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CA Amresh Vashisht

The third-party report over Toshiba Corp’s marked the most damaging event to their brand in 140 year history by breaking an accounting scandal of overstatement of profits going back to the 2008 financial year. The chief executive Tanaka and a string of other senior officials resigned on Tuesday for their roles in the country’s biggest accounting scandal in years. Monday’s report by an outside panel of accountants and lawyers said Toshiba had overstated its operating profit by 151.8 billion yen ($1.22 billion), roughly triple Toshiba’s initial estimate. The Japanese Institute of Certified Public Accountants will interview accountants at Ernst & Young Shin Nihon and check documents for major items they may have overlooked, intentionally or otherwise.

Its only replay of the 2010 episode on Indian soil related to satyam. India rocked by the accounting scandal on the same lines of overstating profits, cash in hand , fake turnover & fake tax credits . It was a fraud, which misled the market and other stakeholders by lying about the company’s financial health. Even basic facts such as revenues, operating profits, interest liabilities and cash balances were grossly inflated to show the company in good health. The role of external third party auditors, who were tasked to ensure that no financial bungling is undertaken to carry out promoters’ interest or hide facts, has also been brought into question. The auditors were having illegal professional affiliation with of Price water house. The Indian arm PricewaterhouseCoopers was the statutory auditor of Satyam Computer Services when the report of the scandal in the account books of Satyam Computer Services when the report of scandal in the account books of Satyam Computer Services broke.

In India, The accounting professional growth is like an unguided target less missile. No field work is there. No regulator assurances are there. These targets less missiles may have a deadly impact. Some time someone, somewhere may hit own Dron and may blame it as enemy Dron. In fact, we require the Americans Patriot missiles to intercept as many targets less missiles are in operation. There are yearnings among us to return to the gold old days when the firms were small, there were leaders of great stature and camaraderie rather than competitive rivalry were the rule. In India, the Big 4 has destroyed the Tana bana of the profession.


Our profession has definitely gone through a transformation that largely parallels the rapid expansion of the economy. It was in the last 15 years the growth of the profession went through on the footprints of Big 4. The nationalist top firms have adopted a route to become larger by holding the hands and coverage of Big 4 firms. The Big 4 firms have largely absorbed the local firms and spread their wings to big corporations. Slowly these firms have entered in to midsized corporate houses and after 15 years they are looking for a final assault over smaller nationalized firms. No one can beat them. The only authority, i.e. the council of ICAI, which can check them and restrict them seems to be now by and large at the disposal of the Big 4 being their paramount presence at council. The next few years shall be marked by their presence at the 40 hot seats and they know how they shall swallow the entire respectable accounting professional opportunity.

All firms who sat on the lap of the Big 4 have expanded by employing member’s at the large number and to fulfill their clients’ needs they became international in scope. These firms have devoted a great deal of efforts towards establishing affiliations on a worldwide basis. The gap is quite clear between largest Big 4 firm and the remainder of the profession. Their first target is the firms of national level spread over to the whole country. These national level firms were built preliminary by serving big corporate, midsized and smaller houses. But these big corporate houses have already slipped and reached at Big 4. Mid Sized firms are slipping day by day. Presently BIG 4 doesn’t care for the smaller corporate houses.


These firms are having a huge no. of chartered accountants as their associates. They are salaried chartered accountants and they devote their full efforts to the firm’s clients. To provide them with the necessary incentive the firm holds out the prospects of eventual promotion to partnership, but only after prolong probationary period during which the associates work under the supervision & the tutelage of their seniors and are gradually assigned increased responsibility. The strategy is simple to recruit young. The presence of a steady supply of highly qualified, but inexperienced young recruits is one of the key ingredients of the big law firm.

The core element of Big 4 firms is the promotion to partnership. Another way is to have a directorship of the associated companies dealing with the matters after than assurance or directors, partners, & employed chartered accountants are not equal, but are arranged in a hierarchy with command and supervision in the former. But they for them CA practice around the promotion to partnership patterns became the industry standard.

