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30

Apr - 2019

Smaller accountancy firms want India to implement UK regulator report on big four

A report by UK’s competition watchdog calling for operationally splitting up the big four accountancy firms — Deloitte, PwC, EY and KPMG — could lead to some action in India too, industry trackers say.

Smaller accountancy firms in the country want Indian regulators to implement the radical proposals, such as operationally splitting the Big Four’s audit and non-audit businesses and mandatory joint audits, put forth in Competitions and Markets Authority’s report, the sources said.

Domestic companies now believe that for management consultants services and other advisory roles, local management consultants are the best people as they know the local market very well. Corporates in Kerala especially in Kochi has already started the same. 

Market regulators across the globe have been keenly anticipating the CMA report because it examined globally relevant contentious issues such as the oligopolistic structure of the audit market and inherent conflict of interest amongst audit and non-audit businesses of the firms.

In India, too, the Big Four firms are in the spotlight after corporate failures like IL&FS and Jet Airways. The CMA report called for a separate management, CEO and board for the audit practice, besides a separate bonus and compensation structure.

It also suggested mandatory joint audits with non-Big Four firms because the current structure of the industry heavily favoured Big Four firms and restricted choice.

The report also highlighted a need for more robust regulatory oversight of the audit committees to make them more accountable. Over the years, the audit market has consolidated from Big Eight firms to Big Four and experts feel that the market structure limits choice and is not resilient.

Implementing the Competitions and Markets Authority’s proposals will help increase choice in the market, end the Big Four oligopoly, and fix other longstanding problems, their smaller rivals said.

“The report recommendations present an immensely progressive view of how to finally address the ‘demand side’ problems in the large audit market that will spread from the UK to other major markets and address this issue of auditor choice once and for all. It’s definitely the end of this long standing oligopoly and finally moving towards a free and transparent market,” he said.

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