CAs Cannot Assume Auditor Position if Previous Auditor's Fees Remain Unsettled: ICAI
A member of the ICAI in practice cannot accept an auditor appointment if the undisputed audit fee of another CA for statutory audit remains unpaid, except for sick units exempted from this rule
CAs – Assume Auditor Position – Auditor’s Fees Remain Unsettled – ICAI – taxscan
CAs – Assume Auditor Position – Auditor’s Fees Remain Unsettled – ICAI – taxscan
The Board of Discipline of Institute of Chartered Accountants of India ( ICAI ) has observed that Chartered Accountants ( CAs ) shall not accept the appointment as auditor if undisputed outstanding fees of another auditor of the audit has not been paid. The ICAI found the CA guilty of Professional misconduct.
The case revolves around a complaint filed by the former auditor against the present auditor of the company M/s Tejimandi Analytics Private Limited. The Complainant- CA alleged that they were appointed as the Statutory Auditor of the Company until the conclusion of the Annual General Meeting for the fiscal year ending March 31, 2018.
Despite fulfilling their auditing duties for the fiscal year 2017-18, the Complainant-CA was replaced as the auditor for the subsequent fiscal year without proper notification. Furthermore, the Complainant-CA emphasised that their undisputed audit fee for the previous year remained outstanding.
The Disciplinary Committee of the ICAI carefully considered the Respondent-CA’s acceptance of the audit appointment despite the outstanding audit fees owed to the Complainant. This contravened Council Guidelines, which stipulate that a member of the institute in practice should not accept an auditor appointment if the previous auditor's undisputed audit fees remain unpaid.
Referring to Chapter VII of Council Guidelines No. I-CA (7)/02/2008, dated August 8, 2008, the ICAI disciplinary committee highlighted the explicit prohibition against accepting such appointments in the absence of settled audit fees, except in cases involving sick units.
The Committee noted that the financial statements for the fiscal year 2017-18, signed by the Complainant, did not disclose any provision regarding pending audit fees on the Balance Sheet. Although the Complainant-CA argued that the pending fee was reflected under the head of sundry creditors, this information was not apparent to the Respondent-CA when conducting their audit for the subsequent fiscal year.
However, during the audit of the books of accounts for the fiscal year 2018-19, the Respondent-CA came across the ledger of the previous auditor, which showed outstanding payable. Subsequently, after persistent follow-up with the company's management, the outstanding audit fee was paid to the outgoing auditor.
The Committee concluded that the Respondent's acceptance of the audit without ensuring the settlement of the previous auditor's undisputed fees constituted a clear violation of professional guidelines. The Respondent acknowledged their guilt in this matter.
Therefore, the ICAI Disciplinary Committee found the Respondent-CA guilty of Professional Misconduct falling within the meaning of Item (1) of Part II of the Second Schedule to the Chartered Accountants Act, 1949.
To Read the full text of the Order CLICK HERE
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