Merry-Go-Round:
How Handful Of Audit Firms Dominate India’s Corporate And Banking Audits
Jun 24, 2025
As stakeholders clamor for a more transparent audit ecosystem, regulators must act decisively to dismantle this cycle and expand the pool of auditors.
In Mumbai, the pulsating heart of India’s financial ecosystem, a troubling pattern has entrenched itself in the audit landscape: a select group of firms, led by the Big 4—Deloitte, EY, KPMG, and PwC—alongside affiliates like Walker Chandiok & Co, BSR & Co, and local players such as M P Chitale & Co, Khimji Kunverji & Co, M S K C & Associates, G D Apte & Co, Chokshi & Co, and Gokhale & Sathe, dominate the audits of major corporations and banks. In FY25, these firms audited 694 of the 2,069 NSE main board-listed companies, securing 34 percent share of assignments and a staggering 57 percent of the market capitalization of listed firms.
Within the Nifty-500, they audited 326 companies—over two-thirds of the total. This concentration spills into the banking sector, where domestic and foreign banks cycle through the same auditors, creating an “audit merry-go-round” that raises critical concerns about competition, independence, and regulatory oversight by the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and the National Financial Reporting Authority (NFRA). As stakeholders clamor for a more transparent audit ecosystem, regulators must act decisively to dismantle this cycle and expand the pool of auditors.
The Mumbai Audit
Mumbai’s audit pool, comprising the Big 4 affiliates, (e.g., SR Batliboi & Co for EY, BSR & Co for KPMG, Deloitte Haskins & Sells), and local firms like M P Chitale & Co, Khimji Kunverji & Co, M S K C & Associates, G D Apte & Co, Chokshi & Co, and Gokhale, Gokhale & Sathe, form a tight-knit clique that consistently lands high-profile assignments. Empanelled by the Institute of Chartered Accountants of India (ICAI) for bank audits, these firms are frequently chosen by domestic banks like HDFC Bank, private players like IndusInd Bank, and foreign banks such as Standard Chartered, HSBC, and Deutsche Bank. For example, Khimji Kunverji & Co has audited Deutsche Bank’s Indian operations, while M P Chitale & Co has worked with IndusInd Bank. This rotation among a select few fosters a perception of an audit oligopoly, where smaller firms are perpetually sidelined.
The Companies Act, 2013, mandates rotation for listed companies—individual auditors every 5 years, firms every 10 years, with a 5-year cooling-off period. The RBI’s 2021 guidelines tightened rules for banks and NBFCs with assets above ₹15,000 crore, requiring auditor rotation every 3 years, with a 12-year cap for foreign bank branch audits. Yet, the limited pool of firms equipped with global networks and technological prowess has led to the same players swapping clients, undermining the intent of rotation.
Bank Scams and Auditor Scrutiny
The merry-go-round’s risks are starkly illustrated by banking scams where auditors faced scrutiny. The Punjab and Maharashtra Co-operative (PMC) Bank scam, uncovered in 2019, exposed ₹6,700 crore in hidden loans to Housing Development and Infrastructure Ltd (HDIL). PMC’s auditor, Lakdawala & Co, failed to detect these irregularities, raising questions about due diligence. While not part of the Big 4 or Mumbai’s elite, the case underscores the broader issue: a lack of fresh perspectives can breed complacency, whether in small or large firms. Similarly, the IL&FS collapse in 2018 implicated Deloitte and BSR & Co, who faced NFRA probes for overlooking ₹90,000 crore in debt defaults. The Yes Bank crisis (2020), involving ₹20,000 crore in bad loans, saw auditors like SR Batliboi (EY) criticized for missing red flags. These cases highlight how reliance on a limited pool, even when compliant with rotation rules, can fail to deliver robust oversight.
Foreign Banks: A Round-Robin Game
Foreign banks like Standard Chartered, HSBC, and Deutsche Bank exhibit a “round-robin” pattern, with auditors from the Big 4 and Mumbai’s select group rotating within the RBI’s 12-year tenure cap. Khimji Kunverji & Co has audited Deutsche Bank, while Gokhale & Sathe and M P Chitale & Co have handled HSBC and Standard Chartered assignments. Despite RBI’s aim for fresh scrutiny, these firms reappear after cooling-off periods, creating a closed loop that excludes new entrants. This risks fostering “comfort zone” auditors who align too closely with bank ecosystems, potentially compromising objectivity.
