ICAI Fines Rs. 25,000 for Professional Misconduct in Tax Audit Appointment without No Objection Certificate [Read Order]

The issue arose when another CA, who was the tax auditor for the financial year 2017-18, raised a complaint stating that CA undertook the tax audit for the year 2018-19 without following the mandatory procedure of written communication with him as the outgoing auditor. The absence of this statutory communication violated the ethical framework and procedural mandate set out for auditors in India.

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Under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949, a practicing chartered accountant is deemed guilty of professional misconduct if they accept the position of auditor previously held by another auditor without first communicating with the outgoing auditor in writing. The purpose of this provision is to ensure transparency, prevent conflicts, and uphold the integrity of the auditing process.

During the hearing held on 28th October 2024, CA admitted that the audit had been accepted based on a verbal request. He explained that due to a cordial personal and professional relationship with the complainant and the latter’s health issues, he did not follow the formal written communication procedure.

However, the Board underscored that personal relationships could not substitute for compliance with professional and statutory duties.

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The Board noted the absence of any documented proof supporting CA’s claim of informal communication and emphasized that statutory rules are mandatory and non-negotiable. The Board also observed that the complainant’s non-appearance at the hearing did not preclude the institution from delivering a reasoned verdict based on available evidence.

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