Apex chartered accountants body ICAI has accused multinational accounting companies of violating the CA Act and asked for joint action by agencies, including the RBI and the Corporate Affairs Ministry, to enforce compliance.
“The (ICAI) Council shall request the Ministry of Corporate Affairs, Reserve Bank of India and other relevant Ministries/Departments of Government of India to take appropriate action (to enforce compliance of law),” ICAI said in its report ‘Operation of Multinational Network Accouting Firms in India’.
The ICAI report, however, did not name multinational audit firms operating in India.
The report is significant in the wake of involvement of PwC affiliates in auditing the books of Satyam Computer Services (now Mahindra Satyam ), which was embroiled in a Rs 14,000-crore accounting fraud.
The ICAI report observed that some of the Indian audit companies have name licence agreements to use international brand names, under which the affiliates have to align their policies with the network, which in turn influences decisions and functioning of the domestic firm.
“In this manner, matters such as selection and appointment of partners, acquisition of assets, investment in capital, etc are regulated through the means of such agreements and at times even the representative voting is held by an aligned private limited company rather than the CA firms themselves.
“As a consequence of this, the control of the Indian CA firms is effectively placed in the hands of non-members/ companies/ foreign entities,” it said.
The ICAI also noted that many CA firms have not furnished complete information or have “masked certain portions” about their arrangements with multinational accounting firms and action would be taken against them for the same.
It was also found that some firms have shared revenue with multinaional entities, which included cost towards marketing publicity and advertising the products and services in India as well as abroad. The arrangment was also in
violation of the Chartered Accountants Act, ICAI said.
ICAI said action would also be taken against firms that have been found paying referreal fees, receiving financial grants, and using name and logo of foreign associations.
Source : Money Control