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TMI Blog2024 (1) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... EP did not co-operate with NFRA. Considering the aforementioned proved professional misconduct by the EP and considering the nature of the violations, in exercise of powers under section 132(4)(c) of the Companies Act, 2013, it is ordered that: i. Imposition of a monetary penalty of Rs Twenty Lakhs on the EP, CA Anil Chauhan, proprietor of M/s Anil Chauhan Associates. ii. Debarment of CA Anil Chauhan and the audit firm M/s Anil Chauhan Associates (FRN: 0140786W), for Ten Years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. This order will become effective after 30 days from the date of issue of this Order. - Dr. Ajay Bhushan Prasad Pandey Chairperson, Dr. Praveen Kumar Tiwari Full Time Member And Smita Jhingran Full Time Member ORDER In the matter of CA Anil Chauhan under Section 132(4) of the Companies Act, 2013. 1. This Order disposes of the Show Cause Notice (' SCN' hereafter) no. NF-23/11/2023 dated 22nd September 2023, issued to CA Anil Chauhan (Membership no: 166286), proprietor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (2009) ('the Code' hereafter), Standards on Auditing ('SA' hereafter), and gross negligence in maintaining of the audit files and impose through this Order the following monetary penalties and sanctions, that will take effect after 30 days from the date of this Order: Imposition of a monetary penalty of Rupees Twenty Lakhs upon CA Anil Chauhan, the Engagement Partner. In addition, CA Anil Chauhan and the audit firm Mis Anil Chauhan Associates (FRN: 0140786W) are debarred for Ten years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. B. INTRODUCTION AND BACKGROUND 7. The National Financial Reporting Authority is a statutory authority set up u/s 132 of the Act to monitor implementation and enforce compliance of the auditing and accounting standards and to oversee the quality of service of the professions associated with ensuring compliance with such standards. NFRA is empowered u/s 132(4) of the Act to investigate the prescribed classes of companies and impose penalty for professional or other miscon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-20 within 15 days' time. The communication was sent to the EP through speed-post and email and was duly delivered, however the EP did not respond. Another opportunity for submission of the same was given vide letter and email dated 23.05.2023, however the EP did not respond. A last opportunity, vide an email dated 30.06.2023, was provided to the EP, however the EP again did not respond. 12. On finding sufficient cause for action under section 132(4) of the Act, 2013 and Rule 11 of the NFRA Rules 2018, an SCN was issued to the EP through post and email on 22.09.2023, asking him to show cause why action should not be taken against him for being grossly negligent in the conduct of professional duties in the statutory audit of SIL for the FYs 2018-19 and 2019-20, and for non-cooperation with NFRA. The SCN charged the EP for: a. Failure to exercise due diligence and being grossly negligent in the conduct of professional duties as defined by clause 7 of Part I of the Second Schedule of the Chartered Accountants Act 1949. b. Failure to supply the information called for, and non-compliance with the requests of NFRA as defined in clause 2 of Part-III of First Schedule of The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of first schedule of The Chartered Accountants Act, 1949 states that failure 10 supply the information called for, or failure to comply with the requirements asked for, is a professional misconduct. 16. The EP failed to submit the audit files and other information despite repeated requests by NFRA. He also failed to respond to the charge of non-maintaining the audit files as levelled in the SCN. By not cooperating, the EP has prevented NFRA from carrying out its legal mandate to exercise oversight of auditing functions performed by the auditors and investigate cases of professional misconduct under section 132 of the Act, 2013 in order to protect public interest and the interests of investors, creditors and others associated with the companies or bodies corporate governed under Rule 3 of NFRA Rules, 2018. 17. Therefore, the persistent failure of the EP to submit any documents and his failure in responding to the communications from NFRA leads us to conclude that either the EP did not maintain any such documents, which is a violation of SA 230, or he is unwilling to cooperate with NFRA in discharging its statutory authority and responsibility under section 132 (4) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a whole were free from material misstatement and that the Auditor's opinion issued through the Independent Auditor's Report dated 14.05.2019 and 31.07.2020 for the FYs 2018-19 and 2019-20 respectively, was without any basis and hence unreliable and invalid. Accordingly, we take a serious view of the failure of the EP to respond to NFRA's repeated communications and conclude that the EP by not responding to the proceedings undertaken by NFRA, has violated Section 132 (4) of the Act, 2013, which is a 'professional or other misconduct' in terms of Section 13 2(4)(c) of the Act, 2013, read with Clause (2) of Part III of Schedule I of the Chartered Accountants Act, 1949. D. Articles of Charges of Professional Misconduct by the EP 21. Given the above-mentioned actions and omissions, it is established that CA Anil Chauhan committed professional misconduct by not submitting the Audit Files and related documentation to NFRA and by not responding to the SCN issued by NFRA under Section 132 (4) of the Act. We conclude that the following failures on the part of CA Anil Chauhan as contained under the Articles of Charges in the SCN stand established: i. Failure t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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