Govt May Mandate Inclusion of Indian Audit Firms in Big Government Tenders
In an effort to allow the Indian Audit Firms to compete with the “Big Four” globally, the government is looking for possible changes to make in the Companies Act. If these changes are approved, they will be introduced through the Companies Act amendment bill.
The Ministry of Corporate Affairs (MCA) is currently planning some changes to company rules, for which it is discussing with the experts and finalising the details. As per sources, one of the key changes is the relaxation of the partner composition rules. The current strict rules restrict the establishment of multidisciplinary partnerships, which allow different professionals like Chartered Accountants, Company Secretaries, Lawyers, etc., to work under the same roof. Relaxing these rules could help firms become more flexible and competitive.
The government tenders for the big audit projects often have strict and high requirements, like turnover, a large number of employees, or global partnerships. These conditions usually favour the Big Four.
Therefore, the government is planning to make it compulsory to include Indian firms in government tenders. They are also looking at changing the rules so that more companies can qualify to secure big audit projects. This would help smaller or newer Indian firms compete more fairly with big international companies.
The government is also planning to bring changes to ease the tender process for the domestic audit firms in big government audits to enhance their participation. Right now, most of these large audits are carried out by big international firms like Deloitte, PwC, EY, and KPMG.
Discussions are also being made to help the capital support mechanism and other enabling devices to help the indian firms invest in technology, overseas expansion and branding.
A senior member of the Institute of Chartered Accountants of India (ICAI) said that changes in tender rules and capital support from the government can help Indian firms build capacity. The ICAI is also working on a digital platform to make it easier for CA firms to merge. These steps are expected to be announced in the next few months.
It is important to make changes to the Companies Act to allow the structural changes in the domestic professional services ecosystem. The government is discussing making changes in Section 144, which restricts an auditor from giving specific non-audit services to a company, its holding, or its subsidiary companies.
Under Section 141(1) of the Companies Act, if a firm is chosen as an auditor, the majority of its partners must be chartered accountants practising in India. This provision has limited the Indian form’s ability to establish multidisciplinary partnerships.
If the Government brings an amendment to this provision, it could help the firms to grow and diversify talent.
