Soon, Chartered Accountants won't be able to do this, decision may irk KPMG, Deloitte, PwC, EY - Details here

Come January 1, 2019, domestic accounting firms won't be able to conceal the details of any deal with global firms. Institute of Chartered Accountants of India (ICAI)'s draft review report has a clause under which domestic accounting firms will likely be asked to disclose their financial transactions with multinational players, reported DNA. As per the clause, any arrangement with multinationals accounting firms including licences, affiliations and network will have to be mandatorily registered with the ICAI.

“Every member holding Certificate of Practice /Indian CA Firms having affiliation/networking/ licensing  agreement by whatever name called, with International network shall file Annual Information Report to the Institute, disclosing, inter alia, the details of the remittances made to and received from overseas on account of networking arrangements, the nature and purpose of such receipts and payments, material changes to the covenants of the partnership deed, entry and exit of new partners in every year,” reads the draft.

Earlier after a Supreme Court order, the top accounting body had formed an 8-member committee to examine the issue of multinational accounting firms camouflaging with Indian entities.

The clause may not go down well with international accounting players like KPMG, Deloitte,  PwC and EY.

As per the DNA report, few domestic CA firms work as dual agents - they portray themselves as MNC to get big projects and claim that they are purely Indian CA firms in front of the ICAI.

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Domestic CA firms pass the price of the brand to the parent foreign entity in the guise of knowledge-sharing fees, said the report quoting a source.

The tough measures by the ICAI aimed at tightening the noose around the multinational accounting firms which flout norms, accounting regulations, RBI Act, and foreign direct investment rules.  multinational accounting firms which flout norms, accounting regulations, RBI Act, and foreign direct investment rules.

Post the Satyam scam, the ICAI had already set up an expert panel to look into the “nature of extra benefits accrued to the Indian CA firms having foreign affiliation”. However, the move did not pay off.

“The ICAI during 2010-11 had prepared a report on this aspect through a group headed by Subodh Agarwal. It is imperative to understand the umbrella under which these firms operate. There needs to be clarity with regard to their understanding of sharing of knowledge, human resources, expenses, profits or any other mode of transfer of funds etc,” said Amarjit Chopra, former ICAI president.

The clause, if implemented, will not only bring more transparency in the working of accounting firms but also will be an effective tool against any illegal transactions.