2018 (7) TMI 923 - Other - Indian Laws

Punishment of removal of the name of the Appellant - imposition of monetary penalty - Appellant was held guilty under Clauses (7) and (8) of Part-I of the Second Schedule to the Act - section 21B(3) of the Chartered Accountants Act 1949 - casual approach of the Appellant neither producing the complete working papers nor producing Shri E. Mathan as his witness. Held that - The working papers are very general and sketchy and do not contain the required information as mandated by the Auditing Standards i.e. AAS 3. In many cases even the year for which audit is done name of person in-charge who carried out the examination and the details of his observations are not mentioned. Further how the observations were satisfied is also not mentioned. When we asked about the Audit programme even no proper audit programme was found in the working papers. We drew the attention of the Appellant towards the complaint that the financial statements certified by him were found to be fraudulent later on and huge losses were suffered by financial institutions/NBFC therefore there is more need on his part to establish that he carried out his duties diligently as per the Auditing Standards in vogue at that time. However no convincing reply was given by the Appellant thereto. Based on the facts involved in both these Appeals in addition to pursuing all records and evidence besides hearing of the arguments of the parties we are of the considered view that the Appellant undoubtedly has failed to prove that he had obtained all the information which was necessary for expressing the opinion and had exercised due diligence in the performance of his professional duties. Accordingly we find no merit in both these Appeals and thus both the Appeals are hereby dismissed. We find no reason to interfere with the punishment awarded by the Disciplinary Committee of the Institute of Chartered Accountants of India to the Appellant. Appeal dismissed.

Summary

Issues Involved:
1. Barred by limitation.
2. Typographical error regarding the name of the audited entity.
3. Lack of opportunity and reliance on CBI statements.
4. Professional misconduct under Clauses (7) and (8) of Part-I of the Second Schedule to the Chartered Accountants Act, 1949.
5. Quantum of punishment.

Issue-wise Detailed Analysis:

1. Barred by Limitation:
The Appellant argued that the disciplinary proceedings were barred by limitation. The Respondent (ICAI) clarified that the information was received from the CBI and proceeded as "information" under Rule 8 (1) (a) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007. The Appellant failed to provide a convincing response, leading to the rejection of this ground.

2. Typographical Error Regarding the Name of the Audited Entity:
The Appellant contended that the complaint referred to "M/s Kantha Spinning Mills Private Limited" instead of "M/s Kantha Spinning Mills, Proprietor Shri P. Venkatachalapathy." The Authority found this to be a mere typographical error, as all other references and examinations correctly named the entity. This ground was also rejected.

3. Lack of Opportunity and Reliance on CBI Statements:
The Appellant claimed a lack of opportunity and improper reliance on CBI statements. The Authority provided the Appellant with ample opportunities to present evidence and noted that the Disciplinary Committee did not rely on CBI proceedings to establish misconduct. This ground was found to lack merit.

4. Professional Misconduct Under Clauses (7) and (8) of Part-I of the Second Schedule to the Chartered Accountants Act, 1949:
The Appellant was found guilty of professional misconduct for not exercising due diligence and failing to obtain sufficient information before expressing an opinion. The Disciplinary Committee observed that the Appellant did not check statutory records or supporting documents and relied solely on trial balances and statements provided by others. The working papers were found to be vague and insufficient. Despite multiple opportunities, the Appellant failed to produce the necessary documents or witnesses to support his case. The Authority upheld the findings of the Disciplinary Committee, confirming the Appellant's guilt under Clauses (7) and (8).

5. Quantum of Punishment:
The Appellant contested the severity of the punishment. The Authority, considering the facts and circumstances, found no reason to interfere with the punishment imposed by the Disciplinary Committee, which included the removal of the Appellant's name from the Register of Members for one year and monetary penalties. This prayer was also dismissed.

Conclusion:
The Authority dismissed both appeals, upholding the Disciplinary Committee's findings and the imposed punishment. The stay, if any, was vacated, and no order as to costs was made. The Registrar was directed to keep a copy of the order in the relevant files.