The Institute of Chartered Accountants of India (ICAI) imposed 1 lakh fine on Chartered Accountants (CA) due to the failure to perform proper audit on non-disclosure of Step Down Subsidiaries.
It was alleged that the Respondent did not perform the proper audit procedure in disclosing the step-down subsidiary company in the consolidated financials of the company and merely relied upon the management’s representation.
Further alleged that the Company had not given a complete, sufficient, and proper disclosure of Bank Guarantee (BG) and letter of credit (LOC) under the head contingent liability in its financial statements for the period ended 31st March 2018 and the Respondent has failed to raise any objection/report such now-disclosure and violation of accounting standards by the management of the Company.
A Coram comprising Mrs. Rani Nair, Shri Arun Kumar, CA. Rajendra Kumar P, Member and CA. Cotha S Srinivas noted that” as per the charge, the Company in its consolidated financials for the year ended 31st March,2018 has not disclosed such step-down subsidiary, SMC and the Respondent too failed to consider and disclose such step-down subsidiary, SMC in his audit report on the consolidated financial statement of the auditee company.”
The Committee concluded that the Respondent has clearly failed to apply his audit procedures diligently and failed to report the violation of an accounting standard made by the management of the Company and also failed to report the existence of such material subsidiary SMC which was not disclosed in the financials of the auditee company.
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