Come April 2017, there is likely to be chaos in corporate India. Not because of bad economic conditions or some policy paralysis of the next government, but because of the newly introduced Companies Act. According to the Section 139 of the Companies Act, all companies (with public deposits of above Rs 50 crore) will have to rotate their auditors after 10 years.

In the case of companies which already have an auditor for more than 10 years from the day the new Companies Act kicked in, the law gives them a cooling-off period of three years to change the auditor. It is believed that a long-term relationship leads to coziness between the company and its auditor which creates a potential conflict of interest. A number of Indian firms have had strong relationships with a particular audit firm for over 50 years. That will now come to an end.

The law has come as both a threat and an opportunity for auditors. Bharat Dhawan, managing director of Mazars, says that auditing firms like his will be gainers. He says that most large corporates - Reliance Industries, Tata Group, M&M -currently have one of the four big four firms - EY, KPMG, Deloitte and PricewaterhouseCoopers-as auditors.

"Deloitte and PwC have maximum of listed companies today. I think Deloitte will be a loser to that extent," he adds.
Moving away from the big four, there are only two global auditing firms present in India: Mazars and Grant Thornton. Industry experts say that two things that matters in the auditing space is cost and attention. Mazars says that there's a 30-40 per cent cost difference between them and the big four. Plus, its partners give more attention to each client.

Once a company becomes big, the board of directors forces them to go for one of the big four auditing firms. "But that is changing. We have a lot of private equity investors coming to us and saying that promoters don't want big four because they are too expensive. And they don't give them time," says Dhawan adding that it's target is not Reliance Industries but companies that have an annual turnover of Rs 50 to Rs 7,000 crore. "There are 7,000 listed companies in India out of which active would be 3,000. There may be at least 2,000 which I may target. Actually, if you leave aside the top 100 companies, the rest will be our targets," he says.