Professional services firm Price Waterhouse is looking to convert all the nine audit firms under its Indian network into limited liability partnerships (LLPs) by April.
“We are in the process of conversion (from partnership firms to LLPs). By April 1, 2014, all the nine audit firms under the Price Waterhouse India network should get converted into LLPs”, Harish Khanna, Assurance Leader, PW India Network Firms, told Business Line here.
Price Waterhouse has somewhat lagged competition (among Big Four) as regards conversion of audit firms into LLPs in India.
A LLP is a separate legal entity and incorporates the benefits of both companies and partnerships.
While partners in a partnership firm have unlimited liability, the liability of each partner in a LLP is limited to his share at the time of creation of such a business vehicle.
Khanna, who was Price Waterhouse global leader for audit quality, is now based in India since 2012 overseeing audit quality of the India network firms.
He made it clear that Price Waterhouse audit firms were looking to convert into LLPs mainly for removing administrative burden and not for the liability issue.
“Under a LLP, we can have more than 20 partners and therefore there will be no need to have nine separate partnership firms for audit work. After LLPs are formed, they can be brought together into fewer entities,” Khanna said.
Price Waterhouse came in for heavy criticism after the accounting scandal at Satyam Computer came to light in early 2009.
Lovelock & Lewes, a member of Price Waterhouse India network, had performed the statutory financial audit of Satyam Computer between April 2001 and September 2008.
In India, there has always been an expectation gap between auditors, general public and the regulators when it came to the quality of statutory audit.
The gap has only widened post the Satyam Computer corporate scandal and the regulatory response has been stringent and seemingly harsh on audit community.
The new Indian company law provides that class action suits can be initiated against auditors by investors-- a facility that was not available earlier.
Khanna felt that audit quality could suffer under the proposed mandatory audit firm rotation framework, but quickly noted that audit firm rotation was now a legal requirement.
Most of the changes ushered in by the new company law as regards audit would only benefit India in the long run, he said, adding that there could be short term pain for the audit professionals.