The Institute of Chartered Accountants of India (ICAI) has approached the ministry of corporate affairs (MCA) to discuss the functioning of all those foreign firms who are offering auditing services in India through their tie ups with the local firms.
According to ICAI, the manner in which the foreign firms handle their auditing services in India needs to be revisited and if possible, reviewed. The foreign firms usually manage business contracts from multinationals and sign up with a local audit firm’s name so that they can perform auditing services in India.
ICAI president, Uttam Prakash Agarwal recently had a meeting with Jitesh Khosla, joint secretary, MCA to discuss issues that include how foreign firms set up alliances with the local auditing firms in India and whether their agreements are valid as per the World Trade Organisation (WTO) norms.
As per the WTO norms, foreign firms are barred from carrying out auditing and assurance services in India. On the basis of this ICAI had opposed the move of Satyam’s new board to appoint KPMG as the company’s new auditor. ICAI made an objection but was not able to displace KPMG from Satyam’s auditing seat.
ICAI objected to foreign firms practicing in India through local tie ups—underlining the point that what companies are not permitted to do upfront and directly must not be done through indirect and obscure means.
After General Agreement on Tariffs and Trade (GATT) was replaced by the WTO, the entry of foreign firms in India was also stopped.
Auditing firms like Price Waterhouse (PW) and Deloitte Haskins and Sells got their licences before this happened.
Other firms like Ernst and Young (EY) and KPMG don’t have licences to work in India but they still manage to do so by tying up with the local audit firms in India.