ICAI Holds CA Guilty for Negligence in Auditor Appointment & Certification:

ICAI Holds CA Guilty for Negligence in Auditor Appointment & Certification The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) initiated proceedings against CA Tarun Kumar Khanna after a complaint by Shri Sudhanshu Aggarwal, a Director in M/s Amritanshu Infrastructure & Management Private Limited. The complainant said that the Respondent had audited the financial statements of M/s Beigh Construction Company Private Limited for the FY 2015-16, which were used to obtain tenders from IRCON International Limited through forged records. Investigation revealed that while the MCA portal showed CA Vikas Marwah as the statutory auditors, the Respondent issued an audit report for the same period without going through the mandatory legal procedures for appointment or verification. Issue Before ICAI: Whether the Respondent committed professional misconduct by accepting an appointment as a statutory auditor without ensuring compliance with the provisions of the Companies Act regarding casual vacancies and for failing to exercise due diligence in certifying financial statements with significant discrepancies. Committee's Decision: The Disciplinary Committee held the Respondent GUILTY of Professional and 'Other' Misconduct. He was found liable under Item (9) of Part I of the First Schedule, Item (2) of Part IV of the First Schedule, and Item (7) of Part I of the Second Schedule of the Chartered Accountants Act, 1949. The Committee observed that the Board made the Respondent's appointment to fill a "casual vacancy" that did not legally exist on the MCA portal at that time. He also failed to verify the resignation of the previous auditor, did not obtain a valid "No Objection Certificate" (NOC), and failed to check his appointment was ratified in a general meeting. The Committee held that the Respondent conducted the audit on an "urgent basis" to help the company submit a tender, leading to the failure in verification of inflated financial figures. To Read Full Judgment, Download PDF Given Below