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Legal audit firms wage turf war

Audit and accounting firms favour multi- disciplinary partnership, the legal fraternity stays out
The global turf war between accountants and lawyers was played out in India last month, when the Society of Indian Law Firms (SILF), an association of about 100 law firms, filed a complaint with the regulator, Bar Council of India, saying that four multinational audit and accounting firms — EY, KPMG, Deloitte and PwC — were indulging in the practice of law in violation of the Advocates Act, 1961 provisions. The Bar Council sent notices to the firms, seeking their response.
The move comes at a time when the three professional institutes that represent chartered accountants, cost accountants and company secretaries are working on broad contours of setting up multi- disciplinary partnerships. That would allow them to offer audit, cost accounting and consultancy services under one roof.
However, the legal fraternity in India has taken an aggressive stand against the multi- disciplinary practice.
To make any one- stop shop for accounting and legal services a reality, lawyers have to agree to share their fees with non- legal professionals. “ We are against multi- disciplinary practice,” says Lalit Bhasin, president, SILF. In its complaint against the big four, SILF alleged that the accountancy and management firms are employing law graduates to render legal services, contrary to the provisions of the Act. The SILF’s contention is: “ Advocates are entitled to practise the profession of law, which includes both litigious and non- litigious matters.” Lawyers have been opposing company secretaries and chartered accountants representing their clients before the National Tax Tribunal.
Globally, multinational audit and accounting networks are increasingly offering legal advice also to their clients. In markets such as the United Kingdom and Australia, which allow multi- disciplinary practice, law firms are an integral part of the network of many audit and accounting majors. Many European countries allow some degree of fee- sharing between legal and audit firms. The United States and India are the two key markets that are yet to open up. However, in India, some global accounting firms have “ friendly’’ relationship with some law firms, which handle bulk of their legal work. The big four in recent years have yanked up hiring of legal professionals to shore up their advisory and fraud investigation services. Advisories involving complex computation of tax matters, fund- raising and M& A activities have seen an increasing role of legal professionals. The Economist, in a recent article on the subject, noted: “… they ( global audit and accounting firms) are seeking to build broader practices in under- lawyered emerging markets where the international law firms do not have a presence but the accountants do.” Many in the accounting community feel that the resistance of legal community, especially the large corporate law firms, to the multi- disciplinary practice, are diversionary tactics against the government’s move to open up the profession to foreign law firms. “ It is a turf battle. They know competition is going to hot up for them in the coming years,” said India head of one of the accounting firms mentioned above, who did not want to be quoted.
Senior executives of accounting firms point out that many law firms have hired chartered accountants, and offering transactional and other non- legal services to their corporate clients. “ We did not object to that. Clients prefer onestop solutions, and we understand and appreciate that,” said an official of another accounting major.
“The core issue is whether the client is receiving legitimate and appropriate advice or service. If that positioning is a threat to the legal practice, that may well be,” said Milind S Kothari, managing partner, BDO India.
Ramesh Vaidyanathan, managing partner, Advaya Legal, feels allowing multi- disciplinary practices in India could be a threat to the legal practice.
“If multi- disciplinary practices are to be permitted, it should be after creating a regulatory framework for licensing, disciplinary proceedings,” he said. The current licence prohibits the accounting and audit firms from undertaking legal practice, he added.
However there are some in the legal fraternity who feel that integrating the different professional services is the next evolutionary step of the legal and accountancy professions. “ Clients have often lamented that we do not have a legal or regulatory structure, which permits multidisciplinary professional services to function under one common banner. The services offered by law firms and accountancy firms often overlap, while advising on forensic services, anti- bribery, anti- trust, anti- dumping, cross border mergers, international trade law or taxation matters,” said Krishnayan Sen, partner, Verus Advocates.
Erik Wulff, partner, DLA Piper, a leading US law firm, said there were legitimate concerns about fee- splitting arrangements with non- lawyers having the potential of compromising the independence and legal judgment of lawyers. However, he added that accounting firms would have a tough time getting their foot in the door for getting meaningful legal work from many global companies. “ I don’t see accounting firms competing for the international work I’m involved in. These clients go to reputed law firms that compete vigorously with each other for the work,” he added. The jury is still out on whether India should allow multi- disciplinary practice.
Business Standard, New Delhi, 20th July 2015

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