Big 4 intl audit firms circumventing laws: ICAI panel
Press Trust of India / New Delhi Apr 05, 2010, 16:10 IST
The big four global accountancy firms -- PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte -- are circumventing laws to provide auditing services in the country, says a report of an ICAI's committee.
"It has been noticed that MAFs (multinational accounting firms), entered through automatic/FIPB route for rendering consultancy services, are transgressing the permission so granted and are rendering taxation services, auditing, accounting and book keeping services and legal services," the high-powered body probing the Satyam scam said.
The big four international accounting firms are operating in India through their domestic affiliates, it said.
Price Waterhouse Bangalore, an affiliate of PricewaterhouseCoopers, had been auditing the accounts of Satyam Computer Services, a company that was involved in the biggest accounting fraud in the country.
"... Indian firms and MAFs are defacto the same entities providing the assurance, management and related services and as such their operations are designed to circumvent the provisions of the Chartered Accountants Act, 1949, and regulations framed thereunder," said the committee, headed by former ICAI President Uttam Prakash Agarwal.
The government does not allow Foreign Direct Investment (FDI) in accounting, auditing and book keeping, taxation and legal services, it said, adding "no commitment so far has been made by India for opening of such services under the WTO/GATS (General Agreement on Trade in Services)".
The Indian affiliate of PricewaterhouseCoopers include Price Waterhouse firms and Lovelock and Lewes, while Deloitte has tie-ups with C C Chokshi, A F Ferguson, Fraser and Ross and S B Billimoria. KPMG has association with BSR firms and Ernst & Young has a tie-up with S R Batliboi entities.
ICAI had in June last year sought details from 94 chartered accountants firms about their arrangement with the international accounting firms. However, "a number of firms have not furnished complete information as asked for by the committee".
"The reply from some of the firms is silent as to whether any payments is being made to obtain the licence to use the brand name."
Besides, the committee has recommended that the Institute maintain a mandatory record for registering international network/affiliations of Indian CA firms.
"The Council should seek for explicit powers to call for information and documents directly from any one to enable it to regulate the profession," it said.
Further, it has also suggested a regulatory mechanism for all entities providing management consultancy and other services with members of the ICAI.
It took a scam to come out with such findings which has been existing since ages. Neverthless, it is heartening to note that at last some one has the courage to speak out.The standards of these MACs have been well established as is evident from the collapse of foreign banks which were being audited by these auditors. Do we require any more eye -openers. We , unfortunately have a penchant for anything tagged "foreign". Despite such fallible track records , such firms find a place in our system to carry out investigations/ find a place in our banks/organisations as advisors.
It is very strange and funny at the same time that the ICAI, the top-notch body of Accounting Profession in this country is saying this. If it is a public knowledge that these MAFs are operating in this country for so long, why ICAI is so late in taking action against the violators of law? Is it without any teeth or the courage and guts to initiate the action against the big and powerful?
Content Guide
