Unlisted multinational companies (MNCs) are keen that they be excluded from the auditor rotation norm put in place by Indian lawmakers under the 2013 enacted Company Law and rules framed under it.
As the current norms are posing practical challenges in terms of ease of doing business, some of the unlisted MNCs have approached a Government-appointed Panel tasked to recommend changes to the new company law to consider exempting them, sources said.
A high-powered panel headed by the Corporate Affairs Secretary is looking at possible amendments to the Company Law so as to improve the ease of doing business in India.
Already, the Modi-led Government had undertaken one round of company law amendments to help corporates function under a better legal framework.
While India has stipulated both auditor (individual) and audit firm (rotation) for all listed and certain unlisted companies, developed countries like the US does not see merit in mandating audit firm rotation.
Jamil Khatri, Partner at KPMG said that companies that are subsidiaries of overseas companies are struggling with managing audit rotation requirements in India since the auditors of the overseas group would also need to be comfortable with the numbers relating to India included in the global consolidated numbers.
"This a practical challenge that needs to be addressed by the regulators", Khatri told Business Line .
The problems gets compounded since many overseas companies incorporated in the European Union may also have to change auditors, but the timelines for such change may be later than the Indian requirement, Khatri added.
Sudhir Soni, Partner in Indian member firm of EY Global said that auditor rotation should be restricted to public interest entities, which is the practice in other jurisdictions.
"Public interest entities may include listed companies, large financial institutions and companies with significant borrowings. In the case of multinational companies the situation of having different auditors from firms of different networks will increase co-ordination efforts for companies and will impact the ease of doing business", Soni said.
Srivats.kr@thehindu.co.in