Fresh storm in the ledgers

NEW DELHI: The Institute of Chartered Accountants of India (ICAI) has requested government to review operation of certain MNCs in accountancy services. In a release, ICAI has asked government to verify that such operations are in consonance with the letter of the law.
ICAI is lobbying for a level playing field vis-a-vis its foreign counterparts. The council discussed the findings of a study group headed by Jayant Gokhale and considered regulatory and ethical issues concerning the profession.
Foreign accountancy and audit firms are not allowed to practice in India.However, foreign consultancy firms like Ernst and Young and KPMG are allowed to give consultancy services here. Making use of the latter provision, the study group noted that some of the MNC accountancy firms had established their commercial presence here to provide consultancy services (MCS) which include internal audit.
Internal audit is the main area of concern. The group said that this arrangement has the consent of the government. However, in multilateral fora — like the WTO — the government has insisted that reciprocity is a pre-condition to opening up the Indian market for foreign firms. In other words, MAFs from foreign countries that allow Indian firms to operate there would be allowed here.
The group argues that the ground reality in India will weaken the government''s stand at the negotiating table. When contacted, an Ernst & young official said that opening up of the sector will only help Indian firms grow.
The council also decided that MCS should not have same or similar name of Indian or MNC accountancy firms. The report said that use of such a name for such an MCS entity results in an impression that certain accountancy firms were indulging in advertising or a brand building exercise.