Deloitte has become the third such company to do so after PW India and Grant Thornton, and is the second among the big four. “Doing the right thing is at the bedrock of the audit profession, and one doesn’t have to wait for regulators to tell you what to do. I’m pleased to see we were able to lead that change in India,” Vishesh C Chandiok, chief executive officer, Grant Thornton India LLP.
Experts said there was pressure from stakeholders to keep audit and non-audit at arm’s length to avoid conflict of interest.
Deloitte Haskins & Sells was among the two firms that the Serious Fraud Investigation Office had asked the National Company Law Tribunal to bar for alleged lapses in auditing the books of IL&FS Financial Services. The Bombay High Court had granted interim relief to the auditors against any coercive action in November.
An audit quality review by the National Financial Reporting Authority had found that Deloitte Haskins & Sells failed to comply with the standards of auditing and compromised its independence by providing prohibited non-audit services for substantial fees in the matter of IL&FS financial services.
In the press statement issued on Sunday, Deloitte said their voluntary action was in the spirit of self-regulation and extended beyond non-audit services permissible under prevailing rules and regulations in India. “Deloitte Haskins & Sells remains committed to support initiatives, which enhance the quality of financial reporting in India.”
A recent consultation paper floated by the corporate affairs ministry called for suggestions on increasing the list of non-audit services and amending existing laws to enhance independence and accountability.
“…the auditors could be tempted to eliminate certain audit procedures to reduce costs, take on riskier clients, acquiesce to management’s demands, or aggressively expand their riskier non-audit services under the banner of a trusted audit firm brand, which would only increase the already continued high rates of audit deficiencies,” the paper said.
Most audit firms operate as networks and have a brand licensing agreement with the big four, which are not allowed to undertake audit activity in India.