 "ICAI India")
The Institute of Chartered Accountants of India (ICAI) has found that seven affiliates of auditing major PwC were violating the local laws.
In an order released Friday, ICAI said that its disciplinary committee was of the view that the affiliate companies of the Big Four firm “had entered into various agreements such as Accession Agreement, Name License Agreement, Firm Services Agreement which contains clauses which clearly violate the provisions of the Chartered Accountants Act, 1949”.
“Further, the Committee noted that visiting cards of the personnel of Respondent Firm contains suffix '@pwc.com' in their email id(s) which depicted their close association or linkage with the international entity,” it added.
The order said that the committee also found out that there was sharing of human resources, infrastructure, brand name and contact details “which signifies that in substance PwC was controlling” the affiliate firms.
Moreover, it said that “substantial payments” were made by affiliates to PwC, adding that they were “nothing, but the allocation of costs incurred by PwC services on its objectives and not for the Respondent Firm(s)”.
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“These are payments made by the respondent firms for obtaining the benefit of using PWC marks and indirect benefit of referral of work obtained from other member firms," it said.
“Incidentally, from perusal of the invoice bills brought on record by the Respondent firms, it is noted that the Respondent Firms charge a percentage of share of its fees from other members of PwC Network outside India for work conducted by them for the Indian client companies.”
Currently under the CA Act, 1949, foreign audit firms cannot register and operate in India.
The ICAI has also asked these firms to "immediately stop existing arrangements with the Multinational entities".
It has also imposed a fine of Rs 500,000 on two partners at these affiliate firms and has ordered their removal from the Register of Members for three years.
In response to the order, Price Waterhouse and affiliates said that they were "disappointed".
“We are disappointed to note that the ICAI has published the said orders in the public domain, which is not in accordance with the court proceedings before the Hon'ble Delhi High Court, which was held in the presence of the ICAI Disciplinary Committee counsel,” they said in a statement.
“We have accordingly asked the ICAI to immediately take down the orders from their website. These matters are of course not unique to us but are general industry-wide issues, and do not in any manner pertain to our audit procedures or the quality of our delivery.”
Earlier, a similar order was issued against affiliates of another Big Four audit firm in India but was later taken down from the website after a stay by the Delhi High Court.
“We remain steadfast in our commitment to respect and adhere to applicable laws and have full faith that our judicial process will uphold our position on the said matters,” Price Waterhouse and affiliates added.
