Archive · 1 Oct 2025
India Needs to Separate Consulting and Auditing Services
In India, companies that advise and audit other businesses are starting to cause issues.
Advisors help companies grow and make more money, while auditors check financial records to protect investors.
However, when the same company does both, it can create problems.
Countries like the US and UK have split these services to make them more trustworthy.
India's regulator, the NFRA, has raised concerns about this.
Separating the two roles would boost trust and allow Indian companies to grow globally, with the PM emphasizing the need to develop Indian Big4s to leverage the nations expertise.
Advisory and audit services, while both important, are increasingly intertwined, potentially weakening trust.
Consulting services often generate higher profits, creating incentives that can impact the audit process.
Research indicates firms offering both services produce lower-quality audits, reducing investor confidence.
International examples, such as the US and UK, have taken steps to separate audit and consulting practices.
India is at a point where it can set a precedent by formalizing a split between consulting and auditing.
- Who
- India
- What
- Differentiating between consulting and auditing services.
- When
- Currently, with rapid growth in the consulting industry.
- Where
- India
- Why
- To improve trust and quality, and to promote the development of "Indian Big 4" firms.
Advocates for Separation
Status Quo
Quality of Work
Advocates for Separation
Separation of audit and consulting improves the quality of both services.
Status Quo
Unstated.
Trust and Confidence
Advocates for Separation
Separation enhances trust among stakeholders.
Status Quo
Unstated.
Growth of Indian Firms
Advocates for Separation
Separation is essential to the development of globally competitive Indian firms.
Status Quo
Unstated.
- Consulting Growth in India
- Grew from $7.8B (2020) to projected $24B (2025)
- Key Risk
- Dual roles can impair independence and undermine audit quality
- US Response
- Sarbanes-Oxley Act limited services auditors could provide
- UK Response
- Mandated operational split between audit and consulting
- Indian Regulator
- National Financial Reporting Authority (NFRA)