Multi-Disciplinary Audit Firms Get Regulatory Nod
ICAI makes way for multi-disciplinary audit firms
The Institute of Chartered Accountants of India has made way for multi-disciplinary partnership firms. Accounting and audit firms have now been allowed to tie up with other professionals like cost accountants, company secretaries, advocates, engineer, architects and actuaries.
The existing regulations require a chartered accountancy firm to furnish Form 18 to the ICAI within one month of the approval of the trade/firm name, or commencement of practice. This form contains detailed particulars regarding the firm including its address, details of partners etc. An amendment has now been made to this form to also provide details of non-CA partners of the firm.
These multi-disciplinary partnership firms will provide an opportunity to smaller firms to come together and cater a range of professional services under a common brand to their clients who usually run from pillar to post to get professional help, Vikas Gupta, partner at Nangia & Co., said.
Concurring with him, Dinesh Kanabar, chief executive officer at Dhruva Advisors, said the demand for such firms has been long pending.
This took almost 14 years to become a reality. Besides practical challenges of different guidelines by different professional bodies, it was felt that such permissions could have led to misuse and shift the focus from primary activity of CA professionDinesh Kanabar, CEO, Dhruva Advisors
But now that the ICAI has allowed it, multi-disciplinary audit firms can offer a range of benefits, experts told BloombergQuint
Scaling up capacity of a professional firm to render multifarious services.
A one-stop shop for clients for their varied needs.
Synergies of different professions can be utilised to come up with highly curated solutions.
CA firms may no longer have to outsource work not covered by their domain.
These benefits, however, must be accompanied by safeguards, experts caution.
The general principal of auditing is that the auditor ought not audit his own work, Kanabar pointed out. But with multi-disciplinary firms, it may happen that the CA partner might have to audit statements authorised by a company secretary who is a part of the same firm.
"Sufficient safeguards must be enacted in the law to create water-tight compartments," he said.
The multi-disciplinary firms can only exist as partnership structures, Sandeep Shah of NA Shah LLP & Co., pointed out. "There’s a limitation is the new form. Only multi-disciplinary partnership firms have been allowed," he said. "A multi-disciplinary company or any other business model has not yet been permitted."
Though the ICAI regulations have now permitted partnerships with advocates, the Bar Council of India will need to made corresponding change to its rules as well, experts said. Similarly, Institute of Company Secretaries of India and Institute of Cost Accountants of India will need to amend their rules as well to make multi-disciplinary firms a reality.