Auditing Practices Comparison: Deloitte and Lodha & Co Report

This report presents a comparative analysis of two auditing firms: Deloitte, a global leader, and Lodha & Co, a non-Big 4 firm. It examines their services, geographical coverage, staff size, industry focus, marketing strategies, and financial metrics. The comparison includes details on their services, market reach, employee numbers, and the industries they serve. Furthermore, it delves into their marketing approaches, penalty structures, and tax rates. The report also discusses the impact of auditor rotation and analyzes audit fees. Finally, it incorporates agency theory and the insurance hypothesis to provide a comprehensive understanding of the auditing landscape. The conclusion recommends the selection of Deloitte over Lodha & Co. for its established global presence and experience.

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Running head: Auditing
Auditing
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Executive Summary
The worldwide leading audit firms are known as the “big four” among which the
company Deloitte ranks first according to the reports of 2017in terms of revenue (Statista,
2017; Deloitte, 2017a). The services provided by the Deloitte are consulting, tax, risk
management, audit, and financial advisory (Deloitte, 2018b). On the other hand, Lodha & Co
is a “non big four” audit company that provides all types of services such as assurance,
management consultancy, corporate advisory and tax (Lodha & Co, 2013). The paper
discusses about the differences between the above two companies in respect to services,
market, customers, revenue, employees and staffs, outcomes and the marketing strategies. In
order to gain adequate knowledge, the study has focused on using secondary data. Hence, it
can be stated that there are differences in the way they operate.

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Introduction
The study intends to compare Deloitte a company founded by William Welch Deloitte
in 1845 in the UK. The company is considered to be leading among the “Big 4” audit
companies in the world as the reports presented by Statista in 2017. Additionally, Deloitte
provides huge service network of professionals in the world (Statista, 2017a). On the other
hand, Lodha & Co a “non-Big 4” was established in the year 1941 in India and its offices are
in various parts of India. The firm includes total of 16 partners and has employed experienced
chartered accountant, company secretaries, management graduates, and cost accountants
(Lodha & Co, 2008).
Comparison between the Two Companies
Services Range
Deloitte with an experience of more than 150 years provides its services in 150
countries along with regions. This helps the company in making a real difference with their
commitment in services. It is observed that approximately 245,000 individuals are employed
by the company for providing the services related to tax, financial advisory, legal, and audit.
The financial services of Deloitte include securities and banking, investment management as
well as insurance (Deloitte, 2018). On the other hand Lodha and Co has an experience of 76
years. Additionally, the range of services it provides is such as Assurance, tax, management
consultancy and corporate advisory. In case of assurance, the services provided are tax audit,
statutory audit, investigative audit, compliance audit, concurrent audit, due diligence reviews,
internal management of audit advisory services, and Adaptation of financial report in
arrangement with US GAAP / IFRS. Furthermore, in case of corporate advisory, the range of
services covered are valuations, joint ventures, debt restructuring, project advisory, corporate
restructuring, and M&A advisory(Lodha & Co, 2013).

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Geographical Coverage
Deloitte was the first professional audit firm, which was established in Middle-East
and is successfully running after 1926. In 15 countries, Deloitte has 26 offices and is
associated with minimum of 3000 directors, partners, and staff. It operates on a worldwide
basis and operates in over 150 countries namely Australia, Algeria, Austria, Bahrain, and
Belgium among others. Headquarter of Deloitte is located in London, UK. It has various
offices in different parts of the world. This includes Oslo, Mexico City, Copenhagen, Vienna,
Los Angeles, Budapest, Parramatta, and Seoul. Deloitte offices are also in India’s major cities
such as Bangalore, Chennai, Delhi, and Hyderabad among others (Deloitte, 2018a). On the
contrary, the geographical area served by Lodha & Co at a domestic level includes i.e. India
includes cities such as Kolkata, Hyderabad, Chennai, Jaipur, Mumbai, and New Delhi. In
addition, the company also has expanded its business in countries such as Dubai, Shanghai,
Singapore, and the US (Lodha, 2017).
Total Staff and employees
According to Statista (2017), the total staff and employees of Deloitte was recorded to
be263,900 at the end of 2017, which increased as compared to the previous year of 2016,
accounting for 244,400 (Statista, 2017). In case of Lodha & Co, the total number of staff of
included over 3700 direct associates along with more than 1600 engineers over. The company
further comprise experienced management professional, which is accounted to be more than
200 and has more than 140 architects as well as designers. In addition, the company has 700
employees with respect to its sales and marketing. Furthermore, Lodha & Co has 300
representatives for customer care services (Lodha, 2017).

