The Institute of Chartered Accountants of India's executive council has constituted a committee under Jayant Gokhale to examine whether multinational audit and consultancy firms operating in India can be brought under the disciplinary framework of ICAI.
It will also suggest ways to strengthen Indian audit firms in the wake of fierce competition from MNCs.
ICAI sources told Business Standard that the committee, which has been asked to submit its report before the next council meeting in July, would undertake a comprehensive review of the audit work undertaken by firms in India. The committee, among other things, will suggest a roadmap to strengthen Indian audit firms.
The sources said that the issue of restricting the activities of multinational firms which "were providing audit services in the guise of consultancy work" was debated at the three-day council meeting in Cochin which ended on Monday.
The department of company affairs had expressed the view that the regulator's executive council, which is the apex decision-making authority, should deliberate on the issue and revert to the government.
ICAI had recently written to the DCA asking the government to restrict the consulting and audit businesses of the Big Four global auditors in India.
In a letter to the department, ICAI had pointed out that the MNCs were not operating in tune with the spirit of the institute's regulations.
Though the institute did not have hard evidence against the Big Four, ICAI president R Bupathy had said there was circumstantial evidence to suggest they had an arrangement in place in India to undertake both audit and consulting work.
While Indian audit firms are not allowed to advertise and solicit clients for both audit and consulting businesses, the multinational firms advertised for consulting and passed on audit assignments to their Indian associate, he had stated.
At the Cochin meeting, the council could not take up another important issue regarding mandatory rotation of auditors.
The matter is being revisited by the council, which had deliberated on the controversial issue last year.
The council is divided on the issue and if the proposal is cleared then guidelines would be worked out. ICAI sources said a set of options have been put up before the council.
Panel view
- A committee, headed by Jayant Gokhale, to examine whether foreign audit and consultancy firms operating in India can be brought under the disciplinary framework of ICAI.
- Panel will suggest ways to strengthen Indian audit firms in the wake of fierce competition from the multinationals.
- ICAI had recently written to the government to restrict the consulting and audit businesses of the Big Four global auditors in India.
