ICAI Fines CA for Accepting Audit Assignment without Prior Written Communication to Previous Auditor
CA fined for not providing formal written communication to the previous auditor before accepting the audit assignment and signing reports without ascertaining whether the requirements of Section 140 of the Companies Act had been complied with.
The Institute of Chartered Accountants of India ( ICAI ) has imposed a monetary penalty on a Chartered Accountant ( CA ) for accepting statutory audit assignments without first communicating in writing with the previous auditor. CA. Bimal Chandra Bothra (Complainant) filed a complaint for the Disciplinary board of ICAI against CA Manmohan Jhawar (respondent). The Board found...
The Institute of Chartered Accountants of India ( ICAI ) has imposed a monetary penalty on a Chartered Accountant ( CA ) for accepting statutory audit assignments without first communicating in writing with the previous auditor.
CA. Bimal Chandra Bothra (Complainant) filed a complaint for the Disciplinary board of ICAI against CA Manmohan Jhawar (respondent). The Board found the respondent guilty of professional misconduct under Items (8) and (9) of Part I of the First Schedule to the Chartered Accountants Act and imposed a fine of ₹25,000.
According to the complaint, CA. Bimal Chandra Bothra, the Complainant was the statutory auditor of K.B. Syndicate Pvt. Ltd. and Saksena Bros Pvt. Ltd. and had been appointed till FY 2023-24. However, due to alleged non-cooperation by the companies in providing documents and explanations required for the audit, he later resigned from both companies on October 14, 2023.
The complaint alleged that before this resignation, CA. Manmohan Jhawar had already conducted and signed the audit reports for FY 2022-23 on August 30 and 31, 2023, without first communicating with the existing auditor in writing.
It was further alleged that the respondent accepted the appointment without properly verifying compliance with Sections 139 and 140 of the Companies Act, 2013 relating to appointment and resignation of auditors.
The respondent-CA admitted that no formal written communication had been made to the previous auditor before accepting the audit assignment. However, he argued that there was no malicious intention or attempt to unfairly take over professional work.
He said that the auditee company had arranged a conference call to inform the previous auditor about the appointment and that he genuinely believed proper communication had been made.
The complainant, however, denied that any conference call ever took place and alleged that the respondent’s explanations were baseless and misleading. It was further contended that the respondent not only violated professional ethics but also assisted the companies in bypassing statutory requirements relating to auditor appointment and resignation.
The Board said that Clause (8) of Part I of the First Schedule imposes a mandatory obligation on a practicing Chartered Accountant to communicate in writing with the outgoing auditor before accepting an audit assignment previously held by another auditor.
The ICAI board noted that during the hearing, the respondent admitted both charges. Considering this clear admission, the Board held that no further factual inquiry was necessary.
It concluded that the respondent had accepted audit assignments and signed auditreports even before the previous auditor had resigned, thereby clearly violating Items (8) and (9) of Part I of the First Schedule to the Chartered Accountants Act.
Thus, a fine of ₹25,000 was imposed on CA. Manmohan Jhawar under Section 21A(3) of the Chartered Accountants Act, 1949.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
