accountancy

In this article, Kshitij Asthana pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses whether accountancy firms can indulge in litigious or non-litigious practices or not.

INTRODUCTION

Can an accountant also assist his client in legal drafting, court hearings, joint venture agreements and tax compliances? Are they infringing any statute while advising or appearing before the court? Is it legally valid to have a captive law firm in an accountancy firm? These are some of the questions which are highly debated in India. In this article the researcher would explain the concept of Multidisciplinary Practices (also referred to as MDP in the article), take of different countries (especially USA) on MDP, its legality in India which essentially shall answer whether these practices of the big accountancy firms violate Section 28 of the Advocates Act, 1961 and some recommendations on whether this way of business of the huge revenue earning accounting firms a way forward or is it just an illegal act in guise of opening up of the economy.

In the United States of America, a firm in 1999 allegedly experienced a humongous growth in its tax practice and hired almost 300 law school fresh pass outs and experienced tax lawyers.[2] The US based firm with more than 650 working professionals with law degree was quoted saying that

“We believe [that we present] law school graduates with unparalleled opportunities for growth in a practice that offers many high-end specialty services and breakthrough strategies for leading clients world-wide.”

The firm which is mentioned above is shockingly not a law firm but one of the greatest accounting firm KPMG or one of the Big Five[3] (now Big four). The Big Five accounting firms in the year 1999, employed almost 5500 non-tax lawyers worldwide.[4] This increased number of lawyers in these accounting firms is not just through mergers and acquisitions but also through recruitments of new graduates from the law schools.

Emerging as competitors of law firms,[5] these accounting firms are expanding their influence in transactional matters as well. Most of the law commentators argue that this unregulated activity in multidisciplinary practices (MDPs) undermines the integrity of professional services[6] as it affects not only the Attorneys but also the clients and those non-attorneys who are engaged in any occupation/business which can be considered practice of law.[7]

CURRENT SCENARIO

Most of the companies and individuals nowadays consider a one-stop-shopping model to reduce the cost that generally is levied upon them through the dual-management structures. By elimination of this dual management structure, the Multidisciplinary practices have been touted as allowing one-stop shopping, better service (because of the broader expertise of the service providers and closer cooperation of an interdisciplinary team), and cost-effectiveness;[8] however, current ethics guidelines present many barriers to multidisciplinary practice.[9]

In the year 2015, the Society of Indian Law Firm filed a complaint in Bar Council of Delhi against the four audit firms namely PwC, EY, Deloitte and KPMG for engaging in law practice in India violating section 29 of the Advocates Act, 1961. The SIFL alleged that these firms were engaging in litigious and non-litigious practice which is clear violation of section 29 of the said act. The complaints cite AK Balaji V Union of India[10] in which the Madras high court issued writ against more than 30 foreign law firms stating

The oversight of the Bar Council on non-litigation activities of such Law Firms was virtually nil till now, and exploiting this loop hole, many accountancy and management firms are employing law graduates, who are rendering legal services, which is contrary to the Advocates Act”.

The complaints also cited the Lawyers Collective case and the Supreme Court case (Ex-Captain Harish Uppal case) to reason that the Advocates Act 1961 applies to both litigious and non-litigious matters.

SILF further noted in its complaint stated that it was essentially unfair for accounting firms to encroach on law firms’ specialized domain of work because

“Advocates cannot engage in multi-disciplinary practices and are not engaged in practice of auditing and accounting. […] Advocates cannot engage in any other business or trade or profession as the profession requires complete devotion by an advocate to the profession.”

This argument though on the face of it intends to debar all the people who non-litigiously advice or give legal aid to those who need it and hence can lead to their aid becoming illegal. The fact that a person employed in a chartered accountancy firm also goes to tribunals and pleads in the court is illegal ab initio but an accountancy firm employing law graduates and law practitioners cannot be considered illegal or unauthorized practice as in the fast growing economy the concept of multi-disciplinary practices has shaped up and it is really consumer/client beneficial.

