The Big Fours affiliate firms in India may be circumventing the countrys laws by providing services such as auditing, tax, accounting and bookkeeping when they only have permission to do consulting, a powerful regulatory committee charges.
A committee of the Institute of Chartered Accountants of India has been probing the causes behind the accounting fraud at the Indian outsourcing giant Satyam Computer, which was audited by an affiliate of PricewaterhouseCoopers. India does not allow foreign direct investment in accounting, tax, auditing, bookkeeping and legal services, so U.S.-based multinational firms typically set up an Indian affiliate, according to the Times of India.
However, a report by the ICAI committee, headed by the organizations former president, Uttam Prakash Agarwal, said the Big Four could be circumventing Indian laws by providing assurance, management and related services through their affiliates, according to the Hindustan Times.
These entities are not only providing services through their own establishment in India, but also through service providers in India, particularly for those services like auditing, which cannot be rendered by them under the laws of the country, said the report.
The Big Four, as well as their somewhat smaller brethren like Grant Thornton and BDO, are known to be especially careful in how they set up their international networks vis a vis their member firms in various countries, including the U.S. But it seems they are going to need to take a fresh look at how they are structuring their operations in India, or they could find themselves unwelcome guests there.