Protectionism in public accounting and auditing services

Nature

In both developing and developed countries, regulations curtail the right of foreign professional accountants to practice locally, or even completely prohibit them from doing so. Audits may have to be supervised by locally registered, qualified accountants. Foreigners may be required to possess the requisite professional degree from a local university, or pass a special examination, as well as be a member of a local professional body.

Background

The issue of protectionism in public accounting and auditing services gained international attention in the late 20th century, as globalization highlighted barriers restricting foreign firms’ market access. Concerns intensified during negotiations under the General Agreement on Trade in Services (GATS), where countries debated the impact of national regulations on competition and transparency. Subsequent studies by organizations such as the OECD and WTO documented persistent restrictions, underscoring the problem’s significance for global financial integration and regulatory cooperation.

Incidence

Protectionism in public accounting and auditing services is a persistent issue affecting both developed and developing economies, with regulatory barriers and licensing restrictions limiting market access for foreign firms. Such measures are prevalent in regions including the European Union, Asia-Pacific, and Latin America, impacting the global mobility of professionals and the competitiveness of the sector. These restrictions hinder cross-border service provision, reduce consumer choice, and can impede the adoption of international best practices.
In 2021, India tightened its regulations on foreign accounting firms, restricting their ability to operate independently and requiring joint ventures with local firms. This move was widely reported as a response to concerns about foreign dominance and market integrity, but it also drew criticism for limiting competition and innovation in the sector.

Claim

Protectionism in public accounting and auditing services is a critical problem that undermines global standards, stifles competition, and limits access to the best expertise. By shielding domestic firms from international competition, protectionist policies breed inefficiency, reduce transparency, and ultimately erode public trust in financial reporting. In an increasingly interconnected world, such barriers are not only outdated but dangerously counterproductive, threatening the integrity and reliability of financial systems worldwide.

Counter-claim

Protectionism in public accounting and auditing services is hardly a pressing issue. The sector’s primary concern should be upholding rigorous standards and public trust, not opening doors indiscriminately. Claims that protectionism stifles competition are overblown; in reality, it safeguards quality and integrity. There are far more urgent problems in the global economy—this is a manufactured controversy, not a genuine obstacle to progress or innovation.