 "ICAI says action against EY India affiliates under its statutory powers")
The Institute of Chartered Accountants of India (ICAI) on Friday defended its recent order against affiliates of EY India for “professional misconduct”, saying it has statutory powers to initiate actions against affiliates of global accounting firms.
The accounting body said the procedure for enquiring and levying penalties was governed by statutory rules framed by the Centre.
"The Institute of Chartered Accountants of India (ICAI) as per its preamble to the Chartered Accountant Act, 1949 has its object to regulate and develop the profession of Chartered Accountancy," it said in reply to Business Standard's queries. it did not, however, specifically mention EY India's name.
"Chapter V of the said Act deals with misconduct and penalties and the constitution of the Board of Discipline and Disciplinary Committees which perform quasi-judicial functions and are empowered under the Act to levy different kinds of penalties," it added.
The response comes a day after the Delhi High Court on Thursday stayed the ICAI order against EY affiliate firms - SR Batliboi & Associates LLP, SRBC & Co., LLP and SR Batliboi & Co. LLP and a former partner concerned.
The ICAI in its order last week stated that entities affiliated with EY were using the email addresses and visiting cards that advertised the names of their global affiliates.
According to ICAI, it came under publicity for a foreign audit firm in India, and was in contravention of the Chartered Accountants Act (CA ACT). It also said that 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 against the guidelines of the CA Act.
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In its statement, ICAI said that the action against multinational accounting firms was dealt with by the Supreme Court in its 2018 judgment in the case of S Sukumar vs the ICAI.
The matter before the apex court was whether the multinational accounting firms were operating in India in violation of the law of the land in a clandestine manner. Subsequently, the top court considered the 2003 report of a study group of the ICAI and a 2011 report on the operations of such firms in India submitted by an ICAI expert group.
The apex court directed the ICAI to "further examine all the related issues at an appropriate level as far as possible within three months and take such further steps as may be considered necessary."
"ICAI is committed to discharge its regulatory functions in accordance with due procedure established by law and in compliance with the direction of the Hon’ble Supreme Court," it said.
The affiliates of Deloitte, KPMG and PwC had already taken a stay from various high courts against the ICAI orders. However, people close to the development said that similar orders against these other three firms of the Big Four were ready and may come out in the coming weeks.