A committee of accounting and auditing regulator ICAI has said that the global Big Four auditing firms are circumventing laws while providing auditing services in the country.
The Big Four PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte are using the permission granted for doing consultancy work but carrying out other services that they are not permitted to do, a high-powered body of the ICAI, that is probing the Satyam scam, said.
"It has been noticed that MAFs (multinational accounting firms), entered through automatic/FIPB route for rendering consultancy services, are transgressing the permission so granted and are rendering taxation services, auditing, accounting and book keeping services and legal services," said the committee, headed by former ICAI president Uttam Prakash Agarwal.
The Big Four operate in India through domestic affiliates, the report said. Price Waterhouse Bangalore, an affiliate of PricewaterhouseCoopers, had been the auditor of scam-tainted Satyam Computer, a company that was involved in India's biggest accounting fraud.
"... Indian firms and MAFs are defacto the same entities providing the assurance, management and related services and as such their operations are designed to circumvent the provisions of the Chartered Accountants Act, 1949, and regulations framed thereunder," the committee said.
India does not allow foreign direct investment in accounting, auditing and book keeping, taxation and legal services, the committee noted, adding that "no commitment so far has been made by India for opening of such services under the WTO/GATS (General Agreement on Trade in Services)".
The Indian affiliate of PricewaterhouseCoopers include Price Waterhouse firms and Lovelock and Lewes, while Deloitte has tie-ups with C C Chokshi, A F Ferguson, Fraser and Ross and S B Billimoria. KPMG has association with BSR firms and Ernst & Young has a tie-up with S R Batliboi entities.
Last year, ICAI sought details from 94 CA firms about their arrangement with the international accounting firms. However, a number of firms are believed to have not furnished complete information. "The reply from some of the firms is silent as to whether any payments is being made to obtain the licence to use the brand name."