ICAI Passes Order Against Three EY Affiliates For 'Professional Misconduct'

The Institute of Chartered Accountants of India (ICAI) has passed an order against auditing major EY's three affiliates and a retired partner for "professional misconduct". Besides, the ICAI has issued an order against S V Ghatalia & Associates, LLP, and its partner for professional misconduct. The entity is not operational now. 

The disciplinary committee of the ICAI has directed the firms and the individual partner concerned to immediately stop existing arrangements with the multinational entities, as the same is circumventing the provisions of the Chartered Accountants Act, 1949. 

The order, dated April 25, is against S R Batliboi & Associates, LLP; SRBC & Co, LLP; S R Batliboi & Co LLP and retired partner Raj Kumar Agrawal. 

"We are disappointed to receive the order against our former retired partners in the matter of operations of Indian audit firms having network with global firms.” 

"We as Indian audit firms have always respected rules and applicable laws. We are reviewing the order and will take action as necessary including all the remedies available under law," SRBC & Co LLP said in a statement on Sunday. 

The disciplinary committee has ruled that the name of Raj Kumar Agrawal be removed from the institute's register of members for three years, concurrently in all the cases, and a fine of Rs 5 lakh for each case has also been imposed on him, as per the order. 

In a separate but similarly worded order, the ICAI has directed the removal of the name 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 slapped on Basu, who was then a partner at that entity. 

According to the committee, joining the international entity and agreeing to its contents provided for referral work and payment of fee for such referral, constituted professional misconduct. 

"The committee is of the view that visiting cards contain information which signify virtual address relating to Ernst & Young (international entity) and further email id used by the respondent firm depicted its close association and/ or linkage with the international entity. 

"The respondent firm/ respondent have failed to point out as to how they were able to maintain their independence when the domain that was being used belonged to the third party i.e. multinational entity," as per the order issued in the case of S V Ghatalia & Associates, LLP. 

Further, the order said the practice was adopted by the respondent firm to reap benefits of affiliation with EYG (Ernst & Young) for influencing the prospective clients or public at large was a professional misconduct under the Chartered Accountants Act, 1949. 

In an updated statement, SRBC & Co LLP also said that among other things, the order has asked that past practices of using global network branding be stopped. 

"Many of such practices no longer exist today. Respondents are evaluating all issues raised in the order and will explore options under the law, including the appeal process as provided under the ICAI disciplinary process," the statement said.