CONCLUSION AND RECOMMENDATION

The present system in India does not bar the above mentioned captive law firms under big accountancy firm. Professor Wu suggests that there are alternatives outside the MDP form that would avoid its negative consequences.[11] One such solution suggests that law firms organize themselves in “client teams” to meet the more diversified needs of particular clients. Under this approach, law firms would build a “strategic client team” around an individual client.[12]  The team formed early in the provision of services to the client, would contain speciality lawyers (who are trained in financial matters, such as accounting) key to the client’s needs.[13]

This would result in improved client service through the coordination of expertise and a more satisfying environment for lawyers with additional training to practice.[14] This would be a change from the traditional organization of a firm around practice groups.[15] While this approach may serve the end of providing high-quality service to clients, Wu does not offer solutions on how fee sharing and non-lawyer partners, the most contentious aspects of the MDP debate, would be addressed. Arguably, these client teams would face many of the same hurdles as MDPs without providing any discernible advantages. The ABA Model Rules of Professional Responsibility apply uniformly to all types of practising lawyers, both litigators and transactional attorneys.

The researcher, however, argues that the Supreme Court’s characterization of the different roles played by lawyers and accountants is incorrect, or at least that the roles are different today than at the time of the Supreme Court’s decision. Professor Kostant observes that “[i]n practice, corporate lawyers perform transactional work, not litigation.[16]

Today, argues Kostant, “[t]he distinction between a lawyer’s duties to the corporate ‘client’ on one hand and an accountant’s duties to ‘creditors, shareholders.., and the investing public’ . . . is in fact much less clear.[17]One solution to this fundamental change in the role of transactional attorneys is to develop a different set of ethical guidelines to reflect the evolution of the transactional lawyer’s role in corporate India.[18]

References

[1] Work of Kshitij Asthana, Student NUJS DABL December Batch, 3rd Year Student

[2] Cliff Collins, The ABCs of MDP: How Multidisciplinary Practice Could Reshape the Practice of Law, OR. ST. B. BULL., Dec. 1999, at 17, 17.

[3] Since the writing of this article, Arthur Anderson is arguably no longer one of the “Big Five” and the “Big Five” are more accurately described as the “Big Four.” However, at the time when this article was written, available data and commentary analyzed the MDP debate and lawyers’ interactions with the “Big Five.” Therefore, for the sake of continuity with the source material, the term “Big Five” will be used throughout this piece.

[4] See Collins, Supra 2.

[5] See Bernhard Grossfeld, Lawyers and Accountants: A Semiotic Competition, 36 WAKE FOREST L. REv. 167, 170 (2001).

[6] See, e.g., Aubrey Meachum Connatser, Comment, Multidisciplinary Partnerships in the United States and the United Kingdom and Their Effect on International Business Litigation, 36 TEX. INT’L L.J. 365, 374, 376 (2001).

[7] See id

[8] See Laurel S. Terry, A Primer on MDPs: Should the “No” Rule Become a New Rule? 72 TEMP. L. REv. 869, 880 n.45 (1999) (discussing the departure of six partners to Big Five firms and lawyers leaving firms for the attraction of international practices);

[9] For a succinct definition of multidisciplinary practice, see William G. Paul, Remarks of the Outgoing President of the American Bar Association, 31 N.M. L. REv. 55, 61 (2001) (defining multidisciplinary practice as “the practice of law through an entity that includes non-lawyer professionals as well as lawyers

[10] Writ Petition No. 5614 of 2010, decided on 21.02.2012

[11] See Edieth Y. Wu, Why Say No to Multidisciplinary Practice, 32 LoY. U. CHI. L.J. 545, 552 (2001).

[12] Id. 11

[13] Id

[14] Id

[15] Id.

[16] See Peter C. Kostant, Paradigm Regained: How Competition from Accounting Firms May Help Corporate Attorneys to Recapture the Ethical High Ground, 20 PACE L. REv. 43, 66 (2000).

[17] See Peter C. Kostant, Paradigm Regained: How Competition from Accounting Firms May Help Corporate Attorneys to Recapture the Ethical High Ground, 20 PACE L. REv. 43, 66 (2000).

[18] See, e.g., Carrie Menkel-Meadow, The Lawyer as Problem Solver and Third-Party Neutral: Creativity and Non-Partisanship in Lawyering, 72 TEMP. L. REv. 785, 808 (1999) (arguing that current rules of legal ethics do not recognize the role of the “lawyer as mediator, arbitrator. Consensus building facilitator, neutral evaluator, and dispute systems designer.”).

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