The possibility of Indian regulators placing temporary bans on American audit firms, Deloitte and BSR & Co. (part of KPMG), for failing to disclose the true picture in the IL&FS case has the US trying to bully India into not acting against them. As per Business Standard, the US has advised India to forego strict regulatory action, saying a ban will retard investment inflows into India since investors depend on firms like Deloitte for investment consultancy also. Thanks to Deloitte’s not relaying the true picture on the IL&FS loans, the banking sector is now saddled with Rs 91,000 crore of NPA from just the IL&FS group firms alone. Invoking section 140 (5) of the Company s Act, the Indian government has moved to the National Company Law Tribunal (NCLT) to impose a five-year ban on Deloitte and BSR from auditing and has instructed the Serious Fraud Investigation Office (SFIO) to initiate disciplinary action against statutory auditors before the ICAI and NFRA. Deloitte handles audits for top companies overseas and within India. Most companies prefer a single auditor for their overseas and Indian accounts due to better efficiency and uniformity and thus have started to make changes with regards to their auditors.
Deloitte global CEO Punit Renjen recently visited India and met some top officials of the Union finance ministry and the US ambassador, Kenneth Juster. Washington, trying to bolster the case for letting Deloitte get away with a slap on the writs, cited the case of altered audits linked to KPMG in the US, in which the regulator there imposed a heavy fine on the consulting major rather than banning it even temporarily. However, India must stand firm and choose its own regulatory path. Even if it is two of the Big Four consulting giants, whose words hold sway over business groups across sector, that are in the dock, if India fails to assert its regulatory sovereignty now, it will set a very poor precedent. At the moment, Deloitte and BSR audit 342 listed companies comprising 40% of NSE capitalisation and 300 unlisted companies. India must not get cowed down by the US’s unwarranted interference in the matter.