A proposed change in India’s corporate law could significantly increase compliance costs for companies and change how audit firms work with businesses.
According to top auditors from Big Four firms, a new rule in the Corporate Laws (Amendment) Bill, 2026 may raise compliance expenses for companies by 20% to 30%.
The proposal has already sparked concern among major industry bodies and audit firms.
What Is the New Rule?
Under the proposed amendment, audit firms and auditors will not be allowed to provide non-audit services to a company or its subsidiaries for three years after their term as statutory auditor ends.
The amendment will be added under Section 144 of the Companies Act.
Currently, companies in India must rotate:
Individual statutory auditors every 5 years
Audit firms every 10 years
The new proposal adds a three-year “cooling-off period” after the audit term ends.
Why Audit Firms Are Opposing It
Senior auditors from major firms believe the rule could create several problems for businesses.
According to them:
Companies may have fewer choices for advisory services
Costs for audits and consulting could rise sharply
Service quality may decline in complex areas
Experts say large audit firms often continue providing consultancy, tax advisory, and compliance services after their audit term ends. The new restriction could stop that completely.
One senior audit executive said firms may increase audit fees to recover future revenue losses caused by the restriction on non-audit services.
Companies Could Face Higher Costs
Industry experts believe businesses may ultimately bear the financial burden.
If experienced firms are blocked from offering advisory services, companies may need to hire multiple smaller firms separately for:
Tax advisory
Internal audits
Consulting
Compliance reviews
Due diligence work
This could increase operational complexity and overall compliance spending.
Industry Bodies Raise Concerns
Major industry groups like ASSOCHAM and FICCI have also opposed the proposal.
ASSOCHAM warned that the move could:
Reduce choices for companies
Increase compliance costs
Increase market concentration
The organisation also argued that audit firms gain a deeper understanding of a company’s business while working closely with them, which can improve governance and compliance quality.
Fear of Lower Service Quality
FICCI said the rule may force companies to rely on smaller firms for highly technical work.
According to the industry body, smaller firms may not always have:
Global reach
Industry-specific expertise
Cross-border compliance experience
Large technical teams
This could become a challenge for large corporations operating across multiple countries and sectors.
What Services Are Already Restricted?
Even now, Section 144 of the Companies Act already prevents statutory auditors from offering several services to audit clients, including:
Internal audits
Investment banking services
Management services
Outsourced financial services
Bookkeeping services
However, firms are still allowed to provide many other services such as:
Consultancy
Forensic reviews
Fact-finding assignments
Administrative support
Due diligence services
The proposed amendment could further tighten these restrictions.
Bill Under Review
The Corporate Laws (Amendment) Bill, 2026 has currently been referred to a Joint Parliamentary Committee (JPC) for detailed review.
Industry experts and companies are now closely watching whether the government keeps the proposed restriction unchanged or makes modifications after consultations.
