According to sources close to the development, the investigation has been going on for almost a fortnight and some employees have also been fired.
When contacted, Paytm Mall in an e-mailed statement said, under the partnership, EY will "undertake frequent audits to identify, analyse and monitor various in-built and outsourced processes".
It will also recommend global practices that will be applied to build a tech-driven fraud prevention system.
Admitting that its current structure could leave "a scope for collusion", the statement said EY partnership will undertake audit and fraud prevention using both human and artificial intelligence.
"This will strengthen the company's mission to build a secure and trusted shopping experience for the buyers and partnered sellers across India and soon to be launched global operations," the statement said.
Paytm Mall said it continues to "de-list fraud merchants and take strict action wherever needed".