White paper to black-brush foreign accounting companies

Venkatachari Jagannathan
12 July 2003

Chennai: It is an irony that foreign chartered accountancy firms, registered in tax havens with their ownership unknown and fined several million dollars in their own countries, are the ones that advise the Indian government and public sector units," say S Gurumurthy, chartered accountant, firebrand journalist and co-convener, Swadeshi Jagran Manch. "In the process they have earned and repatriated around $3.8 billion, and 90 per cent of the consultancy assignments are bagged by the foreign firms."

Not just that. "The Big 4 global accountancy firms present in India are emboldened to transgress the permissions given to them to carry on consulting business and enter into surrogate arrangements with certain Indian audit firms and render auditing and attesting functions too," he adds.

Facilitating them are the domestic public sector units that float consultancy tenders with the criteria that fit only the Big 4 accounting firms. "While pitching for consultancy contracts in a country the Big 4 will always project an unified picture — their global balance sheet size, global operations, number of consultants, associates and members. But when they get into a spot the parent company will wash its hands off saying the subsidiary outfits are separate entities," Gurumurthy says.

As a result of high-profile promos, Indian officials — government and public sector units — are under the impression that foreign accounting firms are more capable than their Indian counterparts. "Where they lack understanding is that it is only the Indian accounting professionals who write the consultancy reports, under a foreign brand name."

The Institute of Chartered Accountants of India (ICAI) has constituted a committee to consider and study what the foreign accounting firms can/cannot do here and the methods adopted by them in securing business. The institute has also issued notice to the surrogate accounting firms but is yet to get a reply.

According to Gurumurthy, a white paper on the multinational accounting firms operating in India prepared by the Chartered Accountants' Action Committee for Level Playing Field (CAAC), will be released by Murali Manohar Joshi, union minister for Human Resources Development on 13th July. The first copy will be received by Suresh Prabhu, chairman, Task Force for River Inter Linking, and a qualified chartered accountant. The white paper is prepared by a committee headed by B S Raghavan, retired civil servant, Gurumurthy and four chartered accountants.