RBI’s norms pit Indian auditors against MNCs
On April 27, the central bank had issued guidelines for appointment of statutory auditors in commercial banks, non-banking financial companies and housing finance companies that included a cap on the number of audits by an audit firm, joint audits in some businesses, a cooling off period, non-audit restrictions, and a reduced three-year audit tenure.
This will curtail growth opportunities for multinational firms and create substantial transitional issues, but Indian firms a chance to get more audit business from the lucrative financial sector currently dominated by the Big Four.
Multinational auditors have started reaching out to RBI, industry associations like CII and FDCI, and even larger financial companies to highlight transition problems and risks of joint audits.
Indian firms have launched a counter-offensive by supporting the central bank’s move and taking their case to the regulator and financial companies directly and through industry associations such as Assocham.
“Indian auditing firms (IAFs) wholeheartedly support this RBI circular and we believe that going forward these regulations would become a model for other regulatory bodies like Sebi (stock market regulator) to come out with similar regulations for top 500 listed companies, to start with,” said Jeenendra Bhandari, partner at advisory and accounting firm MGB.
“In my view, any transition always poses a lot of questions and challenges for its practical application,” he said, shrugging off multinationals’ complaints.
The big fight is over joint audits that have been made mandatory for all entities—commercial banks, NBFCs and housing finance companies—with an asset size of Rs 15,000 crore plus as of March 2021.
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