing is a template-based, disclosure-driven 'network governance' framework.

Efforts appear to be more towards stifling operational flexibility rather than enabling regulatory watch (not surveillance). ICAI and the government should develop a model network governance template specifying minimum standards for management, quality control protocols, brand usage, and conflict of interest.

Networks adopting the template should then be expected to comply or explain deviations publicly, on the model of corporate governance codes. Networks should further publish annual transparency reports, including disclosures on network governance and arrangements, on the lines required in the UK and US.

Status-quo not an option-reforming domestic firms a strategic imperative

Reports of the government setting up separate institutions to take over education, examination or disciplinary functions from ICAI, ICSI and ICMAI reflect the temptation to reach for structural fixes rather than substantive reform.

The profession does not need new institutions, it needs ICAI and MCA to act decisively on the measures outlined above. Raising the structure and stature of the audit profession is a strategic necessity.

The status quo has and will further drift towards an existential crisis for Indian audit firms.

The author is Former Secretary, ICAI

Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper

[The Business Standard]