Financial Daily from THE HINDU group of publications
Tuesday, Jun 10, 2003
Financial Daily from THE HINDU group of publications Tuesday, Jun 10, 2003 |
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Industry & Economy
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Accounting Standards Allegation of `surrogate auditing' — ICAI may be approached for a legal framework
Richa Mishra
NEW DELHI, June 9 ARE foreign consulting entities stepping on the toes of domestic chartered accountancy firms? While there is no concrete evidence of what is being popularly termed in market parlance as "surrogate auditing", Indian chartered accountants are crying foul over insufficient regulation on the activities of such foreign-owned entities in the country. The Department of Company Affairs (DCA) is likely to ask the Institute of Chartered Accountants of India (ICAI) to suggest an appropriate legal framework under which the institute would, if at all, like to exercise its `regulatory oversight' on some of the consulting activities carried out by foreign consulting firms in the country. This follows a recent communication from the ICAI, wherein the concerns of a section of the chartered accountants community on certain activities of foreign consulting entities were conveyed to the DCA. A Finance Ministry official said that the department would insist on the opinion of the ICAI Council on the entire issue before coming to a conclusion. "Any allegation of surrogate auditing has to be substantiated and the ICAI Council should be convinced of the same before regulatory changes can be considered", the official said. The ICAI Council had recently constituted a group under Mr Jayant Gokhale to thoroughly look into the activities of the foreign firms and recommend measures to it. The group would also suggest ways and means for strengthening the Indian audit firms in a fiercely competitive General Agreement on Trade in Services (GATS) environment. A section of aggrieved chartered accountants has pointed out instances that may lead to an inference that some of the foreign consulting entities in India are carrying out "assurance" activities on the financial statements of Indian enterprises. Even though enough expertise exists among Indian chartered accountants, they are often not considered for assignments such as giving an opinion on conformance of financial statements to US GAAP requirements. The reasons could be manifold, including absence of visibility for Indian chartered accountants due to advertising restrictions placed on them. While ICAI exercises strict `regulatory oversight' on the activities of its member firms, it has very little say in the activities of the foreign consulting entities. The common opinion among a section of the CA community is that either the ICAI should have some `regulatory oversight' over the activities of such entities or there should be relaxation of the restrictions (such as advertising) currently imposed on the chartered accountants by the ICAI. "The issue is one of a level playing field even though foreign entities are better placed to have their own way because of both financial muscle and intellectual prowess", an ICAI Council member said.
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