MUMBAI: Water house non-audit service- Price Waterhouse Network of Firms in India (PW India), which is part of the PwC India, on Thursday, said that they would no longer provide non audit services to their audit clients in India which are governed by National Financial Reporting Authority (NFRA). This would essentially mean that none of the network firms under the PwC umbrella would offer any other service like consulting or tax advisory to any company they audit, said people in the know. Most Indian audit firms operate through network firms.
This is mainly because auditors as per the current regulations cannot offer non audit work to any of their clients. This comes within days after the Ministry of Corporate Affairs (MCA) released a consultancy paper where it sought comments on how to deal with firms that offer non-auditing work to their auditing clients. As per the regulations a firm which is a statutory auditor of any company or bank cannot do any other work and earn from it. All firms, including the Indian ones; however interpret the regulation in a way that the auditor cannot offer certain services to their audit clients.
Considering the wide-ranging discussions with stakeholders about the future of audit, PW India firms believe that this voluntary action will further strengthen the audit profession in India and enhance trust in the Indian capital markets, society and Indian economy at large. Commenting on this new development, Subramanian Vivek, Partner - Price Waterhouse said: “Given the important role that auditing plays in the Indian economy, everyone that relies on audit needs to have the same high level of confidence in auditor’s independence, objectivity and effectiveness.
PwC would be the second firm after Grant Thornton India that will completely stop providing any service to their auditing clients. This would mean that PwC will have to walk away from accepting consulting or tax work for all the companies and banks they audit. A consulting paper floated by the MCA is currently seeking comments from all the firms on the structural issues in the profession.
The consulting paper specifically mentions Big Four firms—Deloitte, PwC, EY and KPMG-- and some of the issues related to the firms. MCA is seeking comments from all the auditors on the paper and looking for solutions on several aspects and problems in the auditing industry. According to the consultation paper there is an economic concentration of the big four firms that could impact the Indian economy.
To overcome this situation, there is a need to build capacity of home-grown Indian firms who may need to be at par with global organizations in terms of audit procedures, audit tools, manpower capacity to audit large organizations etc. For that panel of auditors need to be maintained from where the auditors can be appointed. While preparing such list, the assessment of the financial stability of the firms and anticipation of possible risks to a firm's ability to conduct high quality audits would be required,” the consultation paper reads.
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