The future of a Chartered accountant firm has already surfaced with a keynote that the work in the hands of these firms are not evenly distributed. Out of about 2,17,000 chartered accountants, fifty-two percent are in employment, and forty-eight percent, in public practice, The employment percentage is bound to increase as more and more qualified CAs are taking up jobs, rather than going into practice through professional CA firms.


In 2010, ICAI issued a document that MAFs are operating illegally in India. The fact is that Accounting Firms popularly known as BIG 4 firms are not operating at Indian soil by their own name. They are engaged in surrogate practice by their own ways and means. In India, the top affiliated firms decline their affiliation with international firms but the international surveys of accounting networks across world, India stood 7th among the world network. After Satyam , ICAI forced to take up the issue and it has done its duty with the diplomatic language of yes or no. An aggressive council member from SIRC forced council to release the report at public domain. The Said report titled as REPORT ON OPERATION OF MULTINATIONAL NETWRORK ACCOUNTING FIRMS IN INDIA. The report carries observations, summarization of responses from MNAF,   findings and recommendations. Many points were observed and placed before the council. Some of the alarming points were:

  1. As per agreement members firms (Not necessarily Indian firms) are required to refer the work among themselves and referral fee of specified percent was payable /receivable.
  2. Firms found using brand names and logos.
  3. Their emails carried the name of international brands duly mentioned on their parsonal cards thus establishing their affiliation with international audit firms.
  4. Many firms were found making payments to international firms at specified percent.
  5. One firm used “Associated Firm throughout the world”.
  6. Remittances were also received from non members and they haven’t disclosed the purpose.
  7. Firms were registered with similar / identical names so


ICAI missed an golden opportunity to throw them out after the Satyam episode. The reasons were quite unclear. The first part was submitted to the government was nothing but a story written and directed by ICAI bosses. The second part was prepared, but torch holders of ICAI changed. They deliberated on the second part of the report and declare it as non understandable. A task force was made to go through the report and without any strong recommendation; the same was submitted to Government.

The Institute of Chartered Accountants of India should take strongly act against the going on malpractices by the Big 4 firms. The disciplinary actions should be initiated sou moto through the Disciplinary Directorate against their surrogate practice. A legal injunction shall be obtained from the higher courts for their malfunctioning.

Also neglected is the lack of action against MAFs knowing that they are operating illegally in India and harming the CA profession in India. The government of India is very keen to see that Indian services are exported as per WTO, GATS and similar arrangements. However, given that the vice president in office himself represents MAF, office bearers do not take action against the wrong doings of the MAFs. This is, in spite of the fact that at regulatory level also, various matters have been viewed seriously and strictures have been passed. 20% of the nomination on the committees of ICAI comprises representatives of the MAFs like Big 4s. The undue importance to MAFs has increased to such extent that the IFRS Foundation is organizing programmes with KPMG in India instead of with ICAI. The saffron party has recently appointed one among Big 4 to audit their expenditure and to present before election commission. The present coal allocation was again and again consulted with the Big 4. So where are any obstacles in their growth in India.


It is a bare truth that chartered Accountant profession needs progressive dimension of running a successful Audit firm. Another truth is that in today’s national & global area, A Chartered Accountant prepared himself to do more and to make new. It is time that every chartered Accountant with the vision & desire to create new avenues must also be able to successfully administer his or her practice. Here vision is not a luxury, but a necessity otherwise there shall be confusion & disharmony.

Unfortunately, in the last 10/15 years, the regulator has given a way and developed a meaningless four-layer model of professional practice.

  1. LAYER- FIRST –       Big 4 firms with international affiliations.
  2. LAYER- SECOND – Big firms at National Level
  3. LAYER –THIRD –     Midsized Local /Regional Firms
  4. LAYER –FOURTH – Small Local Firms
LAYER STATUS 2003 2013
FIRST 16 to 20 partners 25 56
FIRST 10 to 15 partners 104 277
SECOND 6 to 9 partners 824 1,272
THIRD 3 to 5 partners 3,629 6,129
FOURTH 2 Partners 7,464 8,316
FOURTH Proprietary 33,561 38,132
Total 45,607 54,182

Fortunately, we still have a time to roll back the disaster and to promote same playing field to the practicing chartered accountants. The four corrective measures are need of the hour and be taken up seriously by the regulator of accountancy professional practice.

