ICAI Defends Order Against EY India Affiliates
The Institute of Chartered Accountants of India (ICAI) has defended its recent order against affiliates of EY India for "professional misconduct." The ICAI stated that it has the statutory power to initiate actions against affiliates of global accounting firms.
The accounting body clarified that the procedure for enquiring and levying penalties is governed by statutory rules framed by the Central Government. The ICAI's primary objective, as per the preamble to the Chartered Accountant Act, 1949, is to regulate and develop the profession of Chartered Accountancy.
Chapter V of the Act deals with misconduct and penalties, outlining the constitution of the Board of Discipline and Disciplinary Committees. These committees perform quasi-judicial functions and are empowered under the Act to levy various penalties.
This response from ICAI comes after the Delhi High Court stayed the ICAI order against EY affiliate firms on Thursday. The order stated that entities affiliated with EY were using email addresses and visiting cards that advertised the names of their global affiliates. According to ICAI, this amounted to publicity for a foreign audit firm in India, contravening the Chartered Accountants Act (CA Act). Additionally, the referral fees paid by EY India to its global network firms, EY Global (EYG) and EY Europe, Middle East, India and Africa (EY EMEIA), were deemed to be against the guidelines of the CA Act.
In its statement, ICAI referred to the Supreme Court's 2018 judgment in the case of S Sukumar vs the ICAI, which dealt with the operation of multinational accounting firms in India. The apex court directed the ICAI to further examine the related issues and take necessary steps within three months.
The ICAI reiterated its commitment to discharging its regulatory functions in accordance with due procedure established by law and in compliance with the Supreme Court's direction. It is important to note that affiliates of Deloitte, KPMG, and PwC have already obtained stays from various high courts against similar ICAI orders. However, sources indicate that similar orders against these other three firms of the Big Four may be issued in the coming weeks.