The Institute of Chartered Accountants of India (ICAI) observed that Tax Auditor holding interests and business relations with entities having business connections with company is guilty of professional misconduct.
The Respondent, CA Mukesh P Shah, was the statutory auditor of Multi Commodity Exchange of India Ltd. (“Company/ MCX”) for FY 2002-03 and Tax auditor from FY 2003-04 to FY 2012-13. The Committee noted that in the present case, the Director (Discipline) had held the Respondent prima-facie Guilty of Professional Misconduct falling within the meaning of Item (7) of Part I and Item (I) of Pan of the Second Schedule to the Chartered Accountants Act, 1949.
As regards the charge, the Committee noted that as per the charge, there were various firms. in which the Respondent was the director or an interested party, which were in turn holding business relations with the MCX Company and were receiving payments for services, donations etc, the Respondent conducted audits of various companies. In other words, there was a conflict of interest for the Respondent to hold such a relationship, which is against the provisions of Chartered Accountants Act, 1949.
The Committee, upon consideration of the reasonings submitted by the Respondent, noted that the issue relates to conflict of interest, whereby it is opined by the Director (Discipline) that the Respondent despite being an auditor of the MCX Company was also connected with entities having business relationships with the MCX Company.
The Respondent was reported to be director of Vishwas Broking Services Pvt Ltd. The largest shareholder of Vishwas Broking is Subras Software, holding approximately 85% of the shares wherein Ms. Mina Shah, wife of the Respondent is a director. In other words, the Respondent directly as well as indirectly (through Subcas Software) holds substantial interest in Vishwas Broking.
The Board observed that “The Committee noted that it is apparent that the Respondent, despite being the auditor of MCX, was also connected with entities having business relationships with MCX, as there were numerous instances on record establishing that the Respondent had indirect control over the entities with which he had business relations.”
The Committee, accordingly, in its considered opinion held the Respondent Guilty of Professional Misconduct falling within the meaning of Item (7) of Part I and Item (1) of Pan II of the Second Schedule to the Chartered Accountants Act, 1949.
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