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Industries in which they operate
Deloitte is a leading auditing company in the world with respect to its services such as
global business tax, insurance, audit, legal & financial advice, consulting services, and
operations related to cyber risks. It provides services to the world’s most famous brands,
which includes 85% of fortunate 500 companies. The company also offers its services to over
6,000 middle markets and private companies (Deloitte, 2018). Considering Lodha & Co, the
company has16 partners along with experienced Chartered Accountant, company secretaries,
cost accounts & management graduates, who are engaged in providing various range of
services to the corporate clients. This includes providing services to the banks, public sector,
insurance companies, central bank, and public corporation sectors among others domestically
as well as on a global level (Lodha & Co, 2008).
Publications as well as other materials delivered to their customers or the overall public
Deloitte wants to be the priority of the potential clients whenever they want to take a
calculated action for transformative outcome or while facing challenges to identify deep
knowledge on tax issues. The company focuses on ensuring to provide high quality and
distinctive services by strengthening its network and innovation by making the lead client
well equipped with the pattern of resources that the company o requires. This helps the
company to be successful with the support of hyper collaboration” to deliver exceptional
results (Deloitte Touche Tohmatsu Limited, 2015). Lodha & Co on the other hand focuses on
maintaining its consistency for interacting with the clients and assists them in sale process
and even after-sale service. This provides the clients of the Lodha to interface for any
requirement as well as grievance (Lodha, 2017).

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Marketing Strategies
The important marketing strategy that Deloitte implement is making the clients a
priority and facilitates them with innovation, talent, alliance, and solutions. They believe
cognitive computing, global capabilities, and audit innovation will attribute to the marketing
strategies (Deloitte Touche Tohmatsu Limited, 2015). While, the key strategy of Lodha &
Co’ is that the company strongly believes in the brand name in the market, as it leads to gain
customers confidence, thus influences their decision making process when it comes to
buying. The company focuses on marketing as a “brand” rather than mere commodity or a
service (Lodha, 2017).
Penalty
From tax period of 2016-2017 onwards, penalty is given in case of any misreporting
as well as under-reporting of income during the audit sessions that the accountant or the
auditor is liable to pay. This is to be paid due to under reporting or any wrong reporting of
income (Deloitte Touche Tohmatsu India LLP, 2016). On the other hand the penalty amount
to be paid in case of any misreporting during auditing of the company by Lodha & Co is a
sum of rupees 10,000 by the merchant banker or the accountant associated in making the
report (Lodha & Co, 2017).
Tax rate in case of Provision for Doubtful Debt
The standard tax reduction related to provision for doubtful debt is 50%, whereas for
MFI, it is 30% of Microfinance Institution (MFI) (Deloitte, 2017). On the contrary, with
respect to the bad debt provision, the limit of deduction by banks was 7.5% earlier, which is
now increased to 8.5%. This is calculated on the total amount of income (Lodha & Co, 2017).

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The Number of Companies to be Audited by the Company after the Implementation of
the Auditor Rotation
After auditor’s rotation was made mandatory by law, the ranking listed by NSE was
positioned Deloitte in the third place. The company audited 162 companies in the year 2016-
2017 and the estimated number of companies that Deloitte is to audit is 121 companies in
2017-2018. Cements Ltd On the other hand, Lodha & Co on the other hand was mentioned
in ninth position in the year 2016-2017. The company audited 31 companies in total. By the
end of fiscal year 2017-2018, Lodha & Co has estimated to audit 15 companies as listed by
the NSE (Prime Database Group, 2017).
Audit fees
The total audit fee that was paid to Deloitte by different companies accounted to $3426.8
million in 2015-2016 and was $3167.9 million in the year 2016-2017. Hence, the company
was ranked in first place (Prime Database Group, 2017). Whereas in case of Lodha & Co, the
total resources that was transferred to union territories and states with legislature was
$617789635864.868 million in the year 2015-2016, which in the financial year 2016-2017
was reduced to $541129608056.819 million (Lodha & Co, 2017).
Conclusion and Recommendations
A company can opt for Deloitte for the auditing process because it has established and
proved itself by successfully positioning the company in the first place within the respective
filed and has gained more experience than Lodha & Co. Auditing process is highly benefitted
by the professional development acquired with the experience, which can depict the quality
of the audit. As Deloitte has marked itself as the best auditor in the world, it is advisable and
reliable to choose Deloitte over Lodha & co (Statista, 2017a; Lodha & Co, 2008). Delolitte
for maintaining it global position should focus on its motto, which is to be the best and not

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just good. The objective of the company is to bring success within the society by helping
clients to achieve it (Deloitte, 2018). On the other hand the Lodha & Co can focus on
expanding its business domestically as well as on other parts of the globe. The company also
needs to analyze the needs of each different company in relation to tax, audit, and financial
advice in order to meet them. In addition, it also needs to address the needs along with
requirements of the company, which will help them grow, as the company has tagged itself
with the message grow with us (Lodha & Co, 2013).

