Multinational audit firm tag for Big 4 a misnomer: Panel
An expert panel has noted that the “multinational” tag for the Big 4 auditing firms is a misnomer, since these are Indian firms. The committee was formed during the hearing of a case on alleged FDI violations by PwC. VEENA MANI writes
An expert committee, formed after directions of the Supreme Court, has noted that the “multinational” tag for the Big 4 auditing firms is a misnomer, since these are Indian firms.
The committee, formed during the hearing of a case on alleged FDI violations and malpractices by UK-based audit firm Price water house Coopers (PwC) and its associated companies, said an impression has been created that the Indian audit firms, which are affiliated with international networks, constitute Multinational Accounting Firms (MAFs).
However, on closer scrutiny, it turned out that these Indian audit firms are set up as partnerships or Limited Liability Partnerships (LLPs) under Indian laws and their partners are members of the Institute of Chartered Accountants of India (ICAI).
“As such, these firms do not contravene provisions of Chartered Accountants Act, 1949, which bar members of the countries not allowing Indians to practice accountancy in their jurisdiction to become chartered accountants in India,” said the committee, headed by Anurag Agarwal, a joint secretary in the Ministry of Corporate Affairs.
The panel said such Indian audit firms cannot be equated with multi-national corporations. “Consequently, the term MAF is a misnomer,” it said.
As far as allegations of violation of FDI norms are concerned, should revisit the cap on nonaudit the committee said it fees of auditors who are is not a question of violation members of the international or enforcement of FEMA per network. At present, the se since the firm has claimed restriction is that this fee cannot that the funds have been exceed the audit fee. The received by it as grant and not committee recommended that capital. it should be capped at 50 per
It said only the home ministry cent of the audit fee. can verify the veracity of The committee also wanted this claim of the audit firm. the government to revisit the
The committee noted that list of non-audit services that such audit firms admittedly auditors are prohibited from follow various internal processes, undertaking. The Section 144 policies and methodology of the Companies Act prohibits adopted by their respective the statutory auditors from networks internationally. carrying out certain services
This is aimed at maintaining such as accounting and book consistent standards in keeping, internal audit, design audit quality globally within a and implementation of any network. While such networks financial information system, bring better business opportunities actuarial services, investment in a global economy, advisory services, investment they should be subject to necessary banking services, outsourced checks and balances, financial services. the panel noted. such, the panel recommended that the government
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