Chartered Accountants' Body Asks Affiliate Firms Of PwC To Stop "Existing arrangements" - What Does It Mean
The Institute of Chartered Accountants of India (ICAI) has found that seven affiliates of auditing major PwC were violating local laws, reported Business Standard. In an order released Friday, ICAI stated that its disciplinary committee determined the affiliate companies of the Big Four firm “had entered into various agreements such as Accession Agreement, Name License Agreement, Firm Services Agreement which contain clauses that clearly violate the provisions of the Chartered Accountants Act, 1949.”
The committee also noted that visiting cards of the personnel of the respondent firms included the suffix “@pwc.com” in their email addresses, depicting a close association with the international entity. The order further revealed that there was sharing of human resources, infrastructure, brand name, and contact details, indicating that PwC was substantially controlling the affiliate firms.
Moreover, it found that “substantial payments” made by affiliates to PwC were essentially allocations of costs incurred by PwC services and not payments for the respondent firms. These payments were for the benefit of using PwC marks and the indirect benefit of work referrals from other member firms. The committee also noted that the respondent firms charged a percentage of fees from other PwC Network members outside India for work conducted for Indian clients.
Under the CA Act, 1949, foreign audit firms cannot register and operate in India. Consequently, the ICAI has asked these firms to “immediately stop existing arrangements with the Multinational entities.” Additionally, it imposed a fine of Rs 500,000 on two partners at these affiliate firms and ordered their removal from the Register of Members for three years.
In response to the order, Price Waterhouse and affiliates expressed their disappointment. “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. They have requested ICAI to remove the orders from their website, emphasizing that these issues are industry-wide and do not pertain to their audit procedures or delivery quality.
A similar order was previously issued against affiliates of another Big Four audit firm in India but was later taken down from the website following 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.
