MCA imposes Penalty of Rs. 5000 on Chartered Accountant failing to Disclose Specified Bank Notes in Auditor’s Report
MCA – Penalty – Chartered-Accountant – Disclose – Bank-Notes- Auditor’s-Report-TAXSCAN
MCA – Penalty – Chartered-Accountant – Disclose – Bank-Notes- Auditor’s-Report-TAXSCAN
The MCA has fined a Chartered Accountant (CA) Rs. 5000 due to his omission of reporting the details of Specified Bank Notes that were deposited in banks in the audit report of Vinayak Builders and Developers Private Limited. CA Shishir Kumar was the auditor of the company for the financial year 31.03.2017.
According to the facts, in the financial statements for the fiscal year concluding on March 31, 2017, it is noted that within the section labelled "details of Specified Bank Notes (SBN) possessed and dealt with" between November 8, 2016, and December 30, 2016, the reported sum deposited in banks during that time frame is stated as zero.
Nevertheless, in response dated January 17, 2019, the director has attached a letter from ICICI Bank dated January 16, 2019, outlining that in 2016, they deposited multiple instances of 1000 denomination notes. However, the same transaction was not mentioned in the auditor’s report as mandated Rule 11(d) of the companies (Audit and Auditors) Rules, 2014.
The background of the Rule 11(d) is that, as per Ministry's Notification No. G.S.R. 307(E) dated 30.03.2017, in the Companies (Audit and Auditors) Rules, 2014 in rule 11, after clause (c), the following clause shall be inserted, namely:-
"(d) Whether the company had provided requisite disclosure in its financial statements as to holdings as well as dealings in specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company".
The specified bank notes mentioned are the notes which have been withdrawn during the demonetization. However, the same rules have been omitted from the rules with effect from 1st April 2021 prospectively.
The Registrar of Companies (ROC) under the Ministry of Corporate Affairs (MCA) has issued a notice to explain and subsequently a hearing notice. However, on both occasions, the auditor/CA declined to provide a response or attend in person before the adjudicating officer.
The MCA has found that the auditor has contravened the provisions of Section 143(3) of the Companies Act, 2013 read with Rule 11(d) of Companies (Audit and Auditors) Rules, 2014 for the Financial Year ended 2016-17. Therefore, it was held that the auditor/CA is liable for penalty under Section 450 of Companies Act of Rs. 5,000.
To Read the full text of the Order CLICK HERE
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