India could create its own Big Four audit firms as envisioned by the PM: Here's what it'll take

Subscribe to enjoy similar stories. Prime Minister Narendra Modi, in his address to chartered accountants (CAs) in July 2017, shared his vision of “Big Eight" audit firms in India, of which he said four should be of Indian origin with a global footprint. The idea was not to displace the existing global Big Four, but to complement them with domestic champions.

His call could not have been timelier. India aims to become a developed country by 2047, which requires sustained gross capital formation (GCF) at a minimum rate of 35% of GDP. In this journey, the strength of the country’s institutional framework, including auditing practices and audit assurance, assumes significance.

Investors expect not just world-class corporate governance, but also top-notch assurances on financial statements of the quality level that the world’s Big Four audit firms are perceived to provide. Despite a large talent pool, India lacks homegrown audit firms comparable to the Big Four. Deep fragmentation of the profession is a key reason.

Data from the Institute of Chartered Accountants of India (ICAI) suggests that as of October, India had over 102,000 registered chartered accountancy firms, of which 72,696 were sole proprietorships, 27,442 partnerships and only 2,129 limited liability partnerships (LLPs). Together, they employed about 183,642 professionals, thus averaging only 1.8 CAs per firm. The Big Four are not limited liability companies (LLCs), but a network of independently owned, legally separate member firms, often structured as LLPs.