The Institute of Chartered

Accountants of India
[set up by an Act of
Parliament]

THE GUIDELINES FOR

NETWORKING OF INDIAN CA
FIRMS, 2021

1
 Coverage in revised guidelines

• Preamble
• Concerns relating to growth of Indian CA firms
• Why Networking?
• Three models of networking – Options offered to Members
A - Alliance Model
B - Network Model – sub-divided into:
B1 – Network of firms without Lead firm concept
B2 – Network of firms with Lead firm concept

2
 Preamble

• Guidelines for Networking were issued in 2005 and then

revised in 2011. In last 15 years, close to 100 networks of CA
firms have been formed. Networking has not been popular
despite tangible benefits
• Need to strengthen Indian CA firms and create large Indian CA
firms
• ICAI has noted the bottlenecks in networking and has tried to
mitigate the same in revised Guidelines which hopefully will
encourage practising Members to go for Networking

3
 Concerns relating to growth of Indian CA firms
• Majority CA firms are SMPs
• Large number of firms have confined practice to audit and
taxation
• Many firms have audits allotted through the ICAI-PDC
empanelment process
• Attachment with firm name dissuades Merger or network due
to fear of loss of identity
• Client switches over to larger firm when his business needs
increase
• Need of the hour is to venture into non-traditional practice
areas, specialism and forming large structure by networking

4
 Why Networking?

• Prime Minister’s vision to create 100 big Indian CA firms

• Opportunity of pooling of resources, expertise, combined
strength and showcasing pan India presence

5
 Approach I
Making of Alliance Model

a big firm Approach II

Network Model

6
 Approach I Approach II
A B
Different firms Different firms coming together
coming together to form a Network with a new
to form an Network name and practicing in
Proposed Alliance with a the name of firms belonging to
models of new name of Network. This Model is sub-
networking – Alliance and divided into following two
Options offered continuing to options:
to Members practice
independently B1 B2
and can
showcase as an Network of Network of firms
Alliance to the firms in with a Lead firm
world existing model acting on behalf
by practising of constituent
in individual firms of Network
firm name

7
 Options proposed to be offered to the
Members
APPROACH I APPROACH II
A B1 B2
Alliance Model Network Model Lead Firm in Network
Model
Registered Registered Registered
Not recognised To be recognised To be recognised
Partially regulated Regulated Regulated
New Approach Existing Model New Approach

8
 Alliance Model – A
• Firms come together for mutual benefits
• Name will be “ABCD” or “ABCD & Alliance”
• ICAI will register and allot Alliance Registration Number (ARN)
• Constituent firms can carry on practice as independent firms
• Display of Alliance name in professional stationery to be permitted
• Alliance may direct constituent firms to follow best practices
• Firms of one Alliance cannot become Member of another Alliance or a
Network
• All firms in Alliance can apply for empanelment separately as individual
firms. Their coming together is basically for non-audit services. For audit
practice, they all remain as independent practitioners
• “Independence” issues will have to be kept in mind i.e. if one firm does
statutory audit of an entity, another constituent firm cannot do internal
audit. If one firm does audit work, another constituent firm cannot
perform non-audit services of same client. Rotation of audit amongst
constituent firms will not be permitted

9
 Alliance Model – A

• Referral of professional work and sharing of fees/ cost permitted

• A partner of firm that gets appointment will sign reports
• In case delinquency occurs in a particular assignment, then the firms that
have jointly executed the assignment will be accountable. Therefore,
division of work needs to be well documented.
• Whatever is taboo for a firm under Code of Ethics, is taboo for the Alliance
as well i.e. whatever cannot be done by a firm, cannot be done by Alliance
as well
• Firms are free to join and exit Alliance.
• Reconstitution has to be registered with ICAI
• If one firm leaves Alliance, it will not deprive other firms from completing
the work
• Alliance should have its own bye-laws which should not contradict CA Act,
CA Regulations, Code of Ethics and Council Guidelines
• Alliance shall have to submit to ICAI copy of internal agreement signed by
an authorised partner of all constituent firms
10
 Network Model – B1
• Firms come together for mutual benefits by pooling resources, showcase their
combined strength, and have uniform policies, technology and collaterals, and
showcase themselves as one big unit
• Name will be “ABCD” or “ABCD & Affiliates” or “ABCD Network”
• ICAI will register and allot Network Registration Number (NRN)
• Constituent firms are bound by internal integration agreement, and practice as
independent firm, subject to internal agreement. Network’s decision prevails
upon other firms
• Display of Network name in professional stationery to be permitted
• Firms of one Network cannot become Member of another Network or Alliance
• All firms belonging to Network can apply for empanelment separately as
individual firms. ICAI will put in efforts for recognition of the combined
strength and resources
• “Independence” issues will have to be kept in mind i.e. if one firm does
statutory audit of an entity, another constituent firm cannot do internal audit.
If one firm does audit work, another constituent firm cannot perform non-
audit services of same client. Rotation of audit amongst constituent firms will
not be permitted

