Held, the Respondent is guilty of professional misconduct under Clause (2) of Part III of the First Schedule and Clauses (7) and (8) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. In this case, the Respondent, being the statutory auditor of the Company for the financial years 2010-11 to 2012-13 and the tax auditor for the financial years 2008-09 to 2012-13, was alleged to have failed to detect and report fictitious transactions recorded under the head "Sales-Bio-IT". The Committee noted that the investigation conducted by the Department revealed that the Company had recorded fictitious sales to project an inflated financial position, while no consideration was received against such transactions. The investigation further established, based on bank statements, that no monetary transactions relating to the alleged services had taken place and that the Managing Director admitted the Company had not received any amount towards such services. The Committee also observed that customers purportedly shown as recipients of the services denied having entered into any agreement with or receiving any services from the Company. The Committee noted that despite certifying the financial statements, the Respondent failed to produce any audit working papers or evidence demonstrating the audit procedures performed to verify the material sales, which significantly contributed to the Company's reported profits. It further observed that the Respondent issued unqualified audit reports despite the Company having neither paid service tax nor filed statutory service tax returns, although substantial demand had subsequently been raised by the Department. The Committee held that the Respondent failed to exercise due diligence, obtain appropriate audit evidence and report material misstatements in the financial statements. It also noted that despite repeated opportunities, the Respondent failed to submit any substantive defence or furnish the information sought during the disciplinary proceedings. Accordingly, the Committee held the Respondent guilty of professional misconduct falling within the meaning of Clause (2) of Part III of the First Schedule and Clauses (7) and (8) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

Held, the Respondent is guilty of professional misconduct under Clauses (6) and (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. In this case, the Respondent being the statutory auditor of a co-operative society alleged to have failed to report material irregularities relating to outstanding loans, recoverability of interest and sanction of loans beyond the financial powers of the Society. The Committee noted that the financial statements disclosed loans of Rs. 32.96 crore and recoverable interest of Rs. 31.49 crore, while only 5.21 crore was recognised as interest income during the year. It further observed that the Society had created a provision for doubtful recovery of interest and had instituted 591 arbitration proceedings against defaulting members, indicating prolonged and material defaults. Referring to Rules 80(6)(a)(v) and 80(7) (d) of the Delhi Co-operative Societies Rules, 2007, the Committee observed that the auditor was required to report material irregularities in the realisation of money due to the Society and disclose amounts appearing bad or doubtful of recovery. Though the Respondent claimed that a list of defaulters had been submitted with the audit report, the Committee found that the same was not submitted before the Registrar of Co-operative Societies and treated it as an afterthought. The Committee held that the Respondent failed to make any qualification or adverse comment despite the material outstanding loans and doubtful recoveries. With respect to the second charge, the Committee observed that several loans exceeded the permissible sanction limit under the Society's bye-laws. Although the Respondent contended that the credit limit had been enhanced through amendment of the bye-laws, he failed to produce evidence of approval by the Registrar of Co-operative Societies and his submissions were found to be inconsistent with the statements made in the audit report. The Committee further noted an unusual transaction involving transfer of a deceased member's outstanding loan to his son's account, which remained unrecovered despite arbitration awards and held that such significant matters also warranted appropriate reporting by the auditor. Accordingly, the Committee held that the Respondent failed to exercise due diligence and discharge his statutory reporting responsibilities and was guilty of professional misconduct under Clauses (6) and (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.