In what could come as a major blow to the big four accounting firms, companies filing their financial records and returns in XBRL —(extensible business reporting language)—a computer language for reporting financial statements—may be exempted from getting a certification on the same from a qualified audit firm, as the norm is at present.
The ministry of corporate affairs (MCA) has decided that certification from a qualified accounting firm would not be mandatory, instead, only an authentication from a registered chartered accounting firm will be enough.
This will help smaller companies as only the big four global accounting firms—KPMG, Ernst&Young, PwC and Deloitte—at present are qualified to issue certificates who charge a very high fee.
However, there could be a further delay in the implementation of XBRL as MCA has found faults with the current taxonomy developed by the Institute of Chartered Accountants of India, (ICAI). Taxonomy is a glossary of financial terms used in XBRL. It has to be tested for its validation using certain tools.
MCA wants to switch to XBRL format as data representation in that format is more precise and gives companies less scope to manipulate numbers.
The technology offers greater level of transparency, accuracy and efficiency.
“The use of XBRL would reduce errors in financial data, the move would significantly bring down costs for companies ” an official source familiar with the development told Hindustan Times on condition of anonymity.