Joining Forces for Quality and Scale

The expanded AQMM requirement and the push for Multidisciplinary Partnerships (MDPs) mark a strategic shift by Indian regulators. This plan aims to standardize and improve audit quality across more financial services. It also seeks to close a long-standing gap: the limited size and global competitiveness of domestic audit and consulting firms.

Stricter Audit Quality Rules

The ICAI's decision to make its Audit Quality Maturity Model (AQMM) v2.0 mandatory from April 1, 2026, will affect firms auditing group entities of listed companies, banks, and insurance corporations. This means more rigorous self-evaluation and potential peer reviews beyond direct audits, aiming to strengthen quality controls within complex corporate structures. The AQMM model assesses practice management, HR, and digital skills to help firms improve and boost confidence. This step aligns with a global trend of regulators increasing oversight to protect financial reporting accuracy.

Building Indian Giants via New Partnerships

Alongside quality improvements, the Indian government is actively working to develop domestic professional services firms into global leaders like the Big Four (Deloitte, PwC, EY, KPMG). The Ministry of Corporate Affairs (MCA) is seeking feedback on Multidisciplinary Partnerships (MDPs). This model allows accountants, lawyers, IT experts, and consultants to work together under one firm.

This effort recognizes that current regulations and firm structures limit Indian companies' ability to grow large and offer integrated services like global competitors. The aim is to help Indian firms better compete for profitable contracts, which are now mostly held by global players. These international firms audit about half of India's top 500 listed companies by market value. The Indian accounting services market, valued around $15.97 billion in 2026, is expected to grow strongly, offering significant chances for larger domestic firms.

Market Growth and Regulatory Shifts

The drive for scale and quality happens as the professional services market rapidly changes. Globally, the audit market was worth $226.6 billion in 2024 and is projected to hit $325.61 billion by 2033. In India, the accounting and audit market is expected to reach $65.63 billion by 2034, growing at a 9.76% annual rate. Major growth factors include digital changes, ESG reporting, and complex international rules, with advisory and consulting becoming bigger parts of the business.

The government's strategy includes changing structural rules, like amending Section 141(1) of the Companies Act which limits chartered accountants' majority ownership, and re-evaluating tender processes that often favor international firms with larger global revenue. The ICAI has also looked into helping mergers and partnerships to increase firm size, a goal dating back to at least 2017. The aim is to create a fairer system where Indian firms can merge, invest in technology, and build global brands, capturing more of the estimated $240 billion global audit and consulting market.

Challenges for Domestic Firms

Despite government support and clear goals, Indian audit firms face a difficult road to challenge the Big Four. The main obstacles are size and capital. Most Indian firms are small, often sole proprietorships, with few having over ten partners. This structure severely limits their capacity for large, complex audits or investments in technology and talent needed to compete globally.

Moreover, the Big Four have built strong global networks and brand recognition over many years. In India, they earned approximately ₹38,500 crore in revenue in FY24 and continue to lead in high-value audits for large listed companies. Although Grant Thornton and BDO are gaining ground, they still operate behind these major global players.

While MDPs promise better integration, they also bring challenges in oversight, professional independence, and potential conflicts of interest. The ICAI's proposed 'majority-control' rule for MDPs aims to maintain accountability but might cause disputes between regulators. Past issues with credibility and audit quality, even at firms linked to global networks, show the ongoing difficulties in upholding strong audit standards. Reforms like mandatory auditor rotation can create chances for mid-tier firms, but only if they have the capacity to handle them. Without major investment and consolidation, structural problems could block many domestic firms.

What's Next for India's Audit Sector

The gradual rollout of AQMM and the MDP reforms show a strong commitment to transforming India's professional services industry. Success depends on smooth implementation, overcoming established market leaders, and crucially, solving the capital and size issues facing Indian firms. The goal is to build strong domestic competitors, but in the near term, expect a mix of regulatory progress, consolidation, and the continued strong presence of global firms.