ICAI Clears CA in DLF Audit Case; Holds SQC-1 Policies and EQCR Process Were Complied With

The matter arose from a letter dated 17 January 2014 received from the Quality Review Board (QRB) regarding the statutory audit of DLF Ltd. for FY 2010–11 conducted by M/s Walker Chandiok & Co. LLP. The Technical Reviewer raised concerns about compliance with SQC-1 and SA 220, like client acceptance procedures, engagement quality control review (EQCR), timing of review documentation, and adequacy of test-of-control procedures.

The Director (Discipline), in a Prima Facie Opinion, held the Respondent prima facie guilty under the Chartered Accountants Act, 1949. The Respondent denied the allegations, raised objections on limitation and jurisdiction.

Issue Before the Committee: Whether the Engagement Partner of DLF Ltd. failed to exercise due diligence or was grossly negligent in complying with SQC-1 and SA 220, thereby attracting Clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

Committee’s Decision: The Disciplinary Committee of the The Institute of Chartered Accountants of India rejected the preliminary objections on limitation and jurisdiction, holding that procedural timelines do not automatically invalidate disciplinary proceedings.

The Committee examined the firm’s Quality Control Manual, independence communications, Voyager audit documentation, client acceptance records, and the Respondent’s affidavit. It found that documented policies under SQC-1 were in place and implemented, and that the EQCR had been conducted prior to issuance of the audit report in compliance with SA 220 and SA 230. In the absence of material establishing lack of due diligence or gross negligence, the Respondent was held Not Guilty of Professional Misconduct under Clause (7) of Part I of the Second Schedule to the Act.

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