ICAI Debars CA for 1 month over Misconduct in UDIN Generation Prematurely, Claims Breach of Trust by another CA [Read Order]

The attempt to shift blame onto another member was dismissed due to separate proceedings against them.
ICAI - CA - ICAI Debars CA - CA Professional Misconduct - Taxscan

The Disciplinary Committee of the Institute of Chartered Accountants of India ( ICAI ) debarred the Chartered Accountant ( CA ) for 1 month over misconduct in UDIN Generation. The CA claimed that there was breach of trust from another member of ICAI who certified and uploaded the unauthenticated documents in Form AOC-4 to the MCA portal.

The Registrar of Companies, Goa, filed a complaint against M/s NITP Marketing Services Private Limited, alleging that the company submitted its balance sheet for the fiscal year 2018-19 through e-form AOC-4 without the required signatures of directors and auditors.

Despite being questioned, the respondent claimed they didn’t sign the balance sheet because it was supposed to be signed by the authorised company signatory first. The complaint further accuses the respondent of generating a Unique Document Identification Number ( UDIN ) before obtaining the necessary signatures from the company directors.

During the initial hearing, the Respondent was sworn in. When asked if he wanted the charge read out or taken as read, he opted for the latter, acknowledging awareness of the allegation.

However, he pleaded not guilty and chose to defend himself. The Committee then allowed the Respondent to make submissions, followed by examination. Subsequently, the Complainant presented their submissions, and the Respondent concluded with final remarks.

The Respondent-CA defended the generation of UDIN for the Company’s 2018-19 financial year balance sheet, claiming it was done in good faith and due to a technical lapse regarding UDIN requirements.

The Committee referred to UDIN details as available on the UDIN portal of the Institute and noted that the status of the said UDIN was stated to be ‘Active’. Further, on review of the ‘Document details’ as given by the Respondent while generating UDIN, it was noted that he had provided details in respect of ‘Document Type’, “Type of Certificate’, ‘Figures/ Particulars’ and ‘Document Description’.

It was observed by the Committee that as per the said details, the Respondent had mentioned to have generated alleged UDIN in relation to statutory audit of the Company for the financial statements of FY 2018-19 for discharging audit and assurance function.

It was also noted that the alleged UDIN was generated on 29th October 2019 wherein the audit report was reported to be signed by him on 30th September 2019 thus indicating that UDIN was generated by him showing that he had signed Audit Report of the Company and that UDIN was generated after the lapse of almost a month therefrom.

Further, it was noted that Gross Turnover/ Gross Receipt of Rs. 2,18,893/-, Shareholder Fund/ Owner Fund of (82,85,140) and Net Block of Property, Plant & Equipment of Nil amount was mentioned in UDIN ‘document details’ which was the same as mentioned in the Balance Sheet (C-23 to C-24).

Thus, it was evident that it was the Respondent-C who had generated UDIN for a set of financial statements which were neither signed by its directors nor the audit report on such financial statements was signed by the Respondent himself even though the Institute had advised the members that UDIN be generated by the members on the signature dates of Audit Reports.

The Committee viewed that the Respondent-CA had failed to explain with any evidence as to how a UDIN generated in good faith was put on unsigned documents without his knowledge. Accordingly, it was viewed that the Respondent’s submission that he was oblivious of the alleged financials along with the audit report being considered as audited documents could not be accepted.

Additionally, Respondent-CA’s plea that it was a separate member who had certified & uploaded the unauthenticated documents in Form AOC-4 to MCA portal, it was noted that separate proceedings were taking place against the said alleged member and that proceedings against each member were limited to his role in the alleged act.

Consequently, the Committee found the Respondent guilty of professional misconduct for negligence in performing audit duties and generating UDIN prematurely, breaching professional standards.

Thus, in conclusion, in the considered opinion of the Committee, the Respondent was found guilty of Professional Misconduct falling within the meaning of Item (7) of Part-I of Second Schedule to the Chartered Accountants Act, 1949. Considering the gravity of the matter, the name of the CA was removed from the register for 1 month.

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