Non-Reporting of Fraudulent Practices and Bank Concurrent Audit Misconduct: ICAI reprimands Delhi CA and imposes Rs. 2 Lakh Fine
The Institute of Chartered Accountants of India (ICAI) has reprimanded a Chartered Accountant from Delhi and imposed a fine of ₹2 lakh for professional misconduct in connection with audit failures during the concurrent audit of Jammu & Kashmir Bank’s Rajindra Place branch
ICAI, Fraudulent Practices, Audit Misconduct
ICAI, Fraudulent Practices, Audit Misconduct
The DisciplinaryCommittee Bench-IV, in its order dated 23 September 2025, held the CA guilty under items (5), (6), (7), and (8) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
The case arose from a complaint dated 6 September 2016 by the Vice President, Supervision & Control Division, Jammu & Kashmir Bank Ltd., alleging that the auditor failed to detect and report fraudulent activities and procedural irregularities in the discounting of fake Letters of Credit (LCs), which led to a loss of ₹29.22 crore to the bank.
The Disciplinary Committee found that the respondent, while conducting the concurrent audit between May and November 2014, failed to make any adverse observations or remarks regarding the fraudulent LC discounting and instead repeatedly recorded “No Record Found” in audit reports on devolved LCs, invoked guarantees, and expired instruments. The Committee observed that the respondent’s lack of diligence constituted a serious breach of audit responsibilities.
The CA, in his defence, argued that the fraudulent LCs were fabricated by the branch manager and were not detectable through normal audit procedures since the documents were not part of the banking system records. He also submitted that concurrent auditors are expected to report irregularities based on available records, and since no reportable data was found in the bank’s computerized system, the standard automated output of “No Record Found” was generated.
Rejecting the defence, the Committee emphasized that a concurrent auditor’s duty goes beyond document verification and includes active scrutiny of internal records to identify discrepancies. It noted that the auditor should have exercised greater caution, particularly as large outstanding balances were visible in the branch’s books, and that the absence of data itself warranted escalation to higher authorities.
The Committee concluded that the respondent’s failure to identify and report significant irregularities in high-value LC transactions amounted to gross negligence and lack of due diligence. Consequently, the ICAI reprimanded the Chartered Accountant and imposed a monetary penalty of ₹2 lakh, to be paid within 60 days.
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