Some of the biggest audit firms, including KPMG, EY, PwC and Deloitte, have either removed or relaxed revenue targets for their audit partners, according to a report by The Economic Times.
Their decision comes on the back of Indian regulators increasing their scrutiny of auditors, the newspaper reported.
In recent months, some audit firms have either told their partners that they have de-linked their pay packets from the revenue that they would help generate, or that they would not have any revenue targets.
According to the previous arrangement, an audit partner was given a revenue target. In return, the partner would receive anywhere between 20 and 35 percent of the revenue as compensation.
"When audit rotation happened, partners were expected to go out and win big accounts. In some cases, the auditor’s compensation also depended on how much business he or she helped generate for other verticals," a senior audit partner told the newspaper.
According to the report, observers have become cautious after capital markets regulator Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) cracked down on auditors in cases of financial fraud.
The auditor's role has been questioned in multiple cases. SEBI had even banned a network firm of PwC for two years from auditing listed companies.
The removal of reduction of revenue targets comes at a time when several firms are resigning as auditors of companies.
To make up for lost work, many audit partners had reportedly accepted assignments of some firms without much due diligence.
"A year since the audit rotation, the skeletons are tumbling out. The firms realise that revenue targets for audit partners could backfire as the most important thing about auditing is perception," a senior audit partner told the newspaper.
Finding Price Waterhouse guilty in the multi-crore Satyam scam, SEBI had earlier barred its network entities from issuing audit certificates to any listed company in India for two years.
It also ordered disgorgement of wrongful gains of over Rs 13 crore from PwC and its two erstwhile partners, who worked on Satyam's accounts.