He has been around at PwC and seen it through the worst, and today he is at the helm. As Deepak Kapoor, 52, takes charge as the new chairman of PricewaterhouseCoopers India, he spells out a clear vision for PwC post Satyam. ?No slogans, just two simple words?quality and growth… Growth is a consequence of good quality delivered to clients and if clients perceive value added to them, it automatically results in growth.? And this growth is not just limited to adding new partners. PwC in India has partners and executive directors totalling 150 plus. ?As far as business is concerned, we are talking about 6,500 people and doubling it to 12,000 in the next three-four years.? Kapoor admits that after the Satyam scam, brand PwC suffered but it is taking remedial steps. ?It?s work in progress, especially on the non-client perception.? And how does he perceive the presence of an international partner assisting India as part of the post-Satyam rebuilding? ?The good thing about being a PwC member network firm is that your resources become fungible, as and when needed. At any point in time, the PwC entity in any country will have people coming in and out. So if you go to any PwC office, you will find many people with blonde hair,? he quips. He envisages the consultancy role of firms just growing from here. ?Businesses are constantly exploring the shifting paradigm to take it to a different level. They are talking to consulting firms like ours on how to get to a transformational exercise of the business and take it to the next level. People are no longer happy with 5, 7, 10% growth; they say we have the fear of being left behind within our industry, and this is happening far more than I have witnessed ever before.? Deepak Kapoor shares with Sarika Malhotra and Shailesh Dobhal the roadmap for PwC?s resurrection and accounting practices as India gears up to become IFRS compliant from April 2011.
The PwC brand suffered because of Satyam. What?s your mandate on image post-Satyam?
We were the auditors and Satyam happened under our watch. We regret it. Brand is all about how people perceive you, and there are two types of perceptions that we are dealing with. One is clients? perception. They are stakeholders and their perception has been extremely positive right from the beginning, despite Satyam. Clients understood that while it may have happened under our watch, but the PwC teams put in rigour day in and day out, to deliver quality and value-add to their efficiency. We have lost hardly more than a handful of clients over the last two audit seasons. But non-client perception is also very important. The public and other corporates make up potential clients. Here, we did suffer. Work?s in progress on this front. We have introspected and taken remedial measures. Non-client perception?s getting better.
There was a kind of an exodus from PwC last year, especially in the tax division. Was it linked to whatever happened to PwC and Satyam? How did you address it?
It has been a little more than a year since some of our partners left us and joined competing firms. Whether it was because of Satyam or anything else, I would not like to speculate. We do not like losing talent and that was a sensitive time as we lost talent, which did hurt. The strength of an organisation isn?t reflected in how well it can stop these things (because of lack of control), but in how well it controls the situation after the event. Our tax practice lost a third of its staff, including the head. But we have made a whole lot of headway since then. And over the last year, our tax practice has only grown bigger both in absolute numbers and in percentages. Also, for the second time in a row, PwC in India has been recognised as the tax firm of the year, even with this exiting of partners happening in the interim. So, we have only grown stronger in that practice.
What about your plans to amalgamate all PwC partnerships and related entities with the parent?
PwC in India is not structured the way it is globally because of the regulatory constraints here. But we have to live with the regulations and respect them. We are definitely waiting for the LLP (limited liability partnership) Law to take shape. There are issues from the tax point of view, plus issues concerning the Institute of Charted Accountants fully adopting the law. We are waiting for the regulations to get smoothened out and would want to structure our business accordingly. Business structures that deal with lesser legal entities are less cumbersome to run.
With the IFRS deadline nearing, do you think India Inc is ready to become IFRS compliant and is IFRS more a matter of compulsion than choice?
IFRS as a common accounting language for the world is definitely a welcome step. It will change the way people read any set of accounting statements from anywhere, globally. It is even more important for India, as more and more global acquisitions involve Indian companies. It?s cardinal that India remain on the IFRS bandwagon as aggressively as the rest of the world. India has made some progress on IFRS, though it could have moved faster. A whole lot of balance was brought in when instead of all corporates in India adopting IFRS on a certain date, the deadline got realistically relaxed and adapted to a staggered way of doing things. The challenge on IFRS in India is training the talent, both on the accounting side of the corporates and within the profession, as IFRS is going to become a way of life for auditors and accountants, and the only language in which accounting will get done. They don?t have to just be aware of it; they need to be experts in it. How well we use the language and how well you read it is always going to be far more important than how well it is written.
There have been reports about how the government will make some compromises with respect to IFRS in India, with Indian companies not being required to show currency losses on the balance sheets and real estate companies accounting for properties that are under construction. What do you feel about such country-specific variations?
Somebody could call this a compromise, somebody else could call this a gradual balancing of global needs versus the Indian cultural needs. And I would put it in the second category. While it is true that IFRS will be a common language, till the time the balancing things are there, the Indian set of accounts will read differently or with caveats regarding the global arena. India accounts will be as much IFRS-compliant as those of other countries, but with these two caveats, which will have a sunset clause as we transition gradually. The eventual aim ought to be that all sets of accounts speak the same language without caveats. How soon that can be practically done is something that the government and stakeholders are discussing.
What is your view on the mandatory rotation of auditors?
Rotation of auditors and audit firms are two different things. Rotation of audit firms takes away more than it adds, because there is a whole lot of cumulative audit knowledge and experience which a firm gains by doing audits year after year?understanding the industry, the company and the philosophy of the management better. By the time a firm understands the finer nuances, if there is a change of audit firms, it has to start relearning from scratch. But when it comes to rotation of auditors or the audit team, this definitely has merit. With the same team doing the audit over and over again, a sense of complacency might set in. At PwC, the team changes every five years on an average. The idea is that a new team comes in and you don?t lose the cumulative knowledge and experience, plus the transition is undertaken in a manner that the partner and manager do not change in the same year. So you have a staggered approach, which helps in retaining the cumulative audit knowledge and experience and yet gives a fresh approach to the team.