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Uncovering Professional Misconduct: ICAI’s Verdict on Auditor Appointment Contravention
CA reprimanded for accepting audit assignment without communicating with previous auditor.
CA reprimanded for accepting audit assignment without communicating with previous auditor.
The Institute of Chartered Accountants of India (ICAI) reprimanded Chartered Accountant (CA) Ashish Anand Pathak for professional misconduct. He accepted an audit assignment for the financial year 2014-15 without communicating with the previously appointed auditor, as required by the Companies Act. The complainant’s firm had been appointed as the statutory auditor of the company, but Pathak completed the audit without following the proper procedure.
Key Takeaways:
- CAs must follow due process when accepting audit assignments, including communicating with the previous auditor.
- Failure to comply with requirements under the Companies Act can constitute professional misconduct.
- The ICAI held Pathak guilty of professional misconduct under Item (9) of Part-I of the First Schedule to the Chartered Accountants Act, 1949.
Issue:
Whether CA Ashish Anand Pathak committed professional misconduct by accepting an audit assignment without complying with the requirements under the Companies Act.
Facts:
The complainant’s firm was appointed as the statutory auditor of the company for the financial year 2014-15.
Despite this appointment, CA Ashish Anand Pathak accepted the audit assignment and completed the audit for the same financial year.
Pathak did not communicate with the complainant, who was the previously appointed auditor, before accepting the assignment.
Arguments:
The complainant alleged that Pathak accepted the audit assignment and completed the audit without communicating with the previously appointed auditor, violating the requirements under the Companies Act.
Pathak argued that he was appointed under section 139(6) of the Companies Act 2013, so section 139(1) provision on communicating didn't apply to him.
Pathak further stated that auditee company held EGM late so charging an auditor for professional misconduct merely for a delay in conducting an EGM (Extraordinary General Meeting) of a company is inappropriate.
Key Legal Precedents:
The ICAI relied on Item (9) of Part-I of the First Schedule to the Chartered Accountants Act, 1949, which defines professional misconduct.
Judgement:
A Two-Member Bench of the ICAI Board observed that it is the duty of the incoming auditor to ascertain, prior to accepting the appointment, that the appointment is proper. In this case, Pathak failed to do so. The Board held Pathak guilty of “Professional Misconduct” falling within the meaning of Item (9) of Part-I of the First Schedule to the Chartered Accountants Act, 1949.
FAQs:
Q1: What is the significance of this case?
A1: This case highlights the importance of CAs following due process and complying with the requirements under the Companies Act when accepting audit assignments. Failure to do so can constitute professional misconduct.
Q2: What is the legal basis for the ICAI’s decision?
A2: The ICAI relied on Item (9) of Part-I of the First Schedule to the Chartered Accountants Act, 1949, which defines professional misconduct.
Q3: Can a CA be held guilty of professional misconduct for a delay in conducting an EGM?
A3: In this case, the ICAI did not hold Pathak guilty of professional misconduct solely for a delay in conducting an EGM. The misconduct was accepting an audit assignment without following the proper procedure and communicating with the previously appointed auditor.
