NFRA Imposes 60 Lakh Penalty on CA and CA Firm: Debars CA for 5 Years For Professional Misconduct [Read Order]

NFRA Imposes 60 Lakh Penalty - CA and CA Firm - Debars CA - Penalty on CA and CA Firm - 5 Years For Professional Misconduct -Penalty - taxscan

The National Financial Reporting Authority (NFRA) has imposed a total of Rs. 60 Lakhs Penalty on Chartered Accountant (CA) and CA Firm and debarred the CA for Professional Misconduct.

National Financial Reporting Authority (NFRA) is India’s independent regulator in respect of matters relating to accounting and auditing of prescribed class1 of entities which can be broadly described as ‘Public Interest Entities’ (PIEs).

The Order disposed of the Show Cause Notice issued to Mis M H Dalal & Associates and Chartered Associates Devang Dalal (Auditors). CA Devang Dalal is a Member of the Institute of Chartered Accountants of lndia (‘ICAI’) and was the Engagement Partner (‘EP’) for the Statutory Audit of MAN Industries (India) Limited, Mumbai (‘MIIL’) for the Financial Year (‘FY’ hereafter) 2020-21.

The Auditors did not obtain Sufficient Appropriate Audit Evidence (SAAE) in a number of material account balances and class of transactions. The Auditors failed to perform a fundamental duty to attend the physical count by the management of inventory and other related procedures.

The Auditors made false statement in their report on the Internal Control over Financial Reporting (ICoFR), without testing their adequacy and operating effectiveness as required by the relevant Guidance Note of the ICAI.

A Three Member Bench of the Tribunal comprising Dr Ajay Bhushan Prasad Pandey, Chairperson, Dr Praveen Kumar Tiwari, Full-Time Member and Smita Jhingran, Full-Time Member observed that “The Audit Firm has made departure from the Standards and the Companies Act, 2013 in the conduct of the audit of MIIL for FY 2020-21. As is evident from the above discussion, the Audit Firm has given an unmodified opinion in SFS and a qualified opinion on the CFS without any basis. The poor quality of audit, incomplete documentation and attempt to mislead through evasive replies further compounds the professional misconduct on the part of the Audit Firm. Based on the foregoing discussion and analysis, we conclude that the Audit Firm has committed professional or other misconduct, as defined in the Act.”

“A monetary penalty of Rs.10,00,000/- (Rupees Ten Lakhs) has been imposed upon CA Devang Dalal and he is debarred for Five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of Financial Statements or internal audit of the functions and activities of any company or body corporate. Monetary penalty of Rs.50,00,000/- (Rupees Fifty Lakhs) has also been imposed upon his Firm M/s M H Dalal & Associates” the Bench noted.

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