The Institute of Chartered Accountants of India ( ICAI ) has reprimanded the Chartered Accountant ( CA ) with a fine of Rs. 1.25 lakhs for adopting a different methodology deliberately for calculation of Net Asset Value ( NAV ) causing loss to the complainant.
A complaint has been filed against CA, Partner at SKHD & Associates, by the majority shareholders of Quant Capital Private Limited ( QCPL ), alleging the inflation of QCPL’s Net Asset Value ( NAV ) and failure to comply with the given mandate. The complaint contended that the respondent deviated from the original mandate by adopting a different methodology, potentially causing loss to the complainant.
The ICAI Disciplinary Committee observed that the mandate letter, signed by Kaustubh Samant, Group CFO of QCPL, explicitly required feedback from the respondent on QCPL’s statement of net assets, with no mention of certification. Therefore, the respondent’s role was limited to vetting the statement and providing feedback on adjustments, without any requirement for certification or providing a report on the amount to be retained in consolidated financial statements.
Further noted an email dated 14th December 2017 from Sh. Kaustubh Samant, Group CFO of QCPL, shared a working file that required audited financials from September 2017 as the starting point for calculation. However, the respondent’s “Statement of adjusted amount to be retained in Consolidated Financial Statements” prepared on 30th September 2017 used the net worth of QCPL from 31st March 2014 as the base for calculating the net assets to be retained, deviating from the instructed methodology.
In addition, the committee observed that the respondent claimed to have had discussions and interactions with RCL regarding the format and basis for vetting the amount to be retained in QCPL’s consolidated financial statements. However, the respondent failed to provide any evidence, such as a revised mandate or email correspondence with RCL, to support his contention. Consequently, the Committee found the respondent’s claim untenable due to lack of substantiation.
The respondent alleged that the complainant filed the complaint due to the respondent’s refusal to consider certain adjustments proposed by the complainant, citing insufficient documentary evidence, observed the DC. However, the respondent failed to provide any evidence or details regarding the basis for not accepting these adjustments, undermining his claim and leaving it unsubstantiated, it added.
The ICAI Committee also noted that the respondent claimed to have worked according to the definitive agreement. However, it was observed that the agreement did not specify the use of the net worth of QCPL as per books on 31st March 2014 as the base for NAV calculation.
Consequently, the Committee opined that the respondent deviated from the requirement and adopted a different methodology, causing loss to the complainant. Additionally, the Committee found that the respondent failed to exercise due diligence in performing his professional assignment.
Considering the submissions of the Respondent and documents on record, the ICAI disciplinary Committee held that the Respondent-CA is guilty of Professional and Other Misconduct falling within the meaning of Item (2) of Part IV of First Schedule and Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
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