Held: The Respondent alleged to have conducted the audit of entities who are engaged in providing accommodation entries. The Committee noted that the entry operator had admitted before the Income Tax Authorities that the entities were merely paper concerns and were being used for providing accommodation entries, while the Respondent, in his statement recorded during the search proceedings, had admitted that he was aware that the entities were being operated at the instructions of the entry operator and that the relevant documentation was maintained at his office. The Committee observed that despite such knowledge, the Respondent failed to flag or disclose the material facts in his audit reports or to the statutory authorities. Further, the Committee noted that the Respondent relied upon various documents to substantiate the genuineness of the business activities but failed to produce the audit working papers evidencing the verification procedures undertaken by him. The Committee also observed that the material on record, including bank transactions, discrepancies in purchase and sale invoices, email communications and possession of digital signatures of the proprietors/partners, indicated that the Respondent was aware of the manner in which the entities were being operated and had assisted and abetted the activities relating to accommodation entries. Accordingly, the Committee held that the Respondent failed to discharge his professional responsibilities with due diligence and failed to comply with the principles of professional behavior. Thus, the Committee held the Respondent guilty of Professional and Other Misconduct under Clauses (5), (6), (7) and (8) of Part I of Second Schedule and Clause (2) of Part IV of First Schedule to the Chartered Accountants Act, 1949. [PR/G/335/17/DD/344/2017/DC/1340/2020]

Held: The Respondent alleged to have accepted the appointment as statutory auditor of the Company for the financial year 2016-17 without first communicating with the previous auditor, as required under the Code of Ethics. The Committee noted that the Respondent could not produce any documentary evidence of such communication and therefore, failed to comply with the requirements applicable to an incoming auditor. Further, the Respondent accepted the audit assignment despite the undisputed audit fee of Rs. 25,000/- payable to the previous auditor for the financial year 2015-16 remaining outstanding, which was ultimately paid only during the pendency of the proceedings before the Committee. The Committee also observed that the Respondent failed to establish that the previous auditor had been removed in accordance with Section 140 of the Companies Act, 2013 or that the prescribed procedure for appointment of a person other than the retiring auditor under Sections 139 and 140 of the said Act had been followed. In the absence of any evidence of special notice, special resolution or compliance with the prescribed procedure, the Committee held that the Respondent had failed to adhere to the provisions of the Companies Act, 2013 and the Code of Ethics. Thus, the Committee held the Respondent guilty of professional misconduct under Items (8) and (9) of Part I of First Schedule and Item (1) of Part II of Second Schedule to the Chartered Accountants Act, 1949. [PR/237/2017/DD/258/2017/DC/1337/2020]