The Hindu Business Line : As deadline for Sarbanes-Oxley compliance nears

With a mere four more months away for the deadline for Sarbanes-Oxley (SOX) compliance, Indian accounting firms are seeing a rush of business from subsidiaries of multinationals.

According to industry estimates, the business is worth Rs 400-500 crore and the incremental revenue from such business accounts for around 20 per cent of their revenues.

Companies have budgeted around 15 per cent of their total costs towards SOX compliance.

While November 15, 2004 is the deadline for complying with SOX for accelerated filers in the US for large corporates, July 15, 2005 is the deadline for non-accelerated filers. Earlier, the deadline for smaller companies was April 15, 2005.

According to Mr Srikanth Srinivasan, Director, JCSS Consulting, an accounting firm based out of Bangalore, though the deadline for larger corporates is November 15, 2004, Indian accounting firms have to submit their part of the work as early as October for the company's auditors to check the compliance and sign off the accounts.

"We have earlier deadline as after our submission, auditors have to certify the SOX compliance along with the balance sheets," Mr Srinivasan said.

According to Ms Jayshree Narayanan, Senior Manager in the enterprise risk services division of Deloitte Haskins & Sells, there has been a fair amount of activity in the corporate sector in India especially in the last one year with regard to the Sarbanes-Oxley requirements.

"In that context, companies in India to whom SOX would apply have been seeking the assistance of accounting firms in India to assist them with the readiness assessments," Ms Narayanan said.

Mr Srinavasan said certain teams have already been despatched to countries like Australia, Singapore, West Asia and China etc to carry out the assessment of companies in those countries.

Another JCSS Consulting Director, Mr Srikanth Balakrishnan, said clients prefer Indian accounting firms because they find them well qualified to do the job apart from the fact that key officials in these firms have worked with the Big Four accounting firms.

"With SOX compliance becoming mandatory, there is more business coming from even existing clients," Mr Balakrishnan said.

Mr Srinivasan said those who could take the most hit are the ones who have global presence but have smaller outfits in India.

For the size of the business one gets out of a small subsidiary, the investments are high, he said.

But the challenge for independent accounting firms is recruiting CISA (certified information system auditor) qualified professionals as most of these are already part of major companies.

To meet the increasing demand for such work, the Institute of Chartered Accountants of India (ICAI) has already developed a similar course and offers a diploma for students passing out of this course.

But there are some who see momentum with regard to business acquisition gathering over a period of time.

"Though there has been a lot of such activity in the US and Europe, the momentum in India will gain over a period of time," Mr K.R. Girish, partner with RSM Associates said.