CA held guilty for not obtaining no due certificate from previous Tax auditor

The Disciplinary Committee of ICAI has found Chartered Accountant Guilty for not obtaining no due certificate from previous Tax auditor.

FINDINGS:

The Committee noted the Respondent’s Counsel while explaining the charges relied upon his written submissions dated 02nd November 2021. With regards to the first charge, the Respondent’s Counsel inter-alia, submitted as under:

i. That at the time of accepting the tax audit, the Respondent had communicated. with the previous auditor through the client. The Respondent handed over the letter seeking no objection from previous auditor to the client to obtain the same.

ii. The client advised him to conduct audit as no objection would be obtained later. The client has communicated with the previous auditor a out the change of auditor.

iii. The counsel added that a confirmatory letter in this regard is also provided by the client.

iv. The Respondent’s Counsel stated that the same client is now serviced by the Complainant and the Respondent has issued no objection, to the Complainant.

v. The Counsel accordingly submitted that since the Respondent has communicated with the previous auditor through the client, hence the Respondent may not be held guilty under item (8) of part I of the First Schedule to the Act.

vi. The Committee noted that on perusal of documents on record and provisions of Item 8 of part I of the First Schedule to the Act, it is clear that the [incoming auditor must communicate with the outgoing auditor in writing as reproduced below:

“a) A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he –

Item (8) of Part I of First Schedule: accepts a position as auditor previously held by another chartered accountant or a certified auditor who has been issued :certificate under the Restricted Certificate Rules, 1932 without first communicating! with him in writing;”

In view of the above, it is abundantly clear that before acceptance of the audit, the Respondent was required to have positive evidence of delivery of his communication to the previous auditor i.e., the Complainant in his hand. Hence, the plea of the Respondent that he communicated with the client to arrange to obtain no due certificate from the previous auditor cannot be justified. He was required to communicate with the previous auditor in the manner as being envisaged under Code of Ethics, 2009, i.e. by registered post with acknowledgement due or by hand against a ‘ written acknowledgement.

Since, Respondent has not communicated with the previous auditor i.e., Complainant Firm before acceptance of the tax audits of the assessee(s) for the FY 2015-16 in the manner as envisaged under the provisions of Item (8) of Part I of First Schedule of the Chartered Accountants Act, 1949 read with Code of ethics, hence the Committee in its considered opinion decided to h0ld him GUILTY of Professional Misconduct falling within the meaning of Item (8) of the First Schedule to the Chartered Accountants Act, 1949.

The Committee also noted that the Respondent had brought on record a stock summary of the client(s)/ assessee(s) for the concerned period. The Committee finds no merits in this charge and is convinced by the arguments submitted by the Respondent’s Counsel. The Committee, accordingly, decided to hold the Respondent not guilty on this charge.

ORDER:

In view of the above findings stated in above para’s vis a vis material on record, the Committee in its considered opinion, holds the Respondent is GUIL TY of Professional Misconduct falling within the meaning of Item (8) of Part I of First Schedule to the Chartered Accountants Act, 1949 with respect to first charge only and NOT GUILTY Professional Misconduct falling within the meaning of Item C,; of Part I of Second schedule to the Chartered Accountants Act, 1949 with respect to second charge.

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