Non Recognition of Interest Cost on Borrowings as Non-Performing Assets Amounts to Gross Violation of Professional Misconduct: NFRA Imposes 1 Lakh Fine on CA
Non Recognition of – Interest Cost on Borrowings as Non – Performing Assets Amounts to Gross Violation of Professional Misconduct – NFRA Imposes – CA –
Non Recognition of – Interest Cost on Borrowings as Non – Performing Assets Amounts to Gross Violation of Professional Misconduct – NFRA Imposes – CA –
The National Financial Reporting Authority (NFRA) has held that non-recognition of interest cost on borrowings as non-performing assets amounts to a gross violation of professional misconduct and imposed a one lakh Fine on Chartered Accountants (CA).
CA Shekhar Sharad is the partner of M/s Shekhar Sharad & Co. (ICAI Firm registration no. 011338C), Ramgarh, Jharkhand, who is a member of the Institute of Chartered Accountants of India ('ICAI') and was the Engagement Partner ('EP') for the statutory audit of Burnpur Cement Limited, West Bengal ('BCL') for the Financial Year ('FY' ) 20 I 7-18.
NFRA initiated action under section 132 (4) of the Companies Act 2013 ('CA-2013') against CA Shekhar Sharad, the Engagement Partner, for professional misconduct in the statutory audit of BCL for FY 2017-18, under information received from Registrar of Companies ('ROC'), West Bengal vide letter dated 24.11.2020.
BCL' is a company dealing in the business of Cement Manufacturing and was listed on National Stock Exchange ('NSE'). BCL was required to prepare its Financial Statements ('FS') for the FY 2017-18 by Indian Accounting Standards ('Ind As' ), as notified by the Ministry of Corporate Affairs.
NFRA issued a Show Cause Notice under sub-section (4) of section 132 of the Act on 03.11.2022, asking the EP to show cause for professional misconduct on failure to disclose a material fact known to him, which is not disclosed in a financial statement, but disclosure of which is necessary for making such financial statement, where he is concerned with that financial statement in a professional capacity.
Further, on failure to report a material misstatement known to him to appear in a financial statement with which the EP is concerned in a professional capacity. The EP accepted his lapses in respect of the charges in the SCN stating that he did not differ with the views of NFRA and accepted and acknowledged the issues raised by NFRA and provided certain clarifications regarding the identified lapses for proper appreciation of facts and circumstances of the case.
A three-member coram comprising Dr Ajay Bhushan PRASAD Pandey, Praveen Kumar Tiwari and Smita Jhingran observed that the identified lapses in the audit are regarding the failure of the EP to assess the use of Going Concern basis by BCL, Improper Reporting of the same in the Independent Auditor's Report and Inconsistency in Audit Documentation, which have been discussed in Part 'C' of this Order.
It was observed that CA Shekhar Sharad failed to obtain sufficient appropriate audit evidence in support of the assumption of a Going Concern basis and failed to report the conclusions by the applicable provisions of SA 570 read with SA 705. The Coram further imposed a Penalty on CA.
To Read the full text of the Order CLICK HERE
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