Financial Daily from THE HINDU group of publications
Thursday, Apr 20, 2006
Who are India's top auditors?
"54 per cent of Indian companies pay less than Rs 5 lakh as their compliance costs."
Chennai , April 19
Six audit firms in India grossed a fee earning of over Rs 10 crore. The highest fee paid was Rs 7.95 crore. And only 21 companies paid their auditors more than Rs 1 crore.
These are some of the key findings of a study brought out by Prime Academy, Chennai. `Who are India's top auditors... and, how much do they charge,' is the title of the report, billed as `India's first' on the profession.
Not a summation of the entire population, but of 1,394 companies, adding to "731 audit firms, Rs 1,141 thousand crore turnover, and Rs 208 crore audit fees."
Though the selection accounts for only 28 per cent of the 5,000 listed companies, all the Sensex and Nifty companies are included, explains the report.
Author Mr V. Pattabhi Ram informs that the trigger for the book, codenamed `Project November,' was that there was no definitive answer to the question - Who are the country's top auditors?
Neither the Institute of Chartered Accountants of India nor the Ministry of Company Affairs publishes any such statistics.As a percentage of turnover, how much is audit fee? Only 0.0182 per cent, says the report, after mining data relating to year ended March 2005 and 2004, from published sources and company Web sites. Though the practice space is dominated by solo and small players, "43 firms each with over 10 partners bagged 31 per cent of the audits and 62 per cent of the fees."
These firms audited, on an average, 11 companies, and took Rs 28 lakh per audit.
"Only eight firms (that's just about 1 per cent of the audit population) audited 300 companies representing 20 per cent of the company population." Ranking by the `number of audits' has in the ninth place, Chennai-based CNGSN & Associates. "A large underbelly of the auditing population representing 94 per cent earned under Rs 50 lakh each."
Borrowing a thought from C.K. Prahalad, the report wonders if there is fortune at the bottom of the pyramid? Answer is negative because "54 per cent of Indian companies pay less than Rs 5 lakh as their compliance costs."
The final tally shows A.F. Ferguson & Co at the top, followed by Deloitte Haskins & Sells, S.B. Billimoria & Co, S.R. Batliboi & Co, BSR & Co, PriceWaterhouse & Co, Lodha & Co, Lovelock & Lewes, Price Waterhouse, and S.R. Batliboi & Associates.
"Nine out of ten firms making the grade owe allegiance to one or the other of what the world calls the Big Four," says the report. The sole exception is Kolkata-based Lodha & Co.
An industry-wise classification shows that one in ten was a textile company. Next in numbers are NBFCs, IT, pharma and chemicals, in the population. However, in terms of `best average fee,' automobile comes first, followed by telecom, FMCG, power and consumer goods. Best audit fee ratio (as percentage of turnover) was from entertainment (0.13 per cent); next came hospitality (0.1 per cent) and plantation (0.09 per cent).
"With an annual billing of Rs 208 crore and 2,989 partners, CA India bills at Rs 6.96 lakh per partner," concludes the report.
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