CA guilty of misconduct for signing clean Limited review without proper verification of stock and Debtors

The Disciplinary Committee of ICAI in the matter of Shri Dinesh Chandra has held CA guilty of misconduct for signing clean Limited review without proper verification of stock and Debtors.

That vide findings dated 07.02.2023 under Rule 18(17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committee was inter-alia of the opinion that CA. Raj Kumar Bagri (M. No. 051956) (hereinafter referred to as the Respondent”) was GUILTY of professional misconduct falling within the meaning of Clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

That pursuant to the said findings, an action under Section 218(3) of the Chartered Accountants Act, 1949 was contemplated against the Respondent and communication was addressed to him thereby granting an opportunity of being heard in person / through video conferencing to make a written & verbal representation before the Committee on 9th June 2023.

The Committee noted that on the date of hearing i.e., 09th June 2023, the Respondent was present through video conferencing. The Respondent confirmed receipt of findings of the Committee and made his verbal submissions on the same.

From the facts and findings, it is observed that though the management is primarily responsible for verification of Inventory and Fixed Assets yet the Respondent as auditor was responsible to verify the record and procedures and process of verification. In the instant case, the Respondent brought on record documents in respect of verification of inventory for the financial year 2013-14 only and in respect of other years and also for fixed assets, he did not bring on record any documentary evidence to establish that he has made verification to check as to whether the Company has made proper record and physical verification of Inventory and fixed assets were conducted by the Company with due process. Being material items to the financial statements, the Respondent should have been more careful and verified the process of verification to obtain evidence to ensure that the financial statements are free from material misstatement, if any, but he failed to do so. Accordingly, the Committee decided to hold the Respondent Guilty of Professional Misconduct falling within the meaning of Clause (7) of Part I of Second Schedule to the Chartered Accountants Act, 1949.

Keeping in view the facts and circumstances of the case and material on record including verbal and written submissions on the findings, the Committee is of the view that the misconduct on the part of the Respondent is established. Accordingly, after due deliberations and keeping in view the facts and circumstances of the case, material on record and the Respondent’s verbal and written submissions, the Committee ordered that the Respondent, CA. Raj Kumar Bagri (M. No. 051956) be reprimanded and also to impose a fine of Rs. 75,000/- (Rupees Seventy-Five Thousand) upon him to be paid within 90 days of receipt of the Order. The Committee also ordered that if the Respondent fails to pay the fine within the stipulated period as mentioned above, his name be removed from the Register of Members for a period of 1 (one) month.

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