ICAI Takes Action Against EY Affiliates and Partners for Professional Misconduct
The Institute of Chartered Accountants of India (ICAI) has taken disciplinary action against three affiliates of auditing giant EY and a retired partner for "professional misconduct." The institute has also issued a similar order against another firm and its partner.
The ICAI's disciplinary committee has directed the firms and the individual partner involved to immediately cease their existing arrangements with the multinational entities. This action was taken as the arrangements were found to be circumventing the provisions of the Chartered Accountants Act, 1949.
Who are the EY affiliates involved?
The April 25th order was issued against EY affiliates S R Batliboi & Associates, LLP; SRBC & Co, LLP; S R Batliboi & Co LLP; and retired partner Raj Kumar Agrawal. Another order was issued against S V Ghatalia & Associates, LLP, and its partner for professional misconduct.
Response from SRBC & Co LLP
SRBC & Co LLP expressed disappointment in a statement issued on Sunday regarding the order against their former retired partners. They emphasized their respect for rules and applicable laws as an Indian audit firm and stated their intention to review the order and take necessary action, including exploring all legal remedies available.
Disciplinary Actions
The disciplinary committee has ordered the removal of Raj Kumar Agarwal's name from the institute's register of members for three years, concurrently in all cases. A fine of Rs 5 lakh for each case has also been imposed.
In a separate but similar order, ICAI has directed the removal of Tridibes Basu from the register for three years in the case of S V Ghatalia & Associates, LLP. A fine of Rs 5 lakh has also been imposed on Basu, who was then a partner at that entity.
Reasoning for the Action
The ICAI committee stated that joining the international entity and agreeing to its contents, which provided for referral work and payment of fees, constituted "professional misconduct."
The committee further stated that the use of visiting cards containing information signifying a virtual address relating to Ernst & Young (international entity) and email IDs depicting a close association with the international entity constituted a failure to maintain independence. This practice was deemed a professional misconduct under the Chartered Accountants Act, 1949, as it was adopted to gain benefits from the respondent's affiliation with EYG for influencing prospective clients and the public at large.