Mumbai: After more than a decade, a professional services firm has managed to break the stranglehold of the Big Four in the ranking of number of listed companies audited, with Grant Thornton pipping PwC to capture the No. 4 position and KPMG, EY and Deloitte taking the top three. PwC had to resign from a slew of accounts over the past few months, bringing down its listed audit numbers, while at the same time, Grant Thornton benefited from positioning itself as a viable Big Four alternative. There was a need for a firm for Indian clients that combined quality, independence and solution orientation, along with scale, and our firm filled that space, said Vishesh Chandiok, managing partner at Grant Thornton. The company operates in India through Walker Chandiok & Co.
Even after regulatory action on the firms after a number of scams, the Big Four – EY, Deloitte, KPMG and PwC – dominate the audit space, handling 26% of the total assignments between them. “The Big 4 audit firms, between them, handle a high 479 assignments of 1,813 companies listed on NSE as on 9th December, 2019, for which auditor details are available for 2019-20,” according to nseinfobase.com, a joint initiative of NSE and PRIME Database Group. This accounted for 26% of the total, a drop from 28% in 2018-19, it said. Auditor details were not available for 15 companies. “Even after audit rotation, the top MNCs continue to maintain their lead over Indian firms. Mostly, the top companies find comfort in the top audit firms,” said Pranav Haldea, CEO of Prime Database. In the Nifty 500 subset, they handled 283 of the 500 companies, or 57%, and the market capitalisation of companies audited by them tots up to 60% of the total market capitalisation of all companies listed on the NSE during 2019-20.
In India, the firms operate through a network of affiliates (see chart), in accordance with regulations set by the Institute of Chartered Accountants of India. After the audit rotation, KPMG emerged as the top auditor in India. Former leader Deloitte dropped to No. 3 after losing more than 300 clients in audit rotation, while EY maintained its second position. Reversing the trend of shrinking audit fees that prevailed during the past two years, there was a 4% increase in overall fees (comprising audit fee, fee paid for other services and reimbursements) paid out by companies in 2018-19 on a standalone basis, touching Rs 1,911 crore, up from Rs 1,833 crore paid out in the previous financial year.
EY, which built its audit business by carefully maintaining profitability and a select client base, continued to top the fee rankings with Rs 191.57 crore followed by KPMG at Rs 177.37 crore. Deloitte was India’s audit market leader for years, working for top companies such as the Tatas and the Mahindra Group, until the government mandated an audit rotation, forcing it to exit from hundreds of companies in a matter of two years. The company managed to replace most of the clients with new wins.
PwC, once a powerhouse in the Indian auditing space, is fighting a court battle against a market regulator order banning the firm for two years from auditing listed entities and that uncertainty has hit its audit business. The study also brought out the glaring size and scale difference between multinational and Indian firms – there are only 15 audit firms that audit 10 or more listed companies. The only Indian firms in the top 10 are Singhi Group, SS Kothari Mehta &Co., Haribhakti & Co. and Lodha & Co. The rankings are based on NSE information only.
Source: Economic Times