ICAI Takes Action Against CA for Unethical Behaviour Over Auditor Change

The Institute of Chartered Accountants of India (ICAI) has recently taken disciplinary action against an auditor due to his unprofessional action for not being re-appointed as the company’s auditor.

The Respondent, CA Munish Mehta, was appointed as an auditor of the Complainant Company for FY 2013-14. The respondent was reappointed each year. However, the Respondent was not reappointed at the Annual General Meeting (AGM) held on 29th September 2014, and this decision was communicated to the Respondent over the phone. After this, the Company appointed M/s S.N. & Associates as new statutory auditors in an adjourned AGM on 16th January 2015. But the respondent did not attend the adjourned AGM, and he claimed that he never received the notice of the AGM. The company put the following allegations against the respondent:

• The respondent wrongly claimed pending dues from the company after his services were discontinued.
• He threatened new auditors to stop them from accepting the audit assignment.
• He demanded “opportunity cost” for five years for not reappointing the respondent firm again.
• He issued threats to a company director and other associated professionals.
• He misrepresented to new auditors that he was still appointed as the company’s auditor.
• He claimed that past financial statements had issues, despite having signed them without qualification.

The ICAI Board of Discipline, after investigating the matter, observed that the respondent had created unnecessary issues like wrong dues, misrepresentation of audits, and objections to removal. The board also observed that the respondent demanded wrong claims, like opportunity cost, to stop the company from appointing a new auditor. His actions were unprofessional and caused damage to the reputation of the CA profession.

Accordingly, the Board held the Respondent guilty of “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 and imposed a penalty of Rs 10,000 on him.