Corporate Affairs Secretary Injeti Srinivas Monday flagged concerns over excessive concentration and lack of competition in auditing work as he mentioned about the dominance of Big 4.
Stressing on the importance of independence of chartered accountants, he said the biggest responsibility of an auditor is to give a true and fair view of the financial health and performance of a company.
His remarks about auditing firms also come at a time when many auditors are under the lens for alleged lapses in the wake of various corporate misdoings that came to light in recent times.
Srinivas said that when it comes to auditing of listed firms, there appears to be a lot of concentration.
"A few companies (audit firms) account for bulk of the audits. May be 90 per cent plus. I read somewhere that at the global level, the Big 4 account for more than 75 per cent of the audits," he noted.
"Is there excessive concentration?. Is there lack of competition?. If there is excessive concentration and lack of competition in a market economy, then it is a matter of concern. How do we deal with this?," he wondered.
PwC, Deloitte, EY and KPMG are generally referred to as the Big 4.
Noting that excessive dominance is again a challenge, Srinivas said that earlier chartered accountants were not looked at from this angle.
"We know dominant companies come under the purview of Competition Commission world over and they take remedial measures. They split the companies. There are views that do we need to split companies and these are debates because as we become more and more mature economy, these are real issues we have to look at," he said.
"For a chartered accountant to be able to do justice to his or her duty, it is absolutely essential that the chartered accountant is independent. The whole crux of the debate is independence," Srinivas said.
Speaking at a function here to mark the 70th annual day of chartered accountants' apex body ICAI, Srinivas also talked about the debate regarding having a mechanism for appointing auditors that is similar to the one followed by state-owned enterprises.
"One of the preliminary debates going on in some parts... is can you have some sort of mechanism similar to that which we have for state-owned enterprises, that is Comptroller and Auditor General (CAG) maintains panel of auditors and appoints them...
"I am not saying that it is under any active consideration of the government. This or some other mechanism you can have and protect your independence," he said.
The secretary also delved into various other aspects related to auditing work, including whether independence of auditors get compromised if they are doing both audit and non-audit services.
"Should there be a cap on non-audit service revenues compared to what you get from audit services? What is the role of auditors, internal auditors... we have to look at all these tough questions," Srinivas said.
Sending out a strong message, he also said if there is no strong professional ethics, best of audit standards and best of technologies, then the dream of achieving USD 10 trillion economy cannot be realised.
Chartered accountants should emerge as the steel frame of corporate governance in India, he added.