Failure to Detect Fraud in Financial Statement is Professional Misconduct: ICAI Removes Name of CA for 1 Year [Read Order]
Failure – Failure to Detect Fraud – Fraud – Financial Statement – Failure to Detect Fraud in Financial Statement – taxscan
Failure – Failure to Detect Fraud – Fraud – Financial Statement – Failure to Detect Fraud in Financial Statement – taxscan
The Institute of Chartered Accountants of India(ICAI) removed the name of a Chartered Accountant for one year and noted that failure to detect fraud in financial statement is professional misconduct.
The Committee noted that the Respondent was the statutory auditor of the Indian Bullion Market Association Limited ("IBMAL Company") and he had audited and submitted his report for the Financial Year ending on 31st March 2011, 31st March 2012 and 31st March 2013.
The auditor procedures were performed for the purpose of reporting the true and fair view of the financial statements, and according to the information and explanations given to the complainant by the management, the report indicates that no fraud on or by the company has been noticed or reported during the course of their audit.
The Committee noted, however, that there was a default in payment to its investors, and it seems that goods were not physically available, which resulted in fraud done on or by the company and gross negligence on the part of the company's auditor. The Committee noted that there is no mention of fraud in the Respondent's report.
The Committee, looking into the failure of the Respondent in the detection of fraud asked the management not to rely on his financial statements, was of the view that this act on the part of the Respondent proves that he was also worried about the quality of the audit conducted by him.
This act also raises questions, even in the eyes of the Respondent about the entire scope of the audit performed by him. including the true and fair view of the financials and Audit Report. The Committee noted that this act of the Respondent, overrides all acts of due diligence that may have been performed by him in his assignment.
A Five-Member Bench of the Board comprising CA. Debashis Mitra, Presiding Officer, Mrs. Rani S. Nair, I.R.S. (Retd, Government Nominee, Shri Arun Kumar, IAS (Retd.), Government Nominee, CA. Rajendra Kumar P, Member, CA, Cotha S Srinivas, Member observed that “The Committee was of the view that this act on the part of the Respondent proves that he was also doubtful about the quality of the audit conducted by him. The Committee noted that it has already been established that the Respondent was negligent while performing his professional assignments and failed to exercise his professional scepticism.”
The Committee ordered that the name of the Respondent i.e., CA. Mukesh P. Shah, be removed from the Register of members for a period of 1 (One) Year.
To Read the full text of the Order CLICK HERE
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