India’s audit regulator plans to limit the
number of audit firms a network can be affiliated with in a
post-Satyam shake-up that could have wide implications for the Big
Four. This follows questions over the extent of
PricewaterhouseCoopers (PwC) affiliates’ involvement in the Satyam
accounting fraud.

Global networks such as PwC are affiliated
with multiple audit firms registered in the country to overcome
Indian laws that restrict the number of partners a firm may have to
20. There are nine offices in India affiliated with PwC. These
operate in partnership but are mostly structured as separate legal
entities. Many carry variations of the name Price Waterhouse.

The Institute of Chartered Accountants of
India’s (ICAI) proposal is to allow only two registered audit firms
from the “same entity”. This would affect all the Big Four
networks.

The proposal is designed to prevent global
networks from washing their hands of erroneous work carried out by
affiliated firms.

Opponents of the ICAI proposal argue that
firms will set up new partnerships under different names and the
rules could restrict the ability of large audit firms to serve
their clients, having a detrimental effect on capital markets.

The Indian government recently said it could
take action within a couple of months against the firms Price
Waterhouse Bangalore, Price Waterhouse New Delhi and Price
Waterhouse Kolkata, four Price Waterhouse Bangalore auditors and
two former Satyam Computer Services employees implicated in the
Satyam accounting scandal.

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