11
 Network Model – B1
• Quality control is well documented and complied with, which is applicable to
network as well as to individual constituent firms.
• Individual firms take up professional work on their own, and a partner of said
firm can sign the reports and documents
• Referral of professional work and sharing of fees/ cost permitted
• In case delinquency occurs in a particular assignment, then the firms that have
jointly executed the assignment will be accountable. Therefore, division of
work needs to be well documented.
• Whatever is taboo for a firm under Code of Ethics, is taboo for the Network as
well i.e. whatever cannot be done by a firm, cannot be done by Network as
well
• Firms will be bound by Network’s internal integration agreement.
• Reconstitution has to be registered with ICAI
• If one firm leaves Network, it will not deprive other firms from completing the
work
• Network will have its own bye-laws which should not contradict CA Act, CA
Regulations, Code of Ethics and Council Guidelines
• Network shall have to submit to ICAI copy of internal agreement signed by an
authorised partner of all constituent firms
12
 Lead Firm in Network Model – B2
• Firms come together for mutual benefits by pooling resources, showcase their
combined strength, and have uniform policies, technology and collaterals, and
showcase themselves as one big unit
• Constituent firms will choose one of the firms as Lead firm e.g. if A & Co. is selected as
Lead Firm, then name of Network will be “A & Co. & Affiliates” or “A & Co. Network”
• ICAI will register and allot Network Registration Number (NRN)
• Constituent firms are bound by internal agreement recognising one of the firms as Lead
firm, depending upon specialism and expertise required for each assignment
• Display of Network name in professional stationery to be permitted
• Firms of one Network cannot become Member of another Network or Alliance
• Lead firm is entitled to apply for empanelment in its own name, but by way of internal
agreement, it will be on behalf of entire Network. When Lead firm applies for
empanelment, other constituent firms cannot apply. ICAI will put in efforts to get
recognition of the combined strength and resources
• “Independence” issues will have to be kept in mind i.e. if one firm does statutory audit
of an entity, another constituent firm cannot do internal audit. If one firm does audit
work, another constituent firm cannot perform non-audit services of same client.
Rotation of audit amongst constituent firms will not be permitted
• Quality control is well documented and complied with, which is applicable to network
as well as to individual constituent firms

13
 Lead Firm in Network Model – B2
• Individual firms take up professional work on their own, and a partner of said firm can
sign the reports and documents
• Referral of professional work and sharing of fees/ cost permitted
• In case delinquency occurs in a particular assignment, then the firms that have jointly
executed the assignment will be accountable. Therefore, division of work needs to be
well documented.
• Whatever is taboo for a firm under Code of Ethics, is taboo for the Network as well i.e.
whatever cannot be done by a firm, cannot be done by Network as well
• A partner of lead firm will sign reports and certificates, if the lead firm gets
appointment in its name
• Firms will be bound by Network’s internal integration agreement.
• Reconstitution has to be registered with ICAI
• If one firm leaves Network, it will not deprive other firms from completing the work. If
Lead firm quits the network, after having secured professional work, then it will have to
share the fees with other constituent firms. A clause to this effect can be incorporated
in the internal agreement
• Network will have its own bye-laws which should not contradict CA Act, CA Regulations,
Code of Ethics and Council Guidelines
• Network shall have to submit to ICAI copy of internal agreement signed by an
authorised partner of all constituent firms
14
 Contents of new Guidelines paper

Para 1 of the Paper outlines the purpose of revising the Guidelines so as to make it
easier for the Indian CA firms to form network and also remove any impediments
and bottlenecks that dissuade the firms from growing bigger by joining a network
Para 2 identifies the concerns of Council on growth of firms
Para 3 discusses the need for networking
Para 4 offers three models of networking viz.
 “The Guidelines for Alliance”
 “The Guidelines for Networking” (revised)
 “The Guidelines for Networking with Lead Firm concept”
Para 4 also gives a comparative table of features/ characteristics of the three
models of Networking
Para 5 explains the guidance provided by Council to members at its February, 2021
meeting

15
All the following three models of networking have been given as separate
Annexures to the common Paper:
Alliance Model,
Network Model, and
Network Model with Lead Firm concept

Each of these three Models have 3 Appendices each explaining -

Concept,
Modalities of Working, and
Naming provisions.

Each of these models have three forms –

for name approval,
for registration, and
for change in constitution
16
 Please correspond at
[email protected]

Follow ICAI on Social Media  - 

http://www.icai.org/followus
                                
17