IndusInd Bank: Legal Notices, Yet Resilient
IndusInd Bank exemplifies the merry-go-round’s tenacity. In June 2025, NFRA issued notices to its auditors, including M S K C & Associates, PwC, EY, and M P Chitale & Co, over alleged lapses in auditing derivative irregularities since 2017. Despite these challenges, M S K C & Associates and others continue securing assignments, reflecting their entrenched position. This resilience underscores banks’ reluctance to onboard less-established auditors, perpetuating the cycle.
IDBI Bank: A Case Study in Rotation
IDBI Bank, a major domestic player, exemplifies this merry-go-round. Over the past five years (FY21–FY25), its balance sheets reveal a recurring cycle of auditors from the same limited pool. Firms like G D Apte & Co, M P Chitale & Co, Khimji Kunverji & Co, and Chokshi & Chokshi have frequently appeared as Statutory Central Auditors (SCAs) or branch auditors, often alongside Big 4 affiliates like Deloitte or EY’s SR Batliboi. For instance, in FY22, G D Apte & Co was a joint auditor, while Khimji Kunverji & Co appeared in FY23. By FY25, M S K C & Associates and Chokshi & Chokshi were involved, reflecting a pattern where these firms rotate in and out, rarely allowing new entrants. This cycle, driven by the RBI’s empanelment process and banks’ preference for familiar auditors, limits competition and reinforces the dominance of a select few.
Tata Trusts and Corporate Echoes
The pattern extends to corporates like the Tata Trusts. Their audits have cycled among Deloitte, BSR & Co, and firms like Chokshi & Co, with Deloitte auditing key entities in FY23 and BSR & Co reappearing in FY25 post-cooling-off. This compliant yet repetitive rotation mirrors banking’s reliance on a limited pool, questioning whether fresh perspectives are achieved.
Risks of the Merry-Go-Round
The concentration poses multiple risks. It undermines rotation’s goal of reducing conflicts and ensuring independence, as entrenched relationships may persist under different logos. It also marginalizes mid-tier firms, which, despite talent, lack global branding. In FY19, 70 percent of auditors handled one company each, while the Big 4 audited 522, representing 75 percent of market capitalization. By FY25, the Big 6 audited 326 of 483 Nifty-500 companies, tightening their hold.
High-profile failures amplify concerns. The Satyam scandal led to SEBI banning PwC (later stayed), while recent NFRA notices to IndusInd’s auditors signal ongoing risks. A systemic failure among dominant firms could erode investor trust and destabilize markets. The merry-go-round also fuels high fees—Reliance Industries paid EY ₹63 crore in FY24, and HDFC Bank’s costs rise with each rotation—locking out smaller firms.
Unverified industry murmurs hint at deeper issues. Some speculate that CFOs and audit committee chairpersons, pivotal in auditor selection, may favor familiar firms, potentially compromising objectivity. Rumors of financial kickbacks, like 25 percent cuts from fees, lack evidence but reflect unease over opaque appointments. Such perceptions, even unproven, erode trust.
Regulatory Gaps and Solutions
The RBI, SEBI, and NFRA have acted, but gaps persist. RBI’s 2021 guidelines favored large firms for complex audits. SEBI’s focus on disclosures hasn’t tackled concentration. NFRA, proactive in IL&FS and IndusInd cases, hasn’t addressed structural barriers for smaller firms.
To break the cycle, regulators must act boldly:
Mandate joint audits pairing Big 4 with mid-tier firms, as seen in FY23 with 144 companies, to build capacity.
NFRA should offer training on complex audits, empowering firms like G D Apte or Gokhale & Sathe.
Cap large client numbers—EY audited 176 NSE-listed firms in FY25, Deloitte 124, KPMG 137—to force diversification.
Mandate transparent selection criteria, overseen by audit committees, to ensure merit-based appointments.
A Call to Action
India’s audit merry-go-round, driven by a syndicate-like group of Big 4 affiliates and Mumbai firms, stifles competition and risks independence. Scams like PMC, IL&FS, and Yes Bank underscore the stakes. As India’s economy grows, a diverse audit ecosystem is vital to protect investors and ensure stability. The RBI, SEBI, and NFRA must promote joint audits, build capacity, cap market share, and enhance transparency. Stakeholders deserve an audit system prioritizing quality over familiarity. The time for reform is now.
[Business World]
