The Respondent, who was the statutory auditor for the financial year 2009–10, was allegedly failed to maintain audit working papers; failed to disclose interest accrued and dues separately in the financial statements; and omitted to report statutory and disclosure violations. Despite repeated opportunities, the Respondent did not attend the final hearing, and the Committee proceeded ex parte. Admittedly, the Respondent had not maintained the audit working papers. As per Standards on Auditing (SA) 230, audit documentation is required to be retained for a period of seven years. The failure to do so amounts to professional misconduct. The Committee noted that in the Balance Sheet as on 31st March 2010, loans from Directors and Body Corporates amounting to `10.52 lakh and `28.06 lakh respectively were shown under the head ‘Unsecured Loan’, without separately disclosing interest accrued and due. The Respondent contended that it was the practice of the Company to debit such interest to the capital account. The Committee held that Schedule VI to the Companies Act, 1956, required separate disclosures of interest accrued and due, and the Company’s accounting policy was neither proper nor disclosed. The Respondent’s omission to qualify his audit report accordingly amounted to professional misconduct. The Committee also observed that the Respondent admitted lapses in reporting statutory non-compliances and inadequate disclosures in the financial statements. An auditor is required to ensure compliance with the Companies Act, 1956, and applicable Accounting Standards. The Respondent’s failure to verify and report such matters demonstrates lack of due diligence and professional care. Considering the facts, admissions, and in the absence of supporting documentation, the Committee concluded that the Respondent failed to discharge his professional duties diligently and was therefore guilty of professional and other misconduct falling within the meaning of Clauses (6), (7) & (9) of Part I and Clause (1) of Part II of the Second Schedule to the Chartered Accountants Act, 1949. [PR/G/265/17/DD/246/17/DC/1246/2019]

A complaint was received against the Respondent alleging that the financial statements and Tax Audit Report for the financial year 2013-14, certified by him, were fabricated. Based on the said report, a cash credit limit of `500.00 lakhs was sanctioned and disbursed by the Complainant Bank. During review process, it was observed by the Bank that the figures reported in the Balance Sheet submitted to the Bank did not match those filed with the Income Tax Department, and the turnover as per the financials filed with the Income Tax Department was `729.01 lakhs, whereas, according to the financials submitted to the Bank, it was `2077.57 lakhs. Both sets were signed and certified by the Respondent. The Committee noted that the Respondent issued a certificate dated 19th December 2014, certifying a fresh capital infusion of `145.42 lakhs to fulfil a predisbursal condition, whereas the audited Balance Sheet reflected a capital of only `42.72 lakhs. Despite repeated letters from the Bank seeking clarification, the Respondent failed to respond or take any corrective steps. The Respondent contended that he was unaware of the fabricated documents being submitted to the Bank; however, he failed to produce any evidence in support of the contention or to file an FIR for misuse of the signatures. The Committee, on perusal of the certificate dated 19th December 2014 submitted by the Respondent to the bank, noted that the stamp of Respondent’s firm and his initials on the document are the same when compared with the balance sheet of the NIMC submitted with the Bank. Accordingly, the Committee held the Respondent GUILTY of Professional and Other Misconduct falling within the meaning of Clause (7) of Part I of the Second Schedule and Clause (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. [PR/84/2018-DD/119/2018/DC/1373/2020]