The Institute of Chartered Accountants of India is exploring private equity investment in non-audit accounting services. This move aims to facilitate growth by separating assurance and non-assurance practices. Assurance services will remain independent from such external investments. Global models and regulations are being studied by an internal committee. The profession is also adapting to artificial intelligence and its implications.
New Delhi: The Institute of Chartered Accountants of India (ICAI) is weighing allowing private equity investment in non-audit business of accounting firms through a clear split between the assurance and non-assurance practices, its president Prasanna Kumar D said.
The institute has set up an internal committee to examine whether non-assurance services such as consultancy, accounting and advisory can be separated from assurance practices such as statutory, tax and compliance audits to facilitate private equity investment and help these entities grow.
Assurance practices, however, will be ring-fenced from such investment over concerns about auditor independence. Kumar said audit and other assurance services require professionals to remain free from conflicts of interest and commercial pressure. "Independence is the issue," Kumar said. "Our view is that non-assurance practices can be separated. If so, can we permit it or not?"
The ICAI committee is studying global models and regulations in countries that have allowed private equity investment in accounting firms. It will also examine the history, ownership structures and experience with such investments before making its recommendation.
If the committee decides in favour, the proposal will first need the ICAI council's approval, Kumar said. It would subsequently require an amendment to the Chartered Accountants Act and would be taken to the government for consideration.
According to Jean Bouquot, president of the International Federation of Accountants (IFAC), private equity remains "a relatively new development in the global accountancy profession". The key requirement is that firms continue to comply with professional ethics, audit standards and independence rules, he said. Bouquot was in the national capital for an IFAC board meeting last week, held in India for the first time.
An IFAC study released earlier this year highlighted the rapid growth of private equity investment in professional accountancy firms. The research pointed to the extent of transformation in the sector, with fewer than 200 initial or direct private equity investments facilitating nearly 900 subsequent transactions, underscoring significant consolidation across the profession.
The rise of artificial intelligence, which is giving accountants access to large volumes of data, is also reshaping the accountancy profession. "Young people should see technology as an opportunity," said Lee White, CEO at IFAC.
Professional accountants will continue to need digital skills, but judgement, scepticism and ethics remain central to the profession, White added. White cautioned against relying on automated tax or accounting advice generated solely through AI.
If the service is provided by a chartered accountant, professional obligations apply, he said, adding that the accountant is expected to ensure that the advice is reliable and delivered with due care. "The risks may be greater when such services are provided by entities outside the profession," he said.
ICAI, meanwhile, does not plan to authenticate or approve individual AI-based tax and accounting software.
"Technology is changing too quickly for the institute to certify tools on a continuing basis. Independent certifying agencies may emerge in the future," Kumar said.