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Part B
Agency Theory
An agency relationship is created when a company hires another person as an agent to
act as well as perform on their behalf (Institute of Chartered Accountants in England &
Wales, 2005). Contextually, agency theory focuses on explaining the differences in
information and self –interest of the company owner, who lacks in trusting their agent and
seeks to provide solution. By analyzing this theory, it can be stated that the clients took the
step of announcing about dismissing their auditor Arthur Anderson prior to the results of its
survival (Eisenberg & Macey, 2004). This is because the audit firms are known for its
important economic purpose in serving the client interest, help them enhance their economic
property, and encourage confidence along with trust. A difference in the information
asymmetries and motivation influences the trust level of the clients towards the auditor.
Audits were developed so that it can protect the interest of their shareholders so that it can be
viewed trustworthy by the clients. Therefore, after the news of Enron charges, the
unworthiness and trust issue prevailed in the market (Institute of Chartered Accountants in
England & Wales, 2005).
Insurance Hypothesis
Researchers identified theories that helped the audit companies to retain its clients. In this
context, the theory of insurance hypothesis states that in order to gain the trust and reliability
of the clients by the firm. This hypothesis was implemented that would recover incase if any
financial loss is incurred by the investors due to any kind of misinterpretation (Hillison &
Pacini, 2004). Insurance hypothesis is an essential part of audit, as it encompasses two values
that are insurance and assurance. Contextually, assurance is the basic purpose of an audit that
is to reduce loss of information between the firm management and stakeholders. Insurance
hypothesis play a major role. This includes providing investors the ability to sue the auditors

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for recovering loss due to the wrong statement in the financial report. In this regard, it can be
stated that the clients took such steps so that they can sue the auditor and avoid losses
(Brown, Shu, Soo & Trompeter, 2013; Gray & Manson, 2007).
The Reason for the Failure of Arthur Anderson
According to Cohen (2004), two persons, who were then in the leadership position of
the Arthur Andersen mentioned that corporate structure focused on earning more. It also
included the negligence of the board of directors, which resulted to company’s failure
(Cohen, 2004). On a contrary, Chicago Tribune (2002) stated that the Andersen’s leaders felt
that the company was an innocent victim of the client Enron, which contributed to causing
scandal to the company (Chicago Tribune, 2002).
Investors announced about dismissing Arthur Anderson, when the listed company
being operated became doubtful. The doubt related to trust the auditor was included in
decision making process during any credit loss, as they are considered to be a liable
indemnifier to recover it. The risk such as making wrong decision due to failure in risk
detection emerged due to the lack in finding misstatement. This also includes control risk
when the auditor fails to detect the internal risk of the company along with inheriting prior to
solving of the internal risks (Granberg & Höglund, 2011).
The Change in the Auditing Standard
The government sued Enron $500,000 fine and five years of probation. On the other
hand, Anderson was shut down, when St. Louis telecommunication also filed for the
bankruptcy. The government should take necessary actions to ensure the continuous flow of
accurate information to the investors (Miller, 2004). Government has stated that the auditor
should undertake the revenue reorganization at the right time. The auditor can assist the
guidance, which is provided by the American Institute of Certified Public Accountants

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(AICPA) that ensures the clarity of making the standards understandable, easier to read, and
apply. The format presents introduction, objective, definition, requirement, and application
which have now further developed to effectively serve the interest of the public in enhancing
along with communicating the standards to facilitate them with high quality audit (Cullinan,
Earley & Roush, 2013). International Accounting Standard Board (IASB) and Financial
Accounting Standard Board (FASB) also presents guidelines, which helps in making sure that
they recognize the client’s appropriate earned revenue and avoid misinterpretation
(Johnstone, Gramling & Rittenberg, 2013; Cullinan, Earley & Roush, 2013).
Conclusion
Based on the study findings, it can be inferred that trust enhances the motivational
level among the clients in the market that helps them to choose their auditor. Providing the
clients with the insurance facilities helps the auditor to retain their clients for a longer period
of time by assuring them. In order to monitor the workings that the government has enforced
various laws and standards for controlling the audit miss happenings. With the rise in the
issue of audit frauds, the government enacted the “Public Company Accounting Reform and
Investor Protection Act” or the Sarbanes Oxley. This has significantly helped in governing
the accounting firms to avoid such ground breaking scandals and protect the investors

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