ICAI report on surrogate practice and opening of multiple firms having similar names by Big 4
The central council of accounting regulator Institute of Chartered Accountants of India (ICAI) met on March 13 to consider a second report submitted by its high power committee on Satyam. The committee, set up in the aftermath of Satyam audit failure, has come down heavily on the functioning of Big 4 firms – Deloitte, PwC, KPMG and Ernst and Young.
The report alleges that KPMG and Ernst and Young are indulging in surrogate practice by tying up with Indian affiliates. “KPMG and Ernst and Young have resorted to entering into tie-ups with Indian CA firms and are indulging in surrogate practice. This has created unhealthy competition between the multinational firms too,” observes the committee.
The report highlights the point that foreign accounting firms have opened multiple firms in India under similar names. Deloitte has seven firms registered under the name Deloitte Haskins & Sells, PwC has seven firms registered under the name Price Waterhouse while KPMG, which operated though its Indian affiliate firm BSR, has six firms registered under the name BSR. Ernst and Young has 3 firms registered with ICAI under the name of its Indian network firm S R Batliboi.
Surprisingly, the committee blames its officers for granting multiple firm approvals. “In respect of multiple firms, which have come up after 1st June 1988, the office has uniformly erred in treating the new names as identical names and not similar or nearly similar names.”
Under CA regulations, approval cannot be granted to a firm name which is similar to an already existing firm name. The committee has hence recommended to the council that “any approvals granted for multiple firm name should be withdrawn……”
The report states that the Indian network firms refused to part with a copy of their agreement with Big 4, which had been sought by ICAI. It also states that some of these firms, through their multinational brand names, have been misrepresenting to the public about their ‘competence’ and ’standards’.
The central council has appointed a five-member committee, which will submit its final recommendations on the findings within a month. The council is likely to take some decision on these controversial issues in its May meeting, according to highly placed ICAI sources.
For now, it is an open war between ICAI and the Big 4 accounting firms….