ICAI Reprimands CA for accepting audit when undisputed audit fee of another CA was not paid

The complainant, CA Sandeep Gupta, filed a complaint against CA Himanshu, alleging him of professional misconduct under the Chartered Accountants Act, 1949. The complainant was the auditor of Bhangu Rice and General Mills for the financial year 2020-21.

The first allegation was that the respondent had audited the books of accounts of Bhangu Rice and General Mills for F.Y. 2021-22 without communicating with the complainant, who was the previous auditor. Further, it was alleged that the respondent accepted the audit even though there was an outstanding, undisputed fee payable to the complainant.

Regarding the first allegation, the ICAI Disciplinary Committee observed that Clause (8) of Part I of the First Schedule to the Chartered Accountants Act requires an auditor to inform the previous auditor in writing before accepting an audit assignment.
Even though the respondent relied on a representation letter received from a partner of the firm confirming that the previous auditor had no objection to the respondent’s appointment, the letter also mentioned that the firm would be “solely responsible” for any issue regarding the previous auditor.

Therefore, the committee held the respondent, CA Himanshu, GUILTY of professional misconduct under Clause (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Regarding the second allegation, the committee examined the balance sheet of Mis Bhangu Rice & General Mills, where it was seen that Rs 23,000 was shown under the head “Audit & Legal Fee Payable.”

However, the CA Act stops a member from accepting an audit assignment if the undisputed audit fee of another chartered accountant has not been paid.

During the hearing, the respondent claimed that the fees were paid in cash, but he did not show any documentary proof to substantiate his claim.

Accordingly, the Committee held the Respondent GUILTY of Professional Misconduct under Clause (1) of Part II of the Second Schedule to the Chartered Accountants Act, 1949.

Due to the above violations, the ICAI Disciplinary Committee reprimanded the respondent, CA. Himanshu and fined him Rs 20,000.