  1. The most effective protection against poor practice of the individual/small practitioner of fourth Layer and to provide a framework for the protection of the national level second/third layer firms.
  2. Next, Should initiate to dispense and destroy the flimsy conditions of turnover, strength, location of the chartered accountant firm for appointment and allotment of audits.
  3. That culture of joint auditors or associate auditors be replaced with the ongoing defective pattern of appointment and allotment of audits for solely looking towards the partner.
  4. Finally, The professional regulatory body should regulate a national framework of assurance of same playing field to all and to work on to destroy the illegal operations of layer First Big 4 firms .


The reality is that Big 4 are huge international audit organizations, the largest accounting firms in the world and some of the most influential professional people on earth. They work through an intricate network of high level contacts and special relationships. They are into everything! These firms are unique as they provide highly customized & highly personalized services involving the skills of individuals.

Auditing remains the foundation of the Big 4 practice. It is the center of the action the land of big bucks. They called their higher fees, draw their greatest par and gain entry into the hearts and minds of corporate executives, political leaders and bureaucrats, big lead Auditing is their private presence the one lust & lucrative business market that they alone control. Big business needs big audits and the Big 4 are gigantic. Together they employ thousands of members of the institute. Now it’s a commercialization of CA practice at global lines.

The society of Indian Law firms has filed a complaint with the Bar Council of India claiming that the Big 4 CA firms are carrying on unauthorized practice of Law contravening section 29 of the advocates Acts which provides that only Indian Citizens who are enrolled with the State bar Council can practice in law. Lay people can act against them, but the real regulator has never discussed on any of the issues related to these CA firms. What a big surprise? What a great blunder? In India we are lucky as we have the second largest body of chartered accountants in the whole world with 230000 members. Why such strong forces need the name and protection of international brand?

* The views expressed above are personal view of Author.

(About the Author- Author was Member of ICAI- Regional Research Committee 2013-14 and ICAI- Committee For Direct Taxes 2011-12 and can be reached at email or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA)

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Author Bio

Author was Member of ICAI- Capacity Building Committee 2010-11 and ICAI- Committee for Direct Taxes 2011-12 and can be reached at email or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA) View Full Profile

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  1. Sudhir jain says:

    Dear sir,
    I read your article.It really make sense and why action is not being initiated. for this member fraternity has to take strong against institute top brass asking for their accountability towards the chair and for not taking any action against big 4.

  2. CA Rajesh says:

    Dear sir

    some one take initiative & initiate action against errant firm specially big firm who are defaming the prestige & glory of institue

    Ca Rajesh Gupta

  3. CA.MAHESH KUMAR says:

    Nice Article,

    We more than 70% proprietorship firms if unite can restrict BIG 4 firms.Only thing we most educated professionals must elect council members who are proprietors and are ready to take care of our interest.

  4. kishor says:

    We all need to do lot in order to revert the golden days. Knowledge alone cannot speak. First and foremost ethics of CA profession should speak first.
    People are coming for vote for thousands time, Atleast all council member should try to take against the BIG 4 (whoever is doing wrong). Level 1 & 2 firms should not allow for contest for CA election.

  5. Abhishek Agarwal says:

    Dear sir, your article was quite informative and worth reading.
    Ii hope our so called torch bearers – ICAI looks into all this and take some necessary steps and measures to curb such malpractices.
    The institute’s politics is accused of many such irrational decisions in past too- be it relates to examinations, education system, pass percentages, fund-laundering, and even latest one as elaborated by you.
    Its high time, Institute should re-engineer its processes and create a trasnparent flow process chart of everything.

  6. CA Nilesh Darji says:

    Very good article.
    Still we are unable to understand why ICAI is not initiating any action against so called Big 4. It’s happened only in India…..

  7. supriya says:

    Even newly qualified Chartered Accountants are also fascinated towards BIG 4 only due to lack of opportunity in starting the own practice. Institute should take initiative and encourage the new one’s so that they could think about their own practising firm…

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June 2024