A global concern is the disproportionate amount of significant corporate audits that are under the control of the Big 4 audit firms, Deloitte, KPMG, EY, and PWC.
There are worries that there are a number of drawbacks to this apparent exclusivity of few audit organizations from which to choose a company auditor.
The Companies Act of 2013 required audit firms to change after a certain number of years in an attempt to break the Big 4’s monopoly on large business audits. There was a reorganization of audit activities within the Big 4 firms, akin to a musical chairs game. There was no change to the four card types in the pack.
It is important to consider whether big business managements are hiding behind the Big 4 safety shield due to the numerous transparency and reporting requirements. The majority of big entity listed business management, including the promoter, board of directors, and senior executives in the accounting and audit departments, would tell you that they are uneasy about a non-Big 4 Indian audit firm meeting the audit’s compliance disclosure criteria. The main problems are the audit firm’s human resources and the non-Big 4 audit companies’ capacity to grow to a size and service level that the corporate management finds acceptable.
Let’s be sincere. The auditing process is becoming less and less popular among accounting companies worldwide. In fact, the problem is getting so bad that many graduates aren’t thinking about going into India or other countries to work as professional accountants, such as certified public accountants or chartered accountants. The risks and the obligation of creating and auditing corporate financials are perceived as being greater than the responsibilities of financial and corporate reporting, as well as compensation levels, which are increasingly burdensome. We can observe minority shareholder protection in the case of listed firms. Both listed and non-listed entities, however, have other interests, such as creditors, the government, employees, and financiers.
In the context of preparing business financial statements and conducting audits, numerous queries are coming up. They are as follows:
There are strict deadlines for all business financial reporting, particularly for listed entities. Will we have reliable financial declarations and reports if the caliber of accountants at the corporate and audit firm levels begins to deteriorate?
Are the reporting requirements and needs getting so bad that the audit profession is pushing for a consolidation of audit work, with scale up being the key?
Are we heading toward a situation in the audit practice environment where a few number of firms handle the audit work for all large businesses, leaving the other large, medium, and small audit firms with work that is highly competitively priced and frequently unremunerative?
Why is it that even though Big 4 corporations do audits, there are so many instances both domestically and globally where audit quality appears to be lacking and frauds are exposed to the public eye? It is necessary to inquire as to whether we have progressed so far in mapping and tallying data, reports, disclosures, and compliances that we have forgotten the fundamentals of financial auditing and are unable to identify the loose ends to figure out what is wrong. Many people consider the claim made by the Auditor that they are merely a watchdog and not a bloodhound in cases of fraud to be baseless. The question “why have audit?” always comes up.
The Institute of Chartered Accountants of India appears to have come to the realization that Indian businesses must match the scale and expertise of the Big 4 and is developing a plan to incentivize Indian audit firms to collaborate and compete in the audit market. I wish them all the best of luck in their endeavors, but in my opinion, the challenge for the Big 4 MUST come from outside of the US, the UK, or Europe, and this will eventually build up in India.
I have been observing the audit industry in India for about 45 years, during which time reputable Indian enterprises were forced to join one of the Big 4 organizations. We currently find ourselves in a position where we can scarcely claim audit firms that can compete with the Big 4. This is not how things should be.
Partners in the Big 4 firms switch firms in large numbers whenever there is turbulence. In the commercial climate, moving within the tiny, confined circle provides little value.
Legislators from all throughout the world need to give this issue careful thought. How does an audit reassure you that the financial affairs of the company are in order? Allow the Big 4 to develop into the Big 40 and Big 400. We require that.
We cannot be in a position where audit is not supported by the best HR or where audit procedures are not valued highly enough. Furthermore, there must be sufficient internal controls at the corporate level. The Board of Directors, which includes Promoter, Executive, and Independent Directors, and Audit Committees, are responsible for overseeing the effectiveness of Internal Financial zat the Top Corporate level and taking corrective action when necessary.
The likelihood of a fraud is decreased if the internal corporate group feels that the organization has appropriate controls in place. The external auditor must monitor any attempts to divert attention and withhold information in order to develop an audit plan.
The foundations of corporate governance and corporate democracy are corporate account integrity and trust, which we must never forget.
