The Institute of Chartered Accountants of India ( ICAI ) imposes a penalty on Chartered Accountants ( CA ) as the act of non-communication with the complainant before acceptance of appointment as statutory auditor amounts to misconduct. The Board found CA guilty of Professional Misconduct falling within the meaning of Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.
The Complainant’s Firm has been the Statutory Auditor of M/S ROC Foods Limited ( Company ) for the past ten years and completed their term during the year 2017-18. Thereafter, the Respondent firm was appointed as the Statutory Auditor of the Company from the financial year 2018-19 to 2023-24 vide resolution dated 27th September 2018 to hold the Office of Auditor from the conclusion of the AGM for the year 2017-18 till the conclusion of AGM to be held in the year 2023 and the Company had filed the ADT-I on 10th January 2019.
It was alleged that the Respondent accepted an appointment as Statutory Auditor of the Company without first communicating in writing with the Complainant/Complainant firm, being the previous auditor as required under the provision of Item (8) of Part I of First Schedule to the Chartered Accountants Act, 1949 read with Code of Ethics – 2009.
The undisputed professional fee of the Complainant’s firm was still pending payment from the Company for the financial year 2017-18 in full and partially.
The Board noted that the Director ( Discipline ) in his Prima Facie Opinion held the Respondent prima facie Guilty of Professional Misconduct falling within the meaning of Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 in respect of the charge specified at para 2.1 above only and the said view had been accepted by the Board, Accordingly, the conduct of the Respondent was examined in respect of the first charge i.e., Professional Misconduct falling within the meaning of Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 only.
The Board Comprising of CA. Rajendra Kumar P ( Presiding Officer ), Ms Dolly Chakrabarty and CA. Priti Savla ( Government Nominee ) ( Member ) viewed that the onus to communicate with the previous auditor is on the incoming auditor and the same cannot be passed on to the auditee. Also, whether the intention of the previous auditor is malafide or otherwise should not stop the incoming auditor from performing the duty cast upon him/her in terms of the requirements of Item (8) of Part t of the First Schedule to the Chartered Accountants Act, 1949.
The board held respondent CA guilty of non-communication with the Complainant before the acceptance of the appointment as the statutory auditor of the company for the FY 2018-19 by the Respondent during the course of the hearing. The Board imposed a Fine of Rs.25, OOO/- (Rs. Twenty-Five Thousand only) on CA.
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