The aim is to become globally more competitive by deploying stronger processes already being followed by the global audit firms in delivering audit mandates.
"There has been a significant jump in the number of mid-sized Indian audit firms looking for global tie-ups in the recent past. More than a dozen such firms have approached various global players in past few weeks," said a consultant who is helping local firm scout for a foreign partner.
The primary reason being cited is the growing complexity in businesses, which auditors must understand to deliver a high-quality audit, compounded by the fear of stringent action by regulatory and investigating agencies for negligence or collusion by them in cases of corporate frauds and business failures.
In recent times, there has been a spate of actions against auditors, including against PwC in the Satyam case and against Deloitte and BSR in the IL&FS matter.
The Supreme Court recently stayed an order by the Securities Appellate Tribunal, which held that Sebi lacked powers to bar auditors, after the capital markets regulator contested a SAT ruling that had quashed a two-year ban on PwC in connection with the ₹7,800-crore Satyam scam.
In the IL&FS case, the NCLT had launched proceedings against the company's erstwhile auditors but the Bombay High Court later granted a stay. Besides, some auditors were recently arrested by the Economic Offences Wing of the Mumbai Police in the NSEL matter, though they were released subsequently on bail.
Some auditors, including in the case of IL&FS matter, have also come under the scanner of the Serious Fraud Investigation Office (SFIO), while National Financial Reporting Authority (NFRA) is looking into alleged accounting lapses at Infosys.
The regulatory and government officials have often pointed out that auditors are supposed to be the conscience-keepers of a company and it is their duty to ring the alarm bells even at the slightest hint of a financial wrongdoing.
Within the auditor community, there is a growing feeling that the globalised businesses of the clients they serve call for the latest audit techniques and processes and their absence can be seen as a major obstacle in delivering on the audit mandate.
A robust IT infrastructure is the another biggest gap area that the domestic audit firms are looking to address through global tie-ups.
"Lack of a strong technology infrastructure has been an area of concern for Indian audit firms in carrying out audit for their clients. An effective IT infrastructure at the auditor's end calls for a substantial investment and a global tie-up or getting associated with a multinational network can help significantly on that front," said an audit committee head at a Nifty-50 company.
At the same time, the prevailing macro-economic environment is creating multiple challenges for the industry, while a negative narrative that has got built around the audit profession is making the things worse, experts said.
Vijay Gupta, ex-central council member of the ICAI, said, "Global tie-ups provide local audit firms access to better processes and practices already undertaken by the global partner, thereby building a much-needed bandwidth to serve the clients".
He cited the resource constraints faced by local firms as crucial for pushing them towards global tie-ups, and said the aim is to have a better IT infrastructure to create a more robust audit framework.
"The liability mechanism for auditors is an area that needs to be duly addressed. Drastic actions are being taken against auditors even in the absence of being proven guilty," said an auditor working with a leading firm.
He said a complete ban on any audit firm has a much larger impact on the industry and on people working in it.
On the other hand, officials at regulatory and enforcement agencies have been saying that audit firms tend to put the blame on individuals after finding themselves in the dock for their alleged role in frauds.
Experts opine that availability of trustworthy financial information on performance of companies is important for proper functioning of a market economy, but the entire auditing system has got into a precarious situation as questions are being raised around integrity of auditors.
Serious concerns arise if auditors' independence is compromised or when trust reposed in them gets betrayed as independent audits are fundamental to taking informed and correct investment decisions.
Experts feel that it is important to facilitate a business-friendly environment for corporates as well as for professionals in India and therefore it is vital that Indian laws and regulations on professional services keep pace with the changing market dynamics.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.