ICAI Board of Discipline Holds CAs Guilty of Client Solicitation and Improper Audit Appointments:

The Institute of Chartered Accountants of India (ICAI) Board of Discipline has held CA. Nanak Narang, CA. Vimal Kishore and CA. Kavita Ohri guilty of professional misconduct in proceedings arising from a complaint filed by CA. Anurag Sangal. The Board found the Respondents guilty under Items (6) and (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

The complaint arose from allegations of professional misconduct against CA. Nanak Narang, CA. Vimal Kishore and CA. Kavita Ohri, who were associated with M/s Anurag Sangal & Co. The complainant alleged that while continuing as partners of the firm, the Respondents also became associated with M/s Vimal Kishore & Associates LLP and solicited existing clients of the complainant firm for transfer of professional assignments.

The complainant further alleged that audit assignments of several clients were accepted by the Respondent Firm without the required prior written communication with the previous auditor. The complaint also contained wider allegations concerning alleged misappropriation of approximately Rs 55.38 lakh and alleged tampering with the firm's Income Tax e-filing portal. 

The Board noted that the Respondents and CA. Vimal Kishore were partners of the complainant firm from April 1, 2000 to April 1, 2022, while they also became partners of the Respondent Firm from August 30, 2021. Thus, for a period, they were simultaneously partners in both firms.

On the allegation of solicitation, the Board relied upon contemporaneous correspondence from the clients referring to a communication dated September 22, 2021, concerning the formation of the new firm and appointment of the Respondent Firm. Since the Respondents failed to produce the complete correspondence to establish that it was merely informational, the Board held them guilty under Item (6) of Part I of the First Schedule.

Regarding the audit assignments, the Board found that NOCs obtained from the complainant firm were acknowledged by CA. Vimal Kishore, who was simultaneously a partner of both firms and stood to benefit from the transfer of professional work. According to the Board, obtaining and acknowledging NOCs through partners having a common interest defeated the very purpose of the requirement.

Accordingly, the Board concluded that the Respondents were guilty of professional misconduct under Items (6) and (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949, relating to solicitation of professional work and acceptance of audit assignments without proper and independent prior communication with the previous auditor.