ICAI Finds PwC Affiliates Violating Local Laws: Orders Issued

The Institute of Chartered Accountants of India (ICAI) has found that five affiliates of auditing giant PricewaterhouseCoopers (PwC) were violating local laws. In an order released on Friday, ICAI stated that its disciplinary committee determined the affiliates of the Big Four firm had entered into various agreements that clearly violated the Chartered Accountants Act, 1949.

The committee found that the affiliates had close associations with the international entity, PwC, as evidenced by the use of email IDs ending with ‘@pwc.com’ and sharing of human resources, infrastructure, brand name, and contact details. Payments made by the affiliates to PwC were deemed allocations of costs incurred by PwC services rather than genuine payments for services rendered.

Under the Chartered Accountants Act, foreign audit firms cannot register or operate in India. ICAI has instructed these firms to immediately cease their existing arrangements with multinational entities. Additionally, two partners from these affiliate firms were fined Rs 500,000 each and removed from the Register of Members for three years.

Price Waterhouse and affiliates expressed disappointment with the orders, stating it was against the court proceedings before the Delhi High Court. They have requested the ICAI to take down the orders from their website, asserting that these issues are industry-wide and do not pertain to their audit procedures or quality.

ICAI President Ranjeet Kumar Agarwal stated that a Committee for Aggregation of CA firms has been established and is working on framing guidelines for networking, partnerships, and international networking. Agarwal emphasized the need for incentives, policies, and tools to facilitate mergers and allow Indian CA firms to grow larger.

Previously, a similar order against another Big Four firm’s affiliates in India was taken down following a stay by the Delhi High Court. Price Waterhouse expressed confidence in the judicial process to uphold their position on the matters. ICAI also debarred a related Chartered Accountant for 3 Years in the PwC-related Misconduct Case and slapped a hefty fine of Rs. 30 Lakhs for “protection and promotion of the brand.”