Big Four, other global firms push back against draft ICAI rules

Time of India

5 hours ago

Mumbai
: Top global professional services firms are pushing back against draft guidelines to regulate overseas networks engaged in multi-disciplinary advisory services in India, saying they require excessive disclosures that raise confidentiality concerns and add layers of operational complexity.
The Institute of Chartered Accountants of India's (
ICAI
) proposed guidelines also use highly ambiguous terminology that creates uncertainty in interpreting the rules, they said, setting the stage for a fresh standoff with the regulator.
ICAI had early this month released draft Guidelines for Overseas Network.
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The move was meant to create a level-playing field, but has ended up throwing up concerns that could hamper working of global accounting firms in India.
Vishesh Chandiok, CEO of
Grant Thornton Bharat
, minced no words in saying that he had hoped that ICAI's attempt would be more balanced towards enablement. 'Unfortunately, it continues to attempt to kill too many birds… I fear the one that will die is the Indian Big4 dream,' he said.
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Currently, there are more than 170 global networks operating in India, including the
Big Four
–
EY
,
Deloitte
,
PwC and KPMG
.
One of their key concerns is the draft's sweeping disclosure norms. For example, Form BO requires
foreign networks
to report all civil, criminal, and disciplinary cases against any partner or CA employee of Indian entities from the past five years. Firms say it adds no value and may force irrelevant disclosures beyond professional competence or network operations.
Global professional services firms are also alarmed by the draft's ambiguous disclosure norms, especially the requirement to report turnover on a 'constituent-wise' basis, which could extend to all affiliated firms globally.
'What qualifies as a network? Is it just the Indian firm's arrangement with the global brand, or does it include every associated firm worldwide?' a senior partner at a Big Four firm said. 'The term 'constituents' is vague… If taken literally, it could mean reporting for every firm linked to the brand, regardless of relevance to India.'
The guidelines mention regulated, unregulated, and overseas entities but don't define boundaries, raising concerns about their scope.
'The guidelines appear to overreach by seeking control over overseas entities. The entire exercise looks like one of control not enablement,' said the CEO of a major Indian firm associated with a US network.
A senior CA noted that the recommendations try to extend ICAI's ethical and operational norms to a network's organisations or divisions that don't come under its ambit, particularly the lucrative and rapidly growing consulting services.
This indicates an effort by ICAI to pull these services into its fold, the person said. 'This could disrupt the multidisciplinary firm model by forcing audit firms to build capabilities like IT and valuation independently, raising costs and diluting audit quality,' he added.
Perhaps the most problematic aspect for foreign networks is the demand to disclose sensitive financial data of overseas entities.
Form DO requires turnover details on a constituent-wise basis, including overseas entities, overlooking how global professional networks work and the confidentiality obligations they have to adhere to, experts said.
This could force firms into a regulatory bind, caught between Indian compliance and legal constraints in their home jurisdictions. The rules also demand three years of detailed financial records, showing all money exchanged between Indian and foreign offices.
'Such detailed financial reporting requirements are typically reserved for fully regulated entities, not network arrangements that may be primarily based on brand sharing or quality control coordination,' a partner of a Big Four firm said on condition of anonymity. 'These are independent legal entities. Why would a UK firm (which is part of the same network) disclose its revenue figures to the Indian arm?'
On the point of fees paid by Indian firms to global networks, the partner said it's not a typical royalty but a fair payment for real services, like access to global audit methods, technology, and quality systems that help firms do better work. Insiders say fees could range from 4% to 7% of revenues, varying by firm.
The draft guidelines also add operational strain on global networks by requiring a nodal officer to take personal responsibility for network-wide compliance – a demand seen as unrealistic. 'One person can't ensure compliance across a global structure. It's burdensome and unclear how it helps,' said a senior partner at another Big Four firm, questioning both the feasibility and value of the proposed role.
The guidelines come as the Prime Minister's Office (
PMO
) pushes for the creation of India's own 'Big Four', even as EY, Deloitte, PwC, and KPMG collectively crossed Rs 45,000 crore in India revenue in FY25—with Rajiv Memani-led EY (June year-end) on the verge of becoming the first to reach $2 billion in gross revenues.
Nikhil Singhi, managing partner of Singhi & Co Chartered Accountants, said that ideally, the guidelines, code of ethics, and related regulations should prioritise core responsibilities such as audit quality, ethical compliance, and independence over procedural elements like cost disclosures, capital restrictions, constitution of firms and detailed reporting requirements. 'We need a forward-looking approach, one that emphasises greater operational flexibility and simplifies regulation,' he said.
The draft also seems to suggest regulating overseas entities that participate in Indian audits, even though current group audit standards already hold the Indian auditor accountable, rendering such provisions redundant.
Firms that will lose out most in this exercise are the small and mid-sized Indian firms, experts said. For these firms, access to global networks is crucial, especially with the growing volume of cross-border work coming into India. These global partnerships help them build capacity and improve quality and these guidelines will create substantial hurdles.
'We're left asking, what is the real purpose of these guidelines?' said the unnamed CEO quoted above. 'No other jurisdiction has anything similar. The intent is unclear, and the practical effect may be to discourage even mid-sized firms from entering network arrangements.'
ICAI has invited comments and suggestions on the draft rules proposed by its
Committee for Aggregation of CA Firms
(CACAF) from all stakeholders latest by June 27.