Non adherence to RBI Circular Prior to Issue of Audit Report is Professional Misconduct: ICAI Reprimands CA along with Fine of Rs 1 lakh
adherence – RBI – Audit- Report – Professional- Misconduct-ICAI – CA -TAXSCAN
adherence – RBI – Audit- Report – Professional- Misconduct-ICAI – CA -TAXSCAN
The Institute of Chartered Accountants of India (ICAI), reprimanded a Chartered Accountant (CA), imposed a fine of Rupees one lakh and held that non-adherence to Reserve Bank of India (RBI) Circular prior to issue of audit report is professional misconduct.
Information was received from RBI alleging major differences in the assessment of net profit and Bad and Doubtful Debt Reserves (BDDR) provision by the RBI Inspection Report vis-a-vis that by Statutory Auditors with respect to Financial Year 2010-11.
Investment Fluctuation Reserves (IFR) should be created out of realized gains on the sale of investments. This transfer to IFR should be by way of appropriation of net profit as an appropriation to Statutory Reserve. Further, the amount from IFR should also be transferred to the Profit & Loss Account below the line in the Profit & Loss appropriation account.
In view of the above, transferring amounts directly from the IFR account to the Profit & Loss Account above is a non— compliance of stated provisions of the master circular.
The Committee observed that the Respondent not only failed to invite material departure from the generally accepted principles of audit but also failed to report material misstatements known to him appearing in financial statements. The Committee also noted that the Respondent also failed to exercise due diligence and was grossly negligent while discharging his professional duties.
The Board of CA Dr Debashis Mitra, Presiding Officer, Rani Nair, I.R.S. (Retd.), Government Nominee, Arun Kumar, I.A.S. (Retd.), Government Nominee and CA. Cotha S Srinivas, Member observed that “The present case is based on the crediting of amounts in the Profit & Loss Account above the line which, as per the circular issued by the RBI, should be credited below the line. The Committee further noted that the Respondent did not consider adherence to the RBI circular issued prior to issuing the audit report and that the Respondent relied upon the prevailing Law and industry practice rather than the circular issued by the RBI.”
“Therefore, keeping in view the facts and circumstances of the case, the material on record, and the submissions of the Respondent before it, the Committee ordered that the Respondent CA. Vijaykant Jagannath Kulkarni, be reprimanded along with a fine of Rs.1,00,000/- (Rupees One Lakh Only)” the Board noted.
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