A complaint was filed against the Respondent who was appointed pursuant to a mandate dated 11th November 2017 to vet the statement of Net Assets as on 30th September 2017 in connection with the exit of the majority shareholder. The Respondent along with the senior partner alleged to have inflated the Net Asset Value (NAV); issued inconsistent NAV/Net Worth statements for the same period; and failed to act in accordance with the mandate. The Committee noted that as per the mandate letter issued by the Group CFO, the Respondent was required only to vet the statement of net assets with adjustments and provide feedback, and no certification of NAV or report on “amount to be retained in consolidated financial statements” was envisaged. However, the Respondent issued a statement titled “Statement of adjusted amount to be retained in Consolidated Financial Statements” as on 30th September 2017, which was beyond the scope of the mandate. The Respondent contended that the mandate was modified, but failed to produce any written approval or correspondence, and reliance on alleged telephonic instructions was found to be untenable. The Committee further observed that while audited financials as on 30th September 2017 were to form the basis of calculation, the Respondent adopted the net worth as per books as on 31st March 2014 as the base, without authorization under the mandate. The CFO had also categorically stated that the amount reflected as retained capital was never requested. The Committee also noted material inaccuracies in the Respondent’s report, including incorrect reference to redemption of preference share capital in excess of the authorized limit, and failure to substantiate non-consideration of proposed adjustments on the grounds of lack of documentation. The Committee, held that the Respondent deliberately deviated from the scope of the assignment, adopted an unapproved methodology, and failed to exercise due diligence, thereby caused loss to the Complainant. Accordingly, the Committee held the Respondent GUILTY of Professional and Other Misconduct falling within the meaning of Item (2) of Part IV of the First Schedule and Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. [PR/41/18-DD/92/18] & [PR/41A/18-DD/93/18 (Clubbed)]-DC/1138/19]

A complaint was filed against the Respondent, who was the Statutory Auditor of the Company for the financial years 2008- 09 to 2013-14, pursuant to assessments and investigations conducted by the Income Tax Department, SEBI and CBI, and a special audit under section 142(2A) of the Income Tax Act, 1961. The special audit revealed serious irregularities, including non-maintenance of crucial statutory records such as subsidiary ledgers, stock registers, purchase and sales registers, commission and TDS computations, balance confirmations and title deeds, and material discrepancies in inventory. The Committee noted that despite absence of such records and inconsistencies, the Respondent completed the audit without qualification. The Committee observed that the Company was engaged in collection of public monies in the guise of sale and rearing of livestock, which in substance constituted investment/deposit schemes, as established by SEBI, CBI, the special auditor and the Hon’ble High Court of Madhya Pradesh. It was noted that there was no evidence of actual delivery of livestock; that sale and rearing agreements were merely symbolic, and that payments to customers represented assured returns, rendering the operations akin to an unregistered collective investment scheme. The Committee also noted that the Company used misleading nomenclature by classifying commission paid to sales agents as “spot discount” and interest paid on deposits as “maintenance charges”, thereby avoiding deduction of tax at source. Despite being the statutory and tax auditor, the Respondent failed to report the true nature of these transactions, non-deduction of TDS, fictitious sales, suspicious cash transactions and other serious accounting irregularities highlighted in the special audit. The Respondent’s defence that his working papers were seized by the CBI was not accepted, as he failed to establish that requisite records were maintained by the Company. In view of the same, the Committee held that the Respondent failed to exercise due diligence, failed to point out the correct nature of expenses and other irregularities related to the sale of goat / buffalo and expenses related thereto. Moreover, despite being the tax auditor of the Company, he failed to point out non-deduction of TDS on the payment made to the agent in form of interest and commissions. Accordingly, the Committee held the Respondent GUILTY of Professional Misconduct falling within the meaning of Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. [PR/262/16-DD/307/2016/DC/1310/2020]