CA Auditor slapped with penalty of Rs.1 Lakh for incorrect Accounting Treatment

The National Financial Reporting Authority of India has slapped a penalty of Rs.1 Lakh on Chartered Accountant Auditor for incorrect Accounting Treatment.

Pursuant to the information received from the Ministry of Corporate Affairs, regarding irregularities observed, in the financial statements of Nicco for FY 2015-16, by the Financial Reporting Review Board (‘FRRB’, hereafter) of the ICAI, NFRA initiated investigation into the role of the Statutory Auditors. During FY 2015-16, the Company was listed on Bombay Stock Exchange (‘BSE’, hereafter). M/s G. Basu & Co. were the statutory auditors of Nicco and CA Gautam Guha was the EP for the statutory audit during FY 2015-16.

Based on the investigation into the issues raised in the FRRB report and a preliminary examination of the financial statements of Nicco and the Audit File submitted by the EP, it was observed that there was a prima facie case of professional misconduct and hence a Show Cause Notice was issued to the RP.

Our findings after considering the charges listed in the SCN and the replies of the EP, thereon, establish several failures of the EP in conduct of his statutory audit of Nicco. These relate to several deficiencies in the accounts of Nicco such as non-reporting of foreign currency liability of n 1.83 Crore at the closing rates as on the dates of financial statements viz., 31.03.2015 and 31.03.2016, which was in non-compliance to AS 11; showing assets given on finance lease of Rs.81 Crore even though the lease agreements had become null and void and the assets had turned into NP A 1 ; not showing several items as per the format given in Schedule III to the Companies Act, 2013; making references to the Companies Act, 1956, in place of Companies Act, 2013 which was the applicable law; showing two different values of Earning Per Share (EPS) in the same financial statements; and other omissions in the notes to the financial statements. These omissions and commissions have not been duly reported by EP in the Independent Auditor’s Report. The EP has not even determined the materiality and performance materiality for the Statutory Audit.

This Order establishes that the EP failed to report the Company s non-compliance with Accounting Standards as well as with the format of Financial Statements prescribed by the Companies Act, 2013 and that he did not comply with Standards on Auditing (‘SA’ hereafter) relevant to the audit of the Company.

Finding the EP guilty of professional misconduct based on his established failures in conducting the Statutory Audit, this Order imposes upon the EP a monetary penalty of Rupees One Lakh (Rs.1,00,000).

For Official Order Download PDF Given Below: