The National Financial Reporting Authority (NFRA) imposed a fine of Rs 1 Lakh and debarred Chartered Accountant (CA) for 1 year on the ground of non-adherence to standards of auditing.
The Engagement Partner was charged with failure to report that the company had not recognised interest accrued, amounting to n43.98 lakhs, on loans from bank and non-Banking financial companies (NBFCs) in violation of Section 128 and Section 129 of the Companies Act.
Had the interest accrued been properly accounted for, the reported loss of 20.28 lakhs for FY 2015-2016 would have been t 164.26 lakhs, about eight times of what was reported. This resulted in a material misstatement in the financial statements of the Company for FY 2015-16.
The show cause notice stated that the Auditors’ opinion in the Independent Auditors’ Report that the financial statements give a true and fair view of the state of affairs of the company was false and misleading since the interest had not been accounted for by the company and the auditor had failed to identify this as a qualification in his auditor’s report.
The statutory auditors, both individual and firm of chartered accountants, are appointed by the members of a company, under Section 139 of the Companies Act. The statutory auditors, including the Engagement Partners and the Engagement Team are bound by the duties and responsibilities prescribed in the Companies Act, the rules made thereunder, the Standards on Auditing (SAs) including the Standards on Quality Control and the Code of Ethics, the violation of which constitutes professional misconduct, and is punishable with penalty prescribed under Section 132 (4) (c) of the Companies Act.
A Three-Member Bench of the Board comprising Dr. Ajay Bhushan Prasad Pandey, Chairperson, Dr. Praveen Kumar Tiwari, Full-Time Member and Smita Jhingran, Full-Time Member observed that “Given the above-mentioned actions and omissions, it is established that CA Sachin Kansai did not comply with the stipulations in the Act and the Chartered Accountants Act, 1949 and showed gross negligence and lack of due diligence in the audit of the said engagement. “
“CA Sachin Kansai has not ensured audit quality and was grossly negligent in professional duties by not adhering to the requirements laid down by the relevant SAs. This has led to the issuance of an audit report not backed by audit evidence. Imposition of a monetary penalty of 1,00,000 (Rupees One Lakh) upon CA Sachin Kansal” the Bench noted.
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