Profile: Harinderjit Singh, senior partner, Price Waterhouse India

THE PAST TWO YEARS have been tough for Price Waterhouse, India’s branch of global network PwC. The firm has been caught up in the billion-dollar Satyam scandal that exploded onto the world’s newspages, televisions and computer screens in January 2009. Two PW auditors were arrested and charged for allegedly colluding with corrupt management at the giant IT firm.

Harinderjit Singh, senior partner at Price Waterhouse India, could not comment directly on these cases, as they are still sub judice, but he stresses that steps had been taken – in his firm and elsewhere – to make sure Indian auditors would have a greater chance of detecting such scandals in the future.

Sitting in his eighth-floor office at the Cyber City of Gurgaon, a high-tech-focused satellite township of New Delhi, Singh, 49, says changes have already been implemented in his firm to make sure a Satyam-style scandal does not arise again.

According to Singh, review procedures have been enhanced and there is an increased stress on training and quality.

“We are obliged to keep our quality absolutely top class as per our [international] network standards,” he says. “Every year experienced auditors from the network go through our files and do a quality review.”

The firm has also been training its auditors to be more sceptical, says Singh, and not to accept any document or verbal information from their client on face value. However, he said that there are still some unresolved issues, especially those relating to external confirmations of bank statements by the auditors.

Influential position

He is in a good position to assess these changes. Until earlier this year, Singh was chairman of the Auditing and Assurance Standards Board of the Institute of Chartered Accountants of India (ICAI) and is currently a member of the Confederation of Indian Industries’ accounting standards board.

During and after the scandal emerged, Singh was part of the council of the ICAI, which remains responsible for disciplinary issues regarding Indian accountants and auditors. But he denies any conflict of interest. As per the established norms of the institute, he never participated in any discussion relating to Price Waterhouse or the Satyam case, the result of which is still pending  at the ICAI.

According to Singh, the Satyam scandal prompted the ICAI to enquire into the operations of the larger firms and their networks in India. There were also some procedural changes within the institute and it made some related recommendations to the government, including the provision to hold an auditing firm responsible for the professional misconduct of an individual partner.

Although disciplinary proceedings are still housed in the institute, Singh stresses the government has included non-chartered accountants, lawyers, retired judges and bureaucrats in its disciplinary committees.

Another problem noted by Singh is the scarcity of chartered accountants in the country. In India, there are only around 160,000 CAs and in every examination – held twice a year – only 5% to 10% of students manage to pass on their first attempt. The resulting shortage, he says, allows Indian CAs to attract better salaries than lawyers – a CA with 20 years of experience receives an annual pay package of around $55,000 (£34,500) in the private sector, which is good money in India.

To address the problem of short supply, the ICAI has allowed students to start their articleship two years earlier, one year after passing out of school.

“Now if a student clears all his exams at the first attempt he could be a CA by the age of 22 or 23”, says Singh.

International linkages between institutes could help alleviate this shortage. The ICAI and the ICAEW have started recognising each other’s qualifications, provided candidates also undertakes relevant bridging courses. But, despite the increase in outsourcing of accountancy from the UK to India, for which he sees a lot of further scope, these bridging courses do not give CAs the right to practice in each other’s countries. “Foreign accountants [practicing in India] are a sensitive subject and is to be dealt with at the government level,” he says.

Another handicap for Indian accounting is that more than 70% of practising CAs are sole proprietors.

“How would they service their clients who grow into large or multinational companies?” Singh asks. In 2005, the ICAI tried to address the problem by introducing the concept of networking and consolidation among the smaller firms, which could enable them to compete with larger firms, but he says this initiative met with very limited success.

Indeed, Indian laws still limit the number of partners in a CA firm to 20 and, therefore, large firms like Singh’s are forced to operate through a network of smaller firms. “Who wants to run so many partnership firms?” he says. “The day the LLP (limited liability partnership) Act becomes effective we will look into the possibility of merging all of them in one LLP.”

New rules

This probably would not take too long, he predicts. “The required amendments in the CA Act are on their way, after which the institute will change its rules and regulations to usher in the concept of LLP,” he says. “Who knows, this time next year we may be an LLP [in India].”

Meanwhile, India is at last planning to harmonise its accounting standards with IFRS – with the ministry of corporate affairs saying it will phase in the necessary changes to Indian rules from 1 April. However, the ministry has yet to release details of these new standards, making Indian accountants very anxious, according to Singh.

“What if government does not notify the new standards [in time]? In that case we would like to take more time to prepare our IT systems and other necessary changes to capture initial data for the new format. If the authorities do not announce the new standards now, then it will be difficult for the companies to comply with them by April 2011,” he warns.

He added that the new standards are scheduled to be implemented in three phases, depending upon the size and nature of the companies. In the first phase, only companies with annual sales of $220m and above will adopt them.

Singh said the whole process has been dragged out and the profession is eagerly awaiting the notification of the converged standards by the central government.

Furthermore, the uncertainty relating to these new standards extends to taxation.

Singh said that the tax authorities have yet to announce corresponding changes in Indian tax laws or the official acceptance of new accounting concepts such as fair value, which will be enshrined in the converged accounting standards. This could mean that corporations will have to prepare one set of accounts for dividend declaration and another set for filling tax returns, he says.

Accounting in India is undoubtedly in a state of flux, but the country, its institutes and firms are prepared for the challenges ahead, with Singh helping to pave the way.

(Pictures by Sondeep Shankar)