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Ritika Chaudhary

Assistant Professor, Delhi University, India

Dr. Harish Handa

Associate Professor, Delhi University, India


It was the belief of the Securities and Exchange Board of India (“SEBI”) that efforts to improve corporate governance standards in India must continue.  Corporate governance is the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. The purpose of this study is to investigate the corporate governance role of external audits in a setting where companies traditionally rely more on debt than equity capital. The study has partitioned the Indian audit market into two groups: the first group comprises the top (BIG) Four audit firms with Ernst and young at the top, followed  by PriceWaterhouse & Co  Deloitte Haskins & Sells, and KPMG, The second group  include S.B. Billimoria & Co, S.R. Batliboi & Co, BSR & Co, , Lodha & Co, Lovelock & Lewes, Ambit-RSM ,Chaturvedi and Shah,  Rajendra & co. "Six  out of the first ten  firms making the grade of the study allegiance to one or the other of what the world calls the Big Four," The sole exception is Kolkata-based Lodha & Co. These are classified as the dominant auditors, and the other group consists of all other auditors. 100 companies were selected (Listed either in NSE or BSE or both)* using stratified structured sampling technique. The paper assumed that an Indian company's demand for audit services from one of the two groups of auditors is determined by its set of stakeholders. A positive relationship was found between Indian companies' demand for dominant audit suppliers and the variables that have been used as proxies for the stakeholder interests of creditors, dispersed shareholders, and foreign suppliers. The study also explored a negative association between Indian companies' dominant audit supplier choices and the stakeholder interests of closely held companies. The results suggested that audits play a corporate governance role and econometrically the possibility of fraud can be minimised by getting their accounts audited by big four audit firms.

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