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Thanks to FDI norms tweak, joint audits will boost Indian entities

With the new regime, if there is a requirement for compulsory appointment of a foreign auditor in the shareholders' agreement, then there should be a joint audit

Press Trust of India  |  New Delhi 

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Companies will now have to go for joint audits in case a foreign investor insists on having an international auditor, a move that will provide a fillip to Indian entities. The government's decision is seen as a significant step towards boosting the prospects of local firms amid the backdrop of Big 4 firms holding sway, especially when it comes to companies where there is an overseas investment. Following extensive deliberations and an expert panel report related to firms, the decided to tweak the requirements with respect to companies having foreign While relaxing the Foreign Direct Investment (FDI) policy last week, the said that there were no provisions in respect of specification of auditors that can be appointed by the Indian companies receiving foreign Hence, it has been decided to provide in the policy that wherever the foreign investor wishes to specify a particular auditor/ firm having international network for the Indian investee company, then the of such companies should be carried out as joint wherein one of the auditors should not be part of the same network, an official release had said. According to former ICAI Manoj Fadnis, when there is an overseas investment, generally the foreign investor would say that it wants to have a They want one of the Big 4 firms to be the auditors, he noted. The top global accountancy firms -- PwC, Deloitte, and -- are generally referred to as the Big 4. With the new regime, if there is a requirement for compulsory appointment of a in the shareholders' agreement, then there should be a joint "This would strengthen small and medium Indian firms to a great extent as well as the independence of auditors. When two auditors carry out the work, then there are also checks and balances. "It would help in the growth of Indian firms," Fadnis told While noting that it is a landmark decision, he said globally also, there would be few such instances of national governments taking up such a bold decision. Last year at the of chartered accountants' apex body ICAI, had called for creating four big Indian firms that are counted among the world's Referring to the Big 4, the had said there are so many firms in but none of them has managed to find a place among the top global players. "People talk of the Big 4 firms.

Sadly, there is no Indian firm there. By 2022, let us have a Big 8, where 4 firms are Indian," Modi had said. A three-member group, headed by TERI Ashok Chawla, had submitted its report on various issues related to firms last year. The panel was set up by the corporate affairs ministry in September 2016 following representations from several domestic firms about the negative impact on them due to various practices that lead to circumvention of regulations. "Several firms have represented about adverse impact on Indian firms due to the structuring of certain firms leading to circumvention of various regulations and imposition of restrictive conditions by foreign investors with regard to appointment by companies," the ministry had said while constituting the panel in September 2016. Meanwhile, in a significant order last week, markets regulator Sebi barred network firms from issuing certificates to any listed company in for two years after finding the guilty in the multi- crore scam that came to light in January 2009. had said there has been no intentional wrongdoing by its firms in the Satyam case and expressed confidence of getting a stay on the Sebi order.

First Published: Mon, January 15 2018. 04:02 IST
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