At the Big Five, auditors want pay parity with their western counterparts

The auditors at Big Five firms said the remuneration does not justify the risks, work stress, and investments in technology and talent

Auditors in India are dissatisfied with the lack of fair remuneration for work comparable to that of their counterparts in developed countries, as reported by the Financial Express.

The head of the auditing division at a Big Five firm stated that to remain competitive, they need to invest in technology and hire top talent. He mentioned that audit fees in India should increase by at least 200 per cent from their current levels.

The report cited auditors saying they are grossly underpaid compared to their counterparts in more mature markets like the US. According to capital markets research firm Primeinfobase, the average fees for Indian auditors of 1,847 listed companies was Rs 93 lakh in FY23, significantly lower than the average fees of $10.78 million (Rs 90 crore) paid to auditors of S&P 500 companies in FY22.

 

Auditors at Big Five firms noted that despite the profession being under pressure, the remuneration does not justify the risks, work stress, and investments in technology and talent, the report added.

The regulator also appears to share this view. At a conference in March 2024, Ajay Bhushan Pandey, chairperson of the National Financial Reporting Authority (NFRA), acknowledged that auditing in India is not well compensated. He pointed out the significant disparity between auditing fees in India and abroad.

The difference between US and Indian auditing firms

However, there is another perspective. The report cited experts as saying that comparing audit fees between the US and India is unfounded due to differences in the scope of work. In the US, audits are performed under stringent Public Company Accounting Oversight Board (PCAOB) standards, which involve their own complexities, risks, and liabilities.

The head of a Big Five audit firm explained that in Western markets, a significant factor in auditing public interest entities (PIEs) is the cost of professional indemnity insurance, which firms charge clients based on the size of the PIEs. This concept is not present in India, where such insurance is neither mandatory nor available in the market, the report said.

“In the Western markets, one of the biggest considerations while auditing the public interest entities (PIEs) is the cost of professional indemnity insurance. The firms charge for this insurance from clients based on the size of PIEs. In India, this concept is not even on the radar. Neither is it mandatory nor is any such insurance offered in the market currently,” the report said, citing the head of a Big Five audit firm.