Audit and Accountancy Services in India
The landscape changed dramatically during the 1990s. The liberalization of the Indian economy opened up the market to the entry of the Big Four accountancy firms. The next two decades saw the Big Four firms grow in an unprecedented fashion. Besides, not only serving their international clients, these firms also rode the BPO wave and became outsourced service providers to their own international counterparts. The fact that a number of Indian Companies looked at acquisitions and listings overseas, also helped their case. The rapid growth of the Big Four also received a tremendous boost due to the mergers with other large accounting firms such as Price Waterhouse with Coopers & Lybrand and elements of Arthur Andersen Merging with other remaining Big Four firms after their collapse.
Right up to 2008 the gap between the Big four and other firms of Audit and Accountancy Services in india continued to grow. But there were several cases where the Big four faltered in the role as auditors which began to raise questions on their dominance. Failures of some banks led by the Global Trust Bank, and an unprecedented level of corporate frauds such as at Satyam, began to raise questions about checking the dominance of the Big Four. Particularly, in the aftermath of the Satyam scam a number of steps were taken including introducing penalties and scrutiny of the Accounting Profession. The biggest brunt of this was directed at the Big Four naturally, as they dominated the auditing and accounting profession. Thereafter having introducing strict internal compliance processes, and a number of corrective actions things settled down to business as usual with the continued domination of the Big Four firms.
However things began to take a turn again over the past two years. Some large Corporate’s audited by some of the Big Four began to come under regulatory scrutiny following major accounting misstatements and Corporate Governance failures.
Today the situation presents a great opportunity for large firms doing Audit and Accountancy Services in India, while at the same time presenting significant challenges for the continued domination of the big four. Let’s take a look at some of the big opportunities:
- Many of the firms of Audit and Accountancy Services in India have been in operation For over 50 years. They have developed a loyal base of clients, alumni and invested heavily in resources.
- They are In the perfect position to leverage their significant legacies and entrepreneurial spirit.
- They are perfectly poised to scale up their business models while maintaining Their natural low-cost base.
- They are Naturally able to take quicker decisions for investment or changing direction as may be required in business situations
- They Possess the ability to grow with their clients, with whom they have significant relationships
- They are more oriented to undertake joint ventures or tie-ups with start-up technology firms in the areas of automation, robotics and offshoring.
- They are closer to the clients business and have seen several opportunities through helping the clients through several generations on both sides.
While these opportunities exist, there are several challenges that they also face while challenging the domination of the big four firms. Some of these are:
- These firms lack the cohesiveness and projection of a known Brand. They therefore, significantly need to improve the projection of the legacies and history and invest in building their respective brands.
- While they possess capable resources, the investment in training needs to be greater as does the recognition of talent and the need to retain this within the firm.
- Greater need for self belief and better communication at all forums from professional conferences, to board meetings, to panel discussions, right down to communication within the firm.
- Need for specialization in each of the areas of professional services they choose to be in. Without specialization they cannot challenge the capabilities of the big four.
- Building on the fundamental learning of the many years of professional service to standardization of processes, documentation, communication and simply just how they present themselves.
If anything today, India is poised for more openness create a competitiveness and a greater choice. It is up to the firms doing Audit and Accountancy Services in India to step up in any area that used to be and challenge dominance of the big four.
By Mr. Arvind Chopra
Senior Technical Adviser
SCV & Co. LLP