ICAI Penalizes CA for 21 Professional Misconducts: 3-Month Debarment and Rs. 1 Lakh Fine Imposed [Read Order]

The Institute of Chartered Accountants of India ( ICAI ) has imposed a 3 months debarment and Rs. 1 lakh fine on Chartered Accountant ( CA ) who committed 21 professional misconducts under several provisions.

On May 10, 2018, the Financial Reporting Review Board ( FRRB ) sent a letter regarding respondent – CA, a partner at BPSD and Associates. The FRRB found various non-compliances in the financial statements of SICOM Investments and Finance Limited for the 2012-13 fiscal year, audited by the Respondent. Issues were identified with AS-3, AS-15, AS-16, AS-18, AS-20, AS-26, SA-700, parts of the Companies (Auditor’s Report) Order, 2003, and specific notes and clauses in the Revised Schedule VI to the Companies Act, 1956.

The committee found the following instances of professional misconduct as Guilty:

1. Non-disclosure of accounting policy and employee benefits in relation to gratuity and leave encashment.
2. Liability arising out of encashment of unavailed leave has been provided on payment basis.
3. Separate disclosure of salaries and wages, contribution to provident and other funds was neither disclosed by way of separate line item neither in statement of profit and loss nor in notes to account
4. Non-compliance with the requirement of paragraph 23 (a) of AS-16 ‘Borrowing Costs’.
5. Non-compliance with the requirement of AS-18 ‘Related Party Disclosure’ as outstanding balance pertaining to related party transactions was not disclosed.
6. Non-compliance of requirement of Note 6(F) of ‘General Instructions for Preparation of Balance Sheet’ of Part I of Revised Schedule VI to the Companies Act, 1956.
7. Non-compliance with the requirements of Note 6 (G) of ‘General Instructions for Preparation of Balance Sheet’ of Part I of Revised Schedule VI to the Companies Act, 1956.
8. Non-compliance with the requirement of Note 6 (K) (i) of Part I of Revised Schedule VI to the Companies Act, 1956.
9. It is alleged that ‘share application money paid’ was disclosed under the head ‘NonCurrent Investments’ as against the requirement to disclose under the head “Non-Current Assets” as required by Part I of Revised Schedule VI to the Companies Act, 1956.
10. Non- compliance of requirement of Note 6(L) of ‘General Instructions for Preparation of Balance Sheet’ of Part I of Revised Schedule VI to the Companies Act, 1956.
11. Non-compliance of Note 6(P) of ‘General Instructions for Preparation of Balance Sheet’ of Part I of Revised Schedule VI to the Companies Act, 1956.
12. Non- compliance of Note 6(R) of ‘General Instructions for Preparation of Balance Sheet’ of Part I of the Revised Schedule VI to the Companies Act, 1956.
13. Fixed Assets not segregated between Tangible and Intangible Assets
14. Comparative figures of the previous year relating to fixed Assets have not been disclosed.
15. The Company has reported the note as “Schedule” instead of “Note No.” and has reported the note heading as “Fixed Assets” instead of “Tangible Assets.
16. Non-compliance with requirement of Clause 5(vi) (c) of ‘General Instructions for Preparation of Statement of Profit and Loss’ of Part II of the Revised Schedule VI to the Companies Act, 1956.
17. Non-compliance with the requirements of Paragraph 21 of SA-700.
18. Non-compliance with the requirement of paragraph 23 and Footnote 8 of SA-700.
19. Non-compliance with the requirement of Paragraph 4(i) (c) of Companies (Auditor’s Report) Order, 2003.
20. Non-compliance with the requirement of Paragraph 4 (iii) (e) to (g) of Companies (Auditor’s Report) Order, 2003.
21. Non-compliance with the requirement of Paragraph 4(iv) of Companies (Auditor’s Report) Order, 2003.

The Committee noted that on the date of the hearing held on 19th March 2024, the Respondent was present through video conferencing and made his verbal representation on the Findings of the Disciplinary Committee. He admitted that mistakes had happened. However, he requested the Committee not to consider them as misconduct as his intention was never to hide any information.

The Committee also noted that the Respondent in his written representation, inter-alia, stated as under:

1. an inadvertent error though typographical error should be viewed as minor negligence as there was no occurrence of financial implication on the sole user of the financial statements as the impugned Company was a wholly owned subsidiary of SICOM Ltd. which is a non-listed Company since inception.
2. The mistakes/errors were only that of disclosure and presentation. True and fair view was not affected. Even if a particular thing was not disclosed at a particular place, it was stated somewhere else in another context. Due to these reasons, the Respondent was absolved from a few charges like Cash Flow statement.
3. Thus, the Respondent requested for a sympathetic view for considering the case for full exoneration.

The Committee considered the reasoning as contained in the Findings holding the Respondent Guilty of Professional Misconduct vis-à-vis written and verbal representation of the Respondent.

Considering the facts and circumstances of the case, along with the verbal and written representations, the Committee found non-compliances in the 2012-13 financial statements of SICOM Investments and Finance Limited, audited by the Respondent. These non-compliances relate to AS-15, AS-16, AS-18, SA-700, sections of the Companies (Auditor’s Report) Order, 2003, and various notes and clauses in the Revised Schedule VI to the Companies Act, 1956.

The Committee’s Findings dated February 7, 2024, clearly establish professional misconduct  falling within the meaning of Items (5), (6), (7) and (9) of Part-I of the Second Schedule to the Chartered Accountants Act, 1949 by the Respondent-CA  as reflected in this Order.

Therefore, the Committee deemed it appropriate to administer punishment commensurate with the professional misconduct. Consequently, it was ordered to suspend CA from the Register of Members for a period of three months. Additionally, a fine of Rs. 1,00,000/- (Rupees One Lakh only) was imposed on him, payable within 60 days from the date of receipt of the Order.

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