Failure to Communicate with Previous Auditor: ICAI Holds CA Guilty of Professional Misconduct

This case is a disciplinary matter decided by the Institute of Chartered Accountants of India (ICAI) against a CA. Manmohan Jhawar for accepting an audit in a company without informing the previous auditor.

A complaint was filed by CA. Bimal Chandra Bothra. The complainant (CA Bimal Chandra Bothra) was the statutory auditor of two companies, i.e., K.B. Syndicate Pvt. Ltd. and Saksena Bros Pvt. Ltd. He was appointed as auditor up to Financial Year 2023-24.

However, due to non-cooperation and not receiving proper documents from the companies, he resigned on October 14, 2023. But before his resignation, CA Manmohan Jhawar conducted and signed the audit for FY 2022-23 on August 30 and August 31, 2023.

Two main allegations were made against CA. Manmohan Jhawar:

1. No written communication with the previous auditor

Before accepting an audit that was previously handled by another CA, the new auditor must first communicate in writing with the previous auditor as required under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949. The complaint stated that this was not done.

2. Not checking legal compliance under the Companies Act

Before accepting an appointment as an auditor, the new auditor must ensure that legal requirements under Sections 139 and 140 of the Companies Act, 2013, are properly complied with.

It was alleged that the respondent signed the audit report without checking whether proper procedures regarding the previous auditor were followed.

The respondent, through his written statement dated April 6, 2025, submitted that he had no bad intention. He further added that he believed the company had informed the previous auditor through a conference call. He further requested that failure to comply with Section 140 be mainly the company’s fault. However, he admitted it may have been an oversight. He had informally confirmed with the clients that the complainant did not have any unpaid audit fees.

However, the complainant denied that any conference call happened. He stated that audit reports were signed in August 2023, whereas supporting documents were still being given to him until October 2023. Therefore, the issue raised by the respondent regarding communication is baseless.

Considering all the facts, the Board clearly stated that communication with the previous auditor is a clear violation of Items (8) and (9) of Part I of the First Schedule to the applicable statute.

As a result, the Board held that CA Manmohan Jhawar is guilty of professional misconduct under Items (8) and (9) of the First Schedule to the Chartered Accountants Act, 1949.