ICAI Finds CA Guilty of Professional Misconduct, Imposes Rs. 10,000 Penalty for Threatening New Auditors and Claiming Unlawful Dues [Read Order]

The Institute of Chartered Accountants of India (ICAI) has found a Chartered Accountant guilty of professional misconduct following a prolonged dispute with VSS Clean Technologies Pvt. Ltd. The case involved allegations of unethical behavior, including misrepresentation, undue resistance to auditor change, and billing disputes, culminating in a penalty of Rs. 10,000 imposed on the respondent.

The controversy arose after the shareholders of VSS Clean Technologies, despite the board’s recommendation for reappointing the respondent's firm as statutory auditors, resolved not to reappoint them during the Annual General Meeting (AGM) held on 29th September 2014. The Respondent, however, contested this resolution, communication lapses, and subsequent appointment of new auditors, leading to tension and professional clashes.

ICAI’s Board of Discipline meticulously examined the communications, including emails and letters exchanged between Respondent, the company, and incoming auditors. It noted repeated obstructive behavior by Respondent CA, including sending threatening messages to newly appointed auditors to discourage them from taking up auditing duties, which even resulted in the resignation of the new auditors.

The Board also highlighted respondent's attempt to claim outstanding dues and unsubstantiated "opportunity costs" for five years; a practice deemed inappropriate and unbecoming of a chartered accountant. Furthermore, it found that CA(Respondent)’s misrepresentation as the continuing auditor to the incoming auditor was misleading, further compounding the misconduct.

Drawing from the legal framework under the Chartered Accountants Act of 1949, the Board emphasized that objections regarding removal procedures fall under the jurisdiction of appropriate legal forums and not through pressure tactics on peers or clients. This CA's conduct, thus, was held to bring disrepute to the profession.

Despite expressing personal and economic hardships, this CA was imposed a monetary penalty and urged to adopt more professional ethics. The ruling serves as a stern reminder for practicing professionals on maintaining conduct befitting the esteemed chartered accountancy profession.

This case also underscores the importance of transparent and procedural auditor transitions in corporate governance to uphold audit quality and investor confidence.

The proceedings and findings, documented in detail by ICAI's Disciplinary Directorate, reinforce the responsibility of auditors to adhere strictly to ethical codes, especially during contentious transitions, safeguarding the profession’s dignity and public trust.

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