ICAI Issues Orders Against Three EY Affiliates for Professional Misconduct

The Institute of Chartered Accountants of India (ICAI) has recently taken significant action against three affiliates of the auditing giant EY and a retired partner, citing professional misconduct. This decision also extends to S V Ghatalia & Associates, LLP, and its partner, highlighting a firm stance on maintaining the integrity of the accounting profession. The disciplinary committee's orders, issued on April 25, demand an immediate cessation of existing arrangements with multinational entities, which they found to be in violation of the Chartered Accountants Act, 1949.

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The firms implicated in this order include S R Batliboi & Associates, LLP; SRBC & Co, LLP; S R Batliboi & Co LLP, alongside retired partner Raj Kumar Agrawal. The committee's findings have led to a directive for these entities to discontinue practices that circumvent the provisions set forth in the Chartered Accountants Act. In response to the ICAI's decision, SRBC & Co LLP expressed their disappointment, especially regarding the actions taken against their former retired partners. They emphasized their history of compliance with rules and applicable laws and announced their intention to review the order thoroughly before deciding on the next steps, including potential legal remedies.

Further disciplinary actions include the removal of Raj Kumar Agrawal's name from the institute's register of members for a period of three years. This penalty applies concurrently across all cases brought against him, accompanied by a fine of Rs 5 lakh for each case. In a similar vein, Tridibes Basu faces removal from the register for three years due to his involvement with S V Ghatalia & Associates, LLP, where he served as a partner. Basu also incurs a fine of Rs 5 lakh.

The committee elaborated on the nature of the misconduct, pointing out that affiliating with an international entity and agreeing to its referral work and fee payment constituted professional misconduct. It highlighted how certain practices, such as using visiting cards that suggest a virtual address linked to Ernst & Young and email IDs that depict close association with the multinational entity, compromised the firms' independence. This association was deemed an attempt to leverage Ernst & Young's global brand to influence prospective clients or the public at large, which is against the principles upheld by the Chartered Accountants Act.

In light of these findings, SRBC & Co LLP has updated its statement to reflect compliance with the order's demand to halt past practices related to global network branding. The firm acknowledged that many such practices are no longer in place today and is currently evaluating all issues raised in the order. They are considering all available options under law, including appealing through the ICAI disciplinary process.

This series of actions by the ICAI underscores its commitment to upholding professional standards within the accounting industry in India. By addressing these violations decisively, the institute aims to reinforce the importance of independence and integrity among its members and affiliated firms.