Big 4 scores a win as ICAI pauses 'global networking norms'

Mumbai: The Big 4 firms have won the cold tussle, simmering behind closed doors, against the army of Indian auditors who have been trying to change the rules of the game.

For almost a year, the Institute of Chartered Accountants of India (ICAI), the statutory body under which local audit firms are largely organised, has been pushing the 'global networking guidelines'-a new set of norms that introduced onerous compliance, penal provisions and sharing of confidential business information with ICAI.

Finding them at the receiving end of the 'guidelines', the influential Big 4-or Big 6 including other global consultancies-began an intense lobbying with the government in opposing them. This seems to have paid off now.

At its meeting last week, the 40-member central council of ICAI debated the matter in detail. While no final decision was taken, the networking guidelines are learnt to have been put on hold, two persons familiar with the development told ET.

"The guidelines could be either deferred or withdrawn, we are not sure at this stage. The MCA (ministry of corporate affairs) has also raised the issue with ICAI. This has been discussed threadbare by the council. Earlier, ICAI had meetings with MCA, but some members think there should be a written reply to formally convey the stand of the institute," said a council member requesting anonymity.

Another person who also did not wish to be named felt there may be a scope to revisit and review the guidelines.

Since the Indian law bars the Big 4 and other foreign consultancy majors to offer audit services, they enter into arrangements with local firms which act as audit affiliates.

REVIVING OLD FRICTION

Besides disclosing the commercial terms of these private arrangements, the consultancy majors are also resisting the heavy responsibilities that the new guidelines place on the nodal officers and ICAI's powers to act against the person and the firm following compliance lapses. The big firms have also objected to another element of the networking guidelines that require all dealings between an audit firm and its global organisation to be carried out on an 'arm's length' basis.

ICAI president Prasanna Kumar D did not comment on the matter.

Sources said in the course of interactions with the MCA, representatives of some of the Big 4 firms have conveyed their discomfort in disclosing confidential business arrangements with ICAI which is run by practicing chartered accountants and partners of audit firms.

"Even though the council has eight members representing the government and stakeholders like CAG, Sebi and MCA, the Big 4 firms have raised the issue with the government. These firms dominate the finance, regulatory, technology, business and tax consultancy sectors, with audit constituting a comparatively smaller business for them. Still they feel very strongly about it," said a senior professional.

Although a gazette notification was issued on the guidelines, ICAI has been refraining from uploading the guidelines on its website, thanks to the sensitivity the matter assumed after the issue was escalated to MCA, said sources.

While the aim of the networking guidelines was to enable domestic audit firms to access other markets, gain knowhow through tie-ups, and grow their client book, it ended up stoking the age-old friction between local firms and the Big 6 which have over the years used their respective international brands and networks to build a formidable presence.