India's competition regulator may probe dominance of the ‘Big 4' audit firms and check whether they are impeding fair competition, one person aware of the development told BloombergQuint.
The ‘Big 4' auditors—Deloitte, EY, KPMG and PwC, who service a third of India's listed companies' audit business by value—together act as “entry barriers” for domestic firms, the person quoted above said requesting anonymity as the information isn't public yet. The Competition Commission of India may “suo moto” probe these four accountancy firms, he said.
The regulator hasn't responded to BloombergQuint's emailed query.
The issue stems from the crisis of credibility facing the ‘Big 4' and their affiliates, which according to Prime Database audited close to 60 percent of the Nifty 500 companies in 2017-18. A year ago, SEBI banned PwC from issuing any certificate of audit for listed companies for two years over a fraud at Satyam Computer Services Ltd. Last month, the banking regulator suspended an EY affiliate, S.R. Batliboi & Co., after it found lapses in a statutory audit assignment of Yes Bank. Also, the Indian government sought a ban on Deloitte Haskins & Sells, stating it failed to warn about mounting risks at IL&FS Financials Services Ltd.
A week earlier, Corporate Affairs Secretary Injeti Srinivas, at the foundation day of Institute of Chartered Accountants of India, had said, “There's a discussion (globally) on whether there should be a split of these firms so that audit service is not concentrated in a few hands.”
Not only in India, but the U.K.'s competition watchdog also launched a review of the market power of the big four accountancy firms—more than 90 percent of FTSE 350 companies in the U.K. and S&P 500 companies in the U.S. are audited by these four auditors.
The influence of the ‘Big 4' firms has made it difficult for domestic firms to grow in size or show their ability, the person quoted above said. Keeping a check on the dominance of the big firms will allow domestic audit companies to grow and better compete with their global peers, he said.
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