The Institute of Chartered Accountants of India ( ICAI ) observed that no written communication made on acceptance of appointment as statutory auditor to previous auditor amounts to professional misconduct. The Board imposed a fine of 35000 on Chartered Accountants ( CA ).
The Complainant was appointed as statutory auditors and an appointment was ratified at the AGM held. The Complainant alleged that the respondent accepted his appointment as the Statutory Auditor of the Company for the Financial Year 2019-20 without first communicating with the previous auditor (i.e., Complainant) in writing as required in Item (8) of Part I of First Schedule to the Chartered Accountants Act, 1949.
The Respondent carried out the audit work for the Financial Year 2019-20 and signed the audit report of the Company without verifying the provision of Sections 139 and 140 of the Companies Act, 2013 and Rule 7(1) of Companies ( Audit and Auditors ) Rules 2014. The Complainant’s firm was neither removed as statutory auditor of the Company nor tendered any resignation.
The Respondent has not ensured the compliance of provisions of the Companies Act 2013, and the conditions prescribed under Rule 4(1) of the Companies ( Audit and Auditors ) Rules 2014. Thus, the Respondent violated the provision of Item (9) of the First Schedule of Part 1 of the Chartered Accountant Act 1949.
The Board noted that the Respondent in his written submissions made at the prima facie stage admitted that there had been no written communication held between him and the Complainant before the undertaking of the audit assignment. Although it would have been appropriate for him to send a written communication, because of the peculiar circumstances of the case, it could not be done.
The Board further noted that the Respondent in his oral submissions made during the hearing stated that he gave the letter seeking the no-objection of the Complainant to the accountant of the company for onward transmission to the Complainant. However, he did not sign it.
The board comprises CA. Rajendra Kumar P, Presiding Officer, Ms Dolly Chakrabarty, Government Nominee and CA. Priti Savla, Member held that in the absence of the positive evidence of written communication on the part of the Respondent with the Complainant before accepting the Statutory Audit of the company for the Financial Year 2019-20, the Board held the Respondent guilty in respect of the charge alleged.
The board imposed a Fine of Rs.35,OOO/- (Rs. Thirty-Five Thousand only) on the CA for the Misconduct.
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