Deloitte Office, Bangalore

In a major relief to the multinational audit firm led by the big four — Deloitte, PwC, EY and KPMG, a Ministry of Corporate Affairs panel report has recommended the government to allow them to operate in India. The Economic Times reported that the recommendations given by the committee of experts said that "being part of a multinational network and sharing global costs does not mean these firms are controlled or owned by international entities".

The government had formed a committee to look into the complaints made by an Indian firm where they argued that the foreign firms were apparently flouting norms and gaining an undue advantage. Additionally, amid the audit rotation mandated by the Companies Act 2013 that comes into effect on April 1, 2017, the scuffle between the multinational auditing firms (MAFs) and Indian auditing firms (IAFs) intensified. The legislation resulted in IAFs losing clients to multinational competitors.

It is to be noted that the according to the rules, foreign firms are not allowed in auditing and due to this reason, MAFs operate through network firms that do not use the multinational's brand name.

MAFs have come under the radar of investigative agencies as some of them got involved in controversies including involvement in fraud-accused jeweller Nirav Modi or Infrastructure Leasing & Financial Services (IL&FS). A network firm of EY is the present auditor of IL&FS, a form which is facing a huge cash crunch, meanwhile, Network firms of Deloitte were auditors to Nirav Modi as well as IL&FS. In fact, in many scenarios where the companies had filed bankruptcy, network firms of the Big Four were found to be associated as auditors.

However, the panel has argued that the MAFs will be allowed to operate in India in order to order to increase competitiveness. Speaking on the issue Vishesh C Chandiok, CEO, Grant Thornton India said that "Activation of the independent regulator NFRA (National Financial Reporting Authority), formation of multi-disciplinary partnerships, activation of global brands for audit including marketing and business promotion, transparency on non-audit service fees, are all steps aligned with the direction progressive countries have already moved towards."