ICAI will penalise you if you fail to communicate plus retain positive evidence of communication before accepting any audit.

Case Name:

CA Anumeha Garg vs CA Anoop Kumar Gupta

Key Takeaways:

1. Failure to communicate acceptance of audit to the predecessor CA amounts to professional misconduct.

2. The requirement for communicating with the previous auditor applies to all types of audits, including statutory audit, tax audit, internal audit, concurrent audit, or any other kind of audit.

3. The obligation to communicate with the previous auditor must be fulfilled before accepting the audit, irrespective of the type of audit.

4. Positive evidence of communication with the previous auditor must be retained by the CA.

Case Synopsis:

The Institute of Chartered Accountants of India (ICAI) imposed penalties on Chartered Accountants (CA) for failing to communicate the acceptance of an audit to the predecessor CA, deeming it as professional misconduct.

The Board of Discipline found the CA guilty of professional misconduct falling within the meaning of Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

The case involved the failure to communicate with the previous auditor before accepting the audit of Zila Panchayat, Balrampur for the financial year 2016-17. The Board emphasized the mandatory requirement of communication with the previous auditor, regardless of the type of audit, and highlighted the necessity of retaining positive evidence of communication, which the CA failed to do.

The Board, comprising CA. Rajendra Kumar P as the Presiding Officer, Ms. Dolly Chakrabarty, and CA. Priti Savla as Members, noted that the Complainant was the Auditor of Zila Panchayat, Balrampur for the financial year 2015-16.

Subsequently, the Respondent was appointed as the statutory auditor of Zila Panchayat, along with all implementing agencies, Janpad, Panchayat Balrampur, Kusmi, Rajpur, Ramchandrapur, Shankargarh, and Wadrafnagar for the next financial year, i.e., 2016-17.

The Board held that the Respondent was required to communicate with the Complainant, the previous auditor, before accepting the audit, irrespective of the type of audit, and to retain positive evidence of communication, which the Respondent failed to do.

Consequently, in the absence of positive evidence of communication with the Complainant before accepting the Statutory Audit of Zila Panchayat Balrampur for the Financial Year 2016-17, the Board held the Respondent guilty of the alleged charge.

This case underscores the significance of adhering to the communication requirement with the previous auditor before accepting an audit, as mandated by the Chartered Accountants Act, 1949. It also highlights the responsibility of retaining positive evidence of such communication, irrespective of the type of audit or the nature of the audited entity.

FAQ:

Q1: What was the basis for imposing penalties on the CA?

A1: The penalties were imposed due to the CA’s failure to communicate with the previous auditor before accepting the audit, which was deemed as professional misconduct.

Q2: Did the type of audit affect the requirement for communication with the previous auditor?

A2: No, the requirement for communication with the previous auditor applies uniformly to all types of audits, including government and non-government entities.

Q3: What evidence was the CA required to retain?

A3: The CA was required to retain positive evidence of communication with the previous auditor before accepting the audit.