ICAI finds CA guilty of Misconduct for Negligence in regard to Going Concern Status and Lack of Due Diligence during Audit [Read Order]

The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has found Chartered Accountant Chunnilal Choudhary guilty of professional misconduct and lack of due diligence during audit.

The committee comprising CA Debashis Mitra, Rajeev Kher IAS(Retd.), CA Amarjit Chopra and CA Babu Abraham Kallivayalil has found that the CA was guilty of professional misconduct on many grounds including lack of due diligence, overstatement of debtors to the extent of Rs. 992 Crores and violation of SA-570 in regard to whether the assumption of status of going concern taken by the management is correct or not.

In addition to the above said charges, the committee also found the CA guilty of non-reporting of devolvement of LC and the consequential irregularities with borrowed accounts with the banks to the extent of Rs. 104 Crores, failure to report non-compliance of AS-15 and wrong depiction of FD among other things. The gross negligence on the part of the CA was condemned by the committee.

The respondent was present for the hearing through virtual conference, however, none of the submissions of the CA were substantially sufficient for proving his exercise of due diligence. He submitted that he was an auditor at the company and the company made him a soft target to settle some grievances against him. He also contended that he himself had sent letters to the overseas debtors to verify the correctness of Rs. 160 Crores, the balance amount after giving discount, which was reported, according to the respondent.

The committee, however found no substance in the submissions and held that the Corporate Debt Restructuring that was ongoing in the company was known to the respondent and the reworking of the figures in accordance was the statutory duty of the respondent as the appointed auditor. He also failed to make any observations regarding the same. It was also noted that since the payment for certain debtors were deferred for 5 years, it was depicted as current assets, which is not in accordance with the definition of current assets.

In light of the findings of the Committee, the CA was removed from the Register of Members for a period of one year and was penalized with a fine of Rs. 1,00,000/- . The committee thus held the respondent guilty of Professional Misconduct failing within the meaning of items  (6),(7),(8) and (9) of part I of the Second Schedule to the Chartered Accountants Act, 1949.

Support our journalism by subscribing to TaxscanPremium. Follow us on Telegram for quick updates.