Opening up professional services to the competition is necessary. The time is opportune when audit firms-as well as secretarial practice firms-be allowed to graduate to the next level, and along with the freedom to advertise with some reasonable restrictions.
In a rapidly growing interdependent global economy, the Indian audit and secretarial practice community cannot, and should not, lock itself up into a corner. It is in the best interest of Indian firms to globalise by adopting best practices, state-of-the-art technology and invest in people, rather than resisting international networking, especially when we have one of the best talent pool.
Restrictions on advertising and marketing by Indian accountants that have been applied by the Institute of Chartered Accountants of India (ICAI), over and above internationally accepted rules, need to be reviewed. If the Indian chartered accountant (CA) firms, in their own right, aspire to have a global presence, it may be necessary to adopt the internationally accepted and applied policies under the laws of the country. Instances may be drawn from the mature audit markets such as the US, the UK, France, Germany, China, Singapore and many others on advertising and branding that is allowed for public accountants.
Indian CAs and company secretaries (CSs), too, should be allowed to perform advertising and marketing activities that do not bring the profession into disrepute. In such activities, the professional advertising should be honest and truthful, and not make exaggerated claims for the services offered, qualifications possessed, or experience gained, or make disparaging references or unsubstantiated comparisons to the work of a fellow professional. Objective and non-misleading advertising and marketing activities will help in spreading awareness and knowledge-sharing. CAs and CSs would be able to organise leadership conferences on new accounting, secretarial and auditing standards, changes in laws and regulations.
Regulation 190 of the Chartered Accountants Regulations, 1988, requires a CA firm established in India after 1988 to apply to the ICAI for approval to use a firm name. Subsequently, since 2005, the ICAI has allowed Indian CA firms to enter into contractual or other arrangements with an international network and become a member of the said network. In fact, the ICAI's Revised Guidelines of Network, 2011, allow the use of a familiar brand name.
Consequently, Indian audit firms that are members of an international network are often associated with the brand name of the network. Regulation 190 does not explicitly prohibit the use of international brand names of networks. It gives power to the Council of the ICAI to reject a trade/firm name that, it thinks, may smack of publicity. In addition, the Council of the ICAI reserves the discretion to refuse registration of a trade or firm name, if that name is undesirable in the opinion of the members.
The current guidelines to approve firm names followed by the ICAI and the Institute of Company Secretaries of India (ICSI) seem to be too restrictive. The guidelines require that the name should include the name of the proprietor/partner as they appear in the Register of Members. A trade or firm name that has no relationship with the name of the member(s) is not allowed. Similarly, descriptive trade/firm name is not allowed. Therefore, it's time that these guidelines are reviewed and liberalised as long as the name applied for does not smack of publicity.
Indian audit and secretarial firms need to equip themselves to manage stakeholder expectations, disclosure of financial information, and global accounting practices, as domestic companies are looking to move beyond the country. MNCs are seeking to invest in growth hotspots such as India.
Indian firms need to be as nimble-footed as some of the domestic companies that successfully turned MNCs by expanding overseas by drawing from the templates of global companies that set shop here in 1991. There could be a lot to gain by allowing audit firms to market themselves in India.
A government-appointed committee of experts (COE) in its report on Regulating Audit Firms and the Networks last year also held out similar views, concluding that branding with international networks would increase the competitiveness of Indian audit firms. Indian companies may benefit from using Indian audit firms that are members of international networks with a brand name.
The COE has recommended that the National Financial Reporting Authority (NFRA) and the ICAI make appropriate changes to respective laws and regulations, including Regulation 190, and the Code of Ethics, 2009.
The author is former president of ICSI and founder of Corporate Professionals Group. Views are personal