EPA called the software "defeat device" that conceals the true emissions only during testing and therefore when the cars are on the road they emit as much as 40 times the level of pollutants allowed under clean air rules making sure public health is protected, Giles said.

"Put simply, these cars contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test," Cynthia Giles, an enforcement officer at the EPA, told reporters in a teleconference.

Volkswagen can be liable for civil penalties of $37,500 for each vehicle not in compliance with federal clean air rules. Involve in the allegations are 482,000 four-cylinder VW and Audi diesel cars sold since 2008. The diesel-powered vehicles involved from 2009-2015 model years are the VW Jetta, VW Beetle, VW Golf and the Audi A3 along with VW Passat from 2014-2015 models.

In a statement to Car and Driver, VW spokesman John Schilling said, "VW is cooperating with the investigation; we are unable to comment further at this time."

VW confirmed that they had installed the software only after the EPA and the California Air Resources Board hinted that no certification will be given to the car company's 2016 diesel models. As of the moment, Volkswagen various responses didn't explain the "higher test results consistently confirmed during CARB's testing."

According to Los Angeles Times, suspicions from the State of Resources Board took place after hearing from automotive pollution analysts in Europe about emissions problems, said Air Resources Board Executive Officer Richard Corey.  In addition, West Virginia University researchers collaborating with the International Council on Clean Transportation, a non-governmental organization, also raised questions regarding the emissions levels. 

Volkswagen cars are tested by Air board investigators by using a special dynamometer.  It is a kind of treadmill used for testing vehicles on the open road with the help of portable equipment.

The investigation revealed the cars behavior is different on the open road compared to EPA's testing environments.  A special test was devised by the agency that detected how software on the engine's electronic control module was deceiving the certification tests. 

Cleaning up diesel exhaust is an expensive process that is why diesel-powered vehicles typically carry price premiums over similar gasoline-powered versions and world's strictest in terms of passenger-car diesel are the U.S. laws, as reported by Car and Driver.

For the meantime, the cars do not face recall yet. The process could take up to a year, depending on the complexity of the issue. VW didn't indicate on Friday how it will address the issue. According to EPA, which has the authority to recall the vehicles, the process could take up to a year, depending on the complexity of the issue.