NFRA imposed Penalty of Rs.1 Lakh on CA who failed to report Non-Compliance with Format of Financial Statements

The National Financial Reporting Authority (NFRA) penalised Chartered Accountant, CA Gautam Guha a total of Rs.1 lakh for failing to notify the company’s non-compliance with the structure of the financial statements. The NFRA also discovered more instances of professional misconduct, which resulted in the penalty being imposed.

CA Gautam Guha works as a Partner with Ws G. Basu & Co. in Kolkata. He is also a member of the Institute of Chartered Accountants of India (ICAI) and was the Engagement Partner (EP) in charge of the statutory audit of M/s Nicco Uco Alliance Credit Limited (Nicco) during the financial year (F.Y.) 2015-16.

The NFRA launched an examination into the role of the Statutory Auditors in response to information received from the Ministry of Corporate Affairs regarding inconsistencies found in the company’s financial statements for FY 2015-16 by the Financial Reporting Review Board of the ICAI.

The authority determined many shortcomings of the EP in conducting his statutory audit of Nicco after reviewing the accusations contained in the SCN and the CA/EP’s response. Several flaws were discovered in the Company Nicco’s accounts, including the failure to record a foreign currency obligation of n 1.83 crore at the closing rates on the dates of the financial statements, namely 31.03.2015 and 31.03.2016, in violation of AS 11.

Furthermore, the EP/CA indicated assets supplied on a financing lease of Rs. 1.81 Crore, notwithstanding the fact that the lease agreements had become null and invalid and the assets had become Non-Performing Assets (NPA).

The Order determined that the EP failed to notify the Company’s non-compliance with Accounting Standards as well as the format of Financial Statements stipulated by the Companies Act, 2013, and that he failed to comply with Auditing Standards applicable to the Company’s audit.

After assessing the Engagement Partner/Chartered Accountant’s (EP/CA) professional misconduct as a result of his recorded deficiencies in carrying out the Statutory Audit, the authority imposed a monetary penalty of Rs. 1,00,000 on the EP.

On June 26th, 2023, the National Financial Reporting Authority (NFRA) published a circular to the Auditors of the Entities outlining the responsibilities of the Statutory Auditors in regards to fraud in a firm.