In a transformative move aimed at reshaping the Indian accounting landscape, the Institute of Chartered Accountants of India (ICAI) has approved a draft regulatory framework that will enable local Chartered Accountant (CA) firms to enter into formal tie-ups with global accounting networks. This strategic shift, announced on May 30, 2025, is expected to reshape India’s auditing and financial services ecosystem, allowing home-grown firms to expand their capabilities, scale operations, and compete with international giants.

A Long-Awaited Reform to Empower Indian Firms

The initiative is directly aligned with Prime Minister Narendra Modi’s vision of building large, Indian-headquartered accounting firms capable of operating at a global standard. According to ICAI President Mr. Charanjot Singh Nanda, the draft framework was cleared by the ICAI’s apex council on May 27, 2025, after consultations with the Ministry of Corporate Affairs. The document is now open for stakeholder feedback, with a formal notification expected by early July 2025.

For over a decade, the dominance of international firms such as Ernst & Young (EY), Deloitte, KPMG, PricewaterhouseCoopers (PwC), Grant Thornton, and BDO has created an uneven playing field. These firms currently manage audits for 326 of the 486 Nifty-500 companies as of March 2025. This new regulatory framework is viewed as a necessary correction to bring parity and empower Indian audit practices.

What the New Framework Proposes

The draft regulation lays out detailed norms for domestic CA firms looking to align with foreign accounting networks. The key provisions include:

1. Mandatory ICAI Registration for Global Affiliates

Any Indian CA firm seeking to affiliate or partner with an international accounting entity must register with the ICAI. This will bring formal transparency and oversight into existing collaborations, many of which have been operating in a legal grey zone.

2. Appointment of a Nodal Officer

Registered firms with global affiliations must appoint a senior partner as a nodal officer. This partner will act as the official liaison with the ICAI, responsible for regulatory compliance and ethical adherence.

3. Ethical and Filing Obligations

Such firms must:

• Comply with ICAI’s ethical standards, especially concerning independence, conflict of interest, and integrity.

• Submit annual filings to maintain updated records with the regulatory body.

• Disclose full details of the global entity, including branding agreements, service models, and revenue-sharing structures.

This marks the first formal regulatory structure for global tie-ups in India since the requirement for disclosure of foreign affiliations was discontinued four years ago.

Boosting Domestic Capabilities Amid Global Competition

The ICAI’s move is part of a broader government initiative to fortify India’s domestic professional services infrastructure, particularly in financial services. This includes:

• Encouraging mergers and collaborations among smaller CA firms.

• Extending the post-merger separation period from 5 years to 10 years, which provides more time for firms to integrate operations.

• Waiving the fees for freezing firm names, simplifying administrative barriers to consolidation and scale.

These measures follow repeated appeals by top government officials, including PM Modi in 2017 and Finance Minister Nirmala Sitharaman in 2024, to develop globally competitive Indian auditing firms.

Implications for the Audit and Advisory Industry

This development is likely to have far-reaching implications for both Indian and foreign players in the financial and consulting domains:

For Indian CA Firms:

• A formal path to scale up via global expertise, technologies, and methodologies.

• Access to international training resources, quality assurance programs, and industry best practices.

• Improved global visibility, especially for firms looking to serve MNCs or engage in cross-border audit work.

For Global Accounting Networks:

• Increased ability to enter the Indian market through regulated partnerships.

• Operational clarity, reducing legal and compliance uncertainties.

• Better risk management under ICAI’s umbrella of oversight and ethical standards.

For Indian Industry and Markets:

• Greater competition and service quality in audit, tax, and advisory functions.

• Reduction in dependency on Big Four firms, promoting market diversity.

• More robust corporate governance, with a wider pool of qualified firms.

Challenges and Considerations

Despite its progressive nature, the new draft framework will have to address certain challenges for effective implementation:

• Stakeholder buy-in, especially from mid-sized firms and international entities.

• Potential legal ambiguities around ownership, brand use, and management control in partnerships.

• Resistance from entrenched market players, particularly in areas where international firms currently dominate.

• Need for capacity building among Indian CA firms to meet global audit standards.

The ICAI is expected to refine the framework based on stakeholder feedback, which will likely include input from firms, regulatory experts, corporate clients, and international associations.

Road Ahead: Timeline and Strategic Vision

With the draft framework now in public consultation, the next key steps include:

• Collecting and reviewing feedback throughout June 2025.

• Finalising the framework and issuing an official notification by early July 2025.

• Rolling out implementation guidelines, including registration portals, compliance templates, and audit checklists.

This initiative aligns with a long-term strategy to position India as:

• A global hub for professional and financial services.

• A leader in accounting innovation, governance, and compliance excellence.

• A country with strong indigenous institutions capable of matching global standards.

Conclusion: A New Era for India’s Accounting Profession

The ICAI’s decision to formalise global tie-ups for Indian Chartered Accountant firms marks a milestone in India’s economic and regulatory reform journey. By empowering domestic firms, introducing clear compliance structures, and paving the way for global collaboration, the initiative is a leap toward a more balanced, competitive, and self-reliant professional services sector.

As India moves further into the digital economy and as corporate structures grow in complexity, strong, scalable, and ethical audit firms will be key to ensuring transparency, accountability, and trust in business. This framework, once finalised and enforced, is poised to become a cornerstone of that vision, making Indian CA firms fit for the global stage.

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