The Institute of Chartered Accountants of India (ICAI) has recommended strict penal action, including imprisonment, for auditors who are found associated with serious accounting frauds.

It also wants the Ministry of Corporate Affairs to frame a code of conduct for financial analysts and investment bankers for better scrutiny of firms that may indulge in such illegal affairs.

The recommendations are part of ICAIs final report on Satyam scam and the role of Satyam's former statutory auditors from global auditing firm PriceWaterhouseCoopers. The report, finalised by ICAIs highest decision-making council a few days ago, would be submitted to the ministry this week.

According to sources, ICAI has recommended strict action against auditors known to have collided with Satyams former promoter Ramalinga Raju in committing fraud.

The committee has also recommended fresh scrutiny of the account books of all associate firms and subsidiary companies of the Raju family. ICAI officials confirmed that its apex council had finalised the report on May 13, but declined to provide details.

An ICAI sub-committee, which carried out extensive inquiry into the scam in January this year submitted its report to the institutes council. The sub-committee report prima facie found fault with PriceWaterhouse auditors S Gopalakrishnan and S Talluri, and recommended disciplinary action, including a professional ban on the two individuals.

The central council of ICAI took time to firm up its views on the report as it wanted the accused auditors to be given a fair chance to present their case.