Backdating and Falsification of Company Financial Statements: ICAI dismisses Misconduct Allegations against CA citing Lack of Incriminating Evidence

The Institute of Chartered Accountants ( ICAI ) recently dismissed a case of professional misconduct against a Chartered Accountant ( CA ) owing to the inability of complainant to adduce incriminating evidence against the Respondent CA’s alleged involvement in backdating and falsification of company financial statements.

The instant case was taken up by the ICAI following a complaint lodged by another CA alleging professional misconduct against the Respondent CA. Complainant CA alleged that the company for which the Respondent CA functions as a statutory auditor had illegally trespassed upon and unlawfully occupied the premises of the Complainant’s company.

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It was submitted by the Complainant that the indicted Company of which the Respondent is statutory auditor had abstained from filing mandatory financial statements  for 13 years and, finally did so in 2018 by submitting 29 E-Forms on the MCA Portal availing the ‘Condonation of Delay Scheme, 2018’.

The primary contention was that the Respondent had colluded with their company to regularize numerous financial illegalities by conducting backdating, manipulation of accounts and fabrication of evidence to submit to the Registrar of Companies, Mumbai for their financials between 2004 and 2017.

It was submitted by the 81 year old Respondent CA that his employer company is a small establishment, with family members as shareholders; that the Complainant has filed the present case as a premeditated attempt to arraign the Company owing to a tenancy dispute between them, in the midst of which the Respondent CA has been made scapegoat.

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The ICAI Board of Discipline comprising CA. Rajendra Kumar P, Presiding Officer, Dolly Chakrabarty, IAAS (Retd.), Government Nominee and CA. Priti Savla, Member observed that the complainant lacks adequate locus standi to content the present matter before the Board as he is neither a creditor or debtor or previous debtor towards the arraigned company.

Additionally, the board observed the Complainant’s sheer inability to adduce any material evidence proving the Respondent’s involvement in financial misconduct and has instead relied on procedural lapses such as non-filing of Form-23B which does not explicitly point towards financial misconduct by the Respondent CA.

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In view of the observations, the Board of Discipline, ICAI proceeded to dismiss the instant Complaint absolving the Respondent of any professional misconduct under the meaning of Item (9) of Part- I of First Schedule to the Chartered Accountants Act, 1949.

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