Less Than 1% of Accounting Firms Have More Than 10 Partners Each
Revised Guidelines Likely by March to Create Desi Big 4
Move to help capitalise on $240 billion global auditing & consultancy market
New Delhi: The government may finalize a roadmap for a rules overhaul by the March quarter to encourage the establishment of large audit and consultancy firms akin to the Big Four. Recent data reveals that less than 1% of accounting firms in India have more than 10 partners each. A panel under Corporate Affairs Secretary Deepti Gaur Mukerjee is currently reviewing various regulatory challenges that hinder domestic auditing and consultancy firms from scaling up, and it is expected to release its recommendations soon.
One source noted, “Necessary regulatory changes could be finalized this fiscal itself.” While the government is working to amend relevant laws promptly, subsequent changes to regulations are anticipated.
As of October 1, only 459 out of 100,138 registered chartered accountancy firms had over 10 partners each, and merely 13 of these firms had more than 50 partners. This concerning data, compiled by the Institute of Chartered Accountants of India (ICAI), highlights a fragmented ecosystem. Despite their limited numbers, these 459 firms employ about 15% of the workforce of 183,642, which includes both partners and paid assistants.
Importantly, the top 13 accounting firms collectively employ about 7% of the total number of partners and paid assistants. According to the data, these leading firms have onboarded 1,349 partners and 11,543 paid assistants.
Fragmented Ecosystem
Comprising both partners and paid assistants
Source: ICAI
The dominance of the Big Four—EY, Deloitte, KPMG, and PwC—along with Grant Thornton and BDO, has been facilitated by the absence of large homegrown firms in the Indian audit ecosystem. Last month, Shaktikanta Das, Principal Secretary-2 to the Prime Minister, met with senior officials from the finance and corporate affairs ministries to discuss measures to foster the creation of significant domestic firms.
The government is contemplating a roadmap that would relax rules and regulations to promote the merger and aggregation of local accounting firms, create multidisciplinary partnership firms, facilitate easier tie-ups with global firms, and enable these firms to operate, advertise, and raise funds with relative ease.
Attaining scale could allow Indian firms to capitalize on the estimated $240 billion global auditing and consultancy market. Recently, the Corporate Affairs Ministry issued an office memorandum seeking stakeholder feedback on allowing multidisciplinary partnership firms where skilled professionals from accounting and consultancy backgrounds can work under a single firm structure. Presently, there are restrictions on forming such firms.
The ministry’s memorandum also highlights several challenges in the current system, including prohibitions on advertising and marketing, the involvement of different regulators for licensing across various professional services, restrictive public procurement and empanelment processes, and insufficient global collaborations.
