The charge against the Respondent is that he did not communicate with the Complainant before accepting the Statutory and Tax Audit of the Company for the financial year 2014-15. The Respondent had accepted the statutory and tax audit for the financial year 2014–15 whereas the Complainant had been the auditor up to 2013–14. It was alleged that the Respondent failed to comply with the mandatory requirement of prior communication as envisaged under Clause (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949. In defence, the Respondent contended that communication had been made through electronic means and relied on the validity of modern communication methods. However, the Board observed that the crucial factor was not the mode but the timing of communication. It was noted that the Respondent accepted the audit on 03.10.2014, whereas the first recorded communication with the previous auditor was made only on 14.09.2015, i.e., after acceptance of the assignment. The Board further clarified that presumed knowledge of the previous auditor or communication by the company does not discharge the professional obligation of the incoming auditor. It was also admitted that no communication was made regarding the tax audit. Accordingly, the Board held the Respondent guilty of professional misconduct, reiterating that prior communication is a mandatory and indispensable requirement before accepting any audit engagement. [PR/271/15-DD/241/2015-BOD/269/2017]

The Respondent was the statutory auditor of a Cricket Association for the financial years 2008-09 to 2011-12. It was alleged that the Respondent failed to disclose significant professional charges paid to auditors over and above audit fees in the financial statements as required under Schedule VI read with Section 211 of the Companies Act, 1956; failed to comply with Accounting Standards AS-5, AS-15, AS-18, AS-19 and AS-22; did not qualify mandatory requirements in financial statements; failed to report material transactions such as advances to employees. The Respondent contended that Cricket Association being a not-for-profit entity registered under Section 25 of the Companies Act, 1956 and Section 12AA of the Income Tax Act, 1961, was exempted from compliance with Accounting Standards. The Committee observed that Accounting Standards apply to all enterprises engaged in commercial, industrial, or business activities irrespective of their charitable or not-for-profit status. As Cricket Association’s financial statements included commercial income such as sales of liquor, soft drinks, and cigarettes, the standards were applicable. After examining the audited financial statements and submissions of the Respondent, the Committee concluded that the Respondent failed to exercise due professional care and diligence, did not ensure compliance with statutory and accounting requirements and failed to make proper disclosures. The Committee also noted that certain payments to auditors and expenses exceeding 1% of total expenditure were not disclosed separately as required under Schedule VI, Part II of the Companies Act, 1956. Further, the Respondent did not clarify material financial transactions which should have been reported in the audit report. Accordingly, the Committee held the Respondent GUILTY of professional misconduct falling within the meaning of Clauses (7) and (9) of Part I of Second Schedule to the Chartered Accountants Act, 1949. [PR/227/2014/DD1230/2014/DC/959/2018]