ICAI Board of Discipline Finds Chartered Accountant Not Guilty of Professional Misconduct under Item (2) of Part IV

The disciplinary measures commenced when a complaint was lodged by one partner against another, alleging that the respondent had engaged in unethical conduct by taking the firm’s records and continuing to serve the firm’s clients following his removal from the firm. The complainant stated that the respondent had been a partner of the firm since January 2015 and was relieved with effect from 1st January 2019. It was alleged that thereafter, without obtaining a No Objection Certificate (NOC), the respondent accepted audit assignments earlier handled by the firm, demanded Rs. 5,00,000/- to withdraw his name from the Multipurpose Empanelment Form, and failed to remit Rs. 3,17,302/- allegedly due to the firm as per the audited accounts. The complaint also alleged that the respondent collected audit fees in his personal name and removed important records and business documents without consent.

Upon examination, the Director (Discipline) found no prima facie case on most of the allegations and absolved the respondent on issues relating to audit appointment and fee handling. However, the Board confined its inquiry to one remaining charge, whether the respondent had removed firm records without the consent of other partners. The complainant maintained that audit files of certain clients were missing after the respondent’s exit, while the respondent categorically denied taking any such documents and contended that, by law, audit working papers are the property of the auditor.

Issue Raised: Whether the respondent was guilty of “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949, for allegedly removing firm records without consent.

Decision of the Board: The Board noted that no proof had been provided to support the assertion that the respondent had deleted any audit or firm records. It relied on Standard on Auditing (SA) 230 and Standard on Quality Control (SQC) 1, which state that working papers of an audit are the property of the signing auditor. As the respondent was the one who had signed the financial statements of the respective company, the Board opined that the audit working papers and supporting records were considered to be his property.

The Board also noted that the complainant’s assertion that the firm was responsible for future disputes over those records lacked a legal or evidentiary basis. Accordingly, the Board concluded that the complainant had failed to substantiate any act of misconduct. The respondent was therefore held Not Guilty of “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. The matter was accordingly closed under Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007. The case was thus disposed of.

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