ICAI passes order against three EY affiliates, retired partner for ‘professional misconduct’

The Institute of Chartered Accountants of India (ICAI) has passed an order against three affiliates of auditing major EY and a retired partner for “professional misconduct”. It has passed an order against another firm and its partner for similar reasons. 

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

WHO ARE THE EY AFFILIATES?

The April 25 order has been 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 has been issued against S V Ghatalia & Associates, LLP, and its partner for professional misconduct.

SRBC & Co LLP said in a statement on Sunday that they are disappointed to receive the order against their former retired partners in the matter of operations of Indian audit firms working 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 said. 

The disciplinary committee has ordered to remove the name of Raj Kumar Agarwal 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. 

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 slapped on Basu, who was then a partner at that entity.

‘PROFESSIONAL MISCONDUCT’

The ICAI committee stated that joining the international entity and agreeing to its contents provided for referral work and payment of fee, 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 depicting 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.

The practice, it said, was adopted to reap benefits of the respondent’s affiliation with EYG for influencing prospective clients/public at large, which it deemed a professional misconduct under the Chartered Accountants Act, 1949.

(With PTI inputs)