Indian accounting firms are going global this decade. CAs should come together and hold hands, says Ajay Sethi, Managing Partner at ASA.
Will joint audits & oversight accounting bodies push Indian firms to go global? A discussion with founder of ASA, one of India’s Top 10 accounting and consulting firms.
Ajay Sethi, Managing Partner at ASA & Co worked with Arthur Andersen before starting on his own.
31 years later ASA is amongst India’s Top 10 accounting and consulting firms...and may be the only one with no international network.
The Finance Story spoke with Ajay Sethi to know his thoughts on How and When Indian firms will go global, and why it has not happened so far!
In this conversation, he also mentioned the role played by Mr. Ratan S Mama, the man who built RSM in the 1960s and took global strides, with an office outside India in Dubai.
Excerpts from the interview.
ASA is a 31-year-old firm with a team of 1000+ employees. How did it all start?
Ajay: I qualified as an Indian Chartered Accountant in 1989 and joined Arthur Andersen in their Tax & Business Advisory Services. It was an eye opener as to how developed the professional services firms were outside of India.
Just to place things in perspective, India was a closed economy till 1991.
It helped me realise the future potential of setting up a thoroughly professional firm.
One day I decided to move on and start on my own. To be honest, I had a vague idea and no solid business plan.
The initial team consisted of me, an administration person, and an 8 x 10 feet office!
As luck would have it, within a couple of months of setting up the practice, India opened its arms and welcomed capitalism through its hallmark fiscal budget of 1991.
This fueled my belief and things slowly started shaping up.
Today, 31 years later we are a 1000+ member team with 32 partners and directors.
India has some brilliant global companies and startups but why no Indian Firm has been able to build a firm like that of the Big 4?
Ajay: I think everything takes some time to happen, it won’t happen overnight.
If you go to the 1980s Europe and Australia and see their accounting history, you will realise we share the same past. During that time, the whole ecosystem was scattered, the regulators were stepping in, they had low audit fees, etc.
But look at them now; forget the Big 4, the mid-sized firms in Europe, the UK, and Australia have 80 to 90 partners. And they took 20 - 40 years to reach that position.
That moment for India is also coming. How do I know that?
Not only are the clients pressing for services beyond statutory compliances, but our regulators are also pressing the accelerator for tighter norms.
We have an oversight body in the US called the Public Company Accounting Oversight Board (PCAOB), and in India, we have National Financial Reporting Authority (NFRA).
In my opinion, the presence of an oversight body is important for our profession. Their presence will create a better ecosystem and environment for the future.
That coupled with us embracing new age services will pave way for the next step up in our profession.
Secondly, the Government of India has already introduced joint audits for the Banking sector, and now they will introduce the same for the listed companies as well.
Particularly in the Audit segments, our Big 4 companies are holding 80% of the market share, however, with such an announcement a level playing field will be created.
So if you ask me what is our future, I would say coming together and holding hands is the future for accountants, looking at themselves and finding niche strengths is the future.
Letting go of too much power centralization is the future.
Do you see yourself making great strides in other countries in 5-6 years?
Ajay: Yes, ASA will make mega strides in India and outside of the country, and we are working toward that vision.
In our firm, we have a policy that everybody retires at 65. This will ensure that we always have a great pool of charged-up talent inside the firm.
Technically, ASA is the only Indian firm, that has made a place in the Top 10 Indian accounting firms without having any international network.
At present, we are focusing on 5-6 countries and deliberately staying away from spreading ourselves thin. But I know many companies, who initially operated through their representatives like us and later on set up full-fledged offices.
So, I can confidently say that the moment has come for India.
But do you know who created this movement? It was Mr. Ratan S Mama. That man was way ahead of his time.
He built RSM in the 1960s and later it got merged with PwC. If I remember correctly, he set up an office in Dubai before anybody could think of doing it.
Mr. KN Memani took EY India to unimaginable heights.
One must study the dynamics of these, and understand how they changed the game.
Don’t also forget that the Institute of Chartered Accountants has agreed that other professionals like the Company Secretary and Cost Accountants can come together and form a partnership.
Now that is going to give me a big leap because I could partner up with other professionals.
The moment they allow me to tie up with lawyers, (I believe in Germany it’s allowed to have a mix of lawyers and accountants) our firepower will go up.
And I think in 5 to 6 years we will see major changes where mid-sized firms that are more agile will scale and grow. But crystal gazing has to begin now.
Accounting practices with ambition will go global.
What are your views on technology?
Ajay: ASA is a technology-driven firm.
We have a lot of technology inbuilt.
Does it compare to the Big 4? Not presently, but do I aspire to be there? Absolutely.
And if you ask me, whether I would put my money on that? I will say Yes.
In the last 31 years at ASA, the question of diversity must’ve come up many a time. How do you as a leader handle that kind of situation?
Ajay: Whenever I conduct the orientation of new employees, the first thing I tell them is “I believe in gender equality, for me you all are professionals, and not male or female. And I hope you see yourself that way too.” That applies across the ASA board.
As the world has moved forward, words like diversity and inclusion have picked up. For many people, it’s a marketing opportunity; “Oh I am supporting this and that”, but for me, I have always treated people equally, so what’s new?
Similarly, if somebody has a particular sexual inclination, how does it affect their professional conduct? Either one is good at his job, or he is not. It has nothing to do with their gender or sexual preference.
My only disappointment is that I have not been able to fill my board of partners with enough women partners or people with different sexual inclinations, yet.
But I do not want to do it, just for the sake of it, I am waiting for them to come up as professionals and seize the opportunity.
Fortunately, the chairperson of my independent board of advisors is a woman. As you can see it happens naturally for me, for I don’t see it the way the world sees it.
Lastly, what is your message to other CAs?
Ajay: Indian Chartered Accountants are amongst the best in class, globally and today work for globally renowned organizations. Many have stepped up to CEO roles.
It will only get better in the future for younger CAs.
There are brilliant chartered accountants in India, but somehow their brilliance is a closely kept secret. They have to transparently share that brilliance and knowledge with others. That is what will make a better future for our profession.
The Finance Story is now on Telegram. Click here to join our channel and get updates with latest stories of finance professionals.