An industry body has asked the government to scrap a proposal to ban audit firms from offering non-audit services to clients for three years after their term ends.
It said the move will lead to operational inefficiencies, increased costs and hurdles for large corporate groups, and force companies to depend on smaller auditors, which could compromise service quality in complex areas.
Companies including EY, , KPMG, Deloitte, BDO and Grant Thornton Bharat, among other audit firms, will be severely impacted if amendments proposed to the Companies Act of 2013 are implemented. These companies offer other advisory services besides audits for clients.
The Federation of Indian Chambers of Commerce and Industry (Ficci), a body representing companies across sectors, submitted its comments and suggestions on the Corporate Laws (Amendment) Bill, 2026, last week, Mint has learnt.
According to the proposed clause in the bill, an auditor or audit firm shall not provide, directly or indirectly, any non-audit services to a company or its holding company or subsidiary. This restriction will also apply for three years after the term of the auditor or audit firm has been completed.
, concerned that the cooling-off period will hinder business, suggested that the “proposal to extend the restriction on non-audit services for a period of three years following the completion of the audit term be omitted,” according to the document reviewed by Mint.
Auditors are currently appointed for five years with a company, but if the planned changes become law, they cannot offer non-audit services to a client for eight years (tenure of five years plus the cooling-off period).
‘Unnecessary hurdles’
“In India, only a handful of large audit firms have the scale expertise and resources to handle complex assignments for large corporate groups, leaving companies with fewer qualified options for critical advisory or assurance services,” Ficci said. “The three-year restriction period creates unnecessary hurdles for large corporate groups.”
Deloitte declined to comment on the matter. The industry body and other audit firms mentioned in the story did not respond to Mint‘s queries sent on Thursday noon.
Ficci noted that the rule would apply across a company and its subsidiaries, blocking audit firms from engaging with the entire group, even in non-audit aspects.
“This blanket coverage reduces flexibility and deprives companies of specialized expertise,” the industry body noted.
Experts are divided on the issue.
“A cooling-off period is essential to eliminate familiarity threats and self-review threats that arise when the same firm audits and then immediately advises the same group,” said Shailesh Haribhakti, chairperson of Shailesh Haribhakti & Associates, a chartered accountancy firm. “Three years is a reasonable buffer that reinforces the principle of independence without being unduly punitive.”
Haribhakti said markets and regulators worldwide have recognized that true independence requires both structural and temporal separation and retaining this provision strengthens public confidence in financial reporting.
‘Not logical’
“The cooling-off period is not logical,” said Parveen Kumar, national head for assurance for ASA, an accounting advisory firm. “The auditor during the audit is independent during the audit, but afterwards, the audit team can advise the client on how to improve business processes or control costs and point out where the lags are. Such advice or recommendations might not be required during their tenure as statutory auditors.”
Finance minister Nirmala Sitharaman introduced the bill in the Lok Sabha in March, seeking to ease compliance norms and reduce criminal penalties by amending the Limited Liability Partnership Act, 2008, and the Companies Act, 2013.
According to a senior partner in one of the larger audit firms mentioned earlier, the bill will leave them with few options to work with.
“Fewer clients will mean lesser work and this in turn will lead to redundancy,” the senior partner said.
The Big Four—EY, KPMG, Deloitte and PwC—employ 30,000-40,000 people each in India.
“With top-tier firms excluded for long periods, businesses would be forced to rely on smaller firms, which can compromise service quality in complex areas requiring global reach and deep technical knowledge,” Ficci said. “It is therefore requested to omit this requirement, keeping in view market realities, capacity constraints, and the need to balance independence with operational feasibilities.”
War, AI impact
The proposed changes come as geopolitical upheavals from the West Asia war and changes brought about by artificial intelligence are expected to cause redundancies in consulting and audit firms in areas like research and production services.
A senior auditor from one of the highlighted that while clients can engage with smaller audit firms, they may not yet possess the acumen of larger, established competitors.
The submission to the government was along similar lines. Ficci pointed out that smaller firms “may not always possess the capacity, reach, or specialized skill sets necessary to service such organizations, especially in areas involving complex cross-border regulatory or sector-specific requirements.”
The costs incurred by India Inc were a moot point as well.
“… such restriction may lead to operational inefficiencies and increased costs, as companies would need to onboard new advisors lacking historical context of complex structures,” Ficci said.