Shriode Shrikrushna Vs CA. Pukhraj M. Banwat (ICAI Disciplinary Committee)
Clean Audit Opinion Despite NPA and Disclosure Lapses: ICAI Removes CA’s Name for One Month
Summary: The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI), Bench-II, constituted under Section 21B of the Chartered Accountants Act, 1949, passed an order dated 3 October 2026 reprimanding CA. Pukhraj M. Banwat (Membership No. 071541), Jalgaon, directing removal of his name from the Register of Members for one month and imposing a fine of ₹50,000. The disciplinary proceedings arose from a complaint filed by Shri Shriode Shrikrushna concerning the respondent’s performance as statutory auditor of M/s Bhaichand Hirachand Raisoni Multistate Co-operative Credit Society, Jalgaon. The Committee’s punishment order followed detailed findings pronounced on 29 August 2026, holding the respondent guilty of professional and other misconduct falling within Clause (2) of Part IV of the First Schedule and Clauses (5) and (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. The charges concerned failure to appropriately qualify audit opinions despite non-compliance with income recognition and asset classification norms, threats to independence arising from unpaid loans obtained by the auditor’s son, inadequate related-party disclosures, material deficiencies involving loans to directors and failure to adequately report known fraud and misappropriation.
The background recorded in the Committee’s findings revealed that the Society operated 243 branches across seven states and had deposits aggregating approximately ₹1,100 crore from a substantial number of depositors. The respondent served as its statutory auditor during FY 2007-08 to FY 2013-14. According to the complaint, the Society offered interest of approximately 13% on fixed deposits and subsequently faced serious allegations concerning its inability to repay depositors. During 2015, complaints were registered against its directors involving allegations of cheating, criminal breach of trust and offences connected with protection of depositors’ interests. The Society subsequently entered liquidation. The disciplinary inquiry examined whether the respondent had complied with applicable accounting and auditing requirements, particularly while issuing his statutory audit report dated 11 August 2014 for the financial year ended 31 March 2014. The Committee assessed the evidence and the respondent’s professional conduct against the applicable requirements existing during the audit period, rather than treating the Society’s subsequent liquidation alone as proof of misconduct.
The first major charge concerned the Society’s non-compliance with Income Recognition and Asset Classification (IRAC) and Non-Performing Asset (NPA) norms. According to the complaint, the Society failed to classify loans and advances appropriately as standard, substandard, doubtful or loss assets and continued recognising interest on overdue or non-performing loans in its Profit and Loss Account. This affected the reliability of reported income, provisions, asset values and profitability. The Committee examined the Society’s financial statements for several years and found that its significant accounting policies themselves disclosed that loans and advances were presented according to outstanding balances without classification under the applicable NPA framework. The respondent acknowledged that he had advised the Society to classify overdue loans and make appropriate NPA provisions, but asserted that management had not complied. He further relied upon observations contained in covering letters, Form-I and accompanying annexures to demonstrate that he had reported the irregularities. The Committee considered the non-compliance particularly material because interest on loans represented approximately 87% of the Society’s total income, while loans constituted about 70% of its total assets. These figures indicated that failures concerning loan classification and interest recognition could substantially affect the financial statements.
The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has reprimanded CA. Pukhraj M. Banwat, ordered removal of his name from the Register of Members for one month, and imposed a ₹50,000 fine for professional and other misconduct relating to the audit of a multistate co-operative credit society.
The order dated October 3, 2026, follows findings pronounced on August 29, 2026, in a complaint filed by Shri Shriode Shrikrushna. The Committee found lapses concerning the audit opinion, related party disclosures, directors’ loans, reporting of fraud and auditor independence.
Background of the Case
The respondent was statutory auditor of M/s Bhaichand Hirachand Raisoni Multistate Co-operative Credit Society, Jalgaon, from 2007-08 to 2013-14.
According to the background recorded in the findings, the Society operated 243 branches across seven states, with deposits of approximately ₹1,100 crore. Complaints concerning failure to repay depositors were subsequently registered, and the Society went into liquidation.
The disciplinary proceedings examined whether the respondent had appropriately reported material irregularities affecting the Society’s financial statements, particularly for the year ended March 31, 2014.
Unqualified Opinion Despite Non-Compliance With NPA Norms
The first charge concerned failure to follow Income Recognition and Asset Classification (IRAC)/NPA norms, including recognition of interest on overdue or non-performing loan accounts.
The respondent argued that the irregularities were disclosed in different parts of the audit documentation. He characterised the omission of a corresponding reference in the “true and fair view” opinion as inadvertent.
The Committee found that he had issued an unqualified audit opinion despite knowing of the non-compliance, which affected income recognition, asset classification and reported profits.
It clarified that the central issue was not complete non-reporting of irregularities, but failure to reflect their effect appropriately in the audit opinion. Mentioning the matter elsewhere or instructing management was insufficient.
Referring to AAS 28, the Committee held that material non-compliance required consideration of a modified or qualified opinion, together with assessment of its financial impact. The respondent was held guilty under Clauses (5) and (7) of Part I of the Second Schedule.
Son’s Loan: Borrowing and Non-Repayment Considered Separately
The Committee distinguished between the allegation concerning the respondent’s son obtaining loans and the separate allegation concerning continued non-repayment.
On the first aspect, it considered provisions of the Code of Ethics, 2009, addressing loans from banks or similar institutions under normal lending procedures. It concluded that the evidence did not establish misconduct merely on account of the son obtaining the loans and held the respondent not guilty on that charge.
However, the respondent admitted that approximately ₹20 lakh remained unpaid. He claimed that the amount should be adjusted against audit fees allegedly due from the Society.
The Committee found that the financial statements did not record outstanding audit fees payable to him. His Form-I audit report also recorded “N.A.” against unpaid audit fees.
It held that the relative’s non-payment created an independence threat and rejected the reliance on alleged outstanding fees as justification. The respondent was held guilty of other misconduct under Clause (2) of Part IV of the First Schedule.
Directors’ Loans Required Related Party Disclosure
The Committee noted that loans outstanding to directors as on March 31, 2013, aggregated ₹44.05 crore, representing approximately 8% of the total loan portfolio.
Despite these transactions, the financial statements stated that there were no related parties requiring disclosure under AS 18.
The respondent argued that a list of directors’ loans had been enclosed with the audit report. The Committee held that merely annexing a list did not discharge the responsibility to report material non-disclosure.
It also found no statutory or regulatory basis supporting an exemption on confidentiality grounds. Failure to report the AS 18 non-compliance constituted misconduct under Clause (7) of Part I of the Second Schedule.
Security and Recovery Deficiencies Not Reflected in Main Report
The Committee found serious deficiencies concerning sanction, collateral security, repayment and disclosure of directors’ loans.
Although the respondent relied on observations in annexures and suggestions to the Board, these matters were not appropriately reflected in the main audit report. Given their materiality, the Committee held that he should have considered modification of the opinion. His failure amounted to gross negligence.
Material Fraud Required Appropriate Reporting
The Committee further found that known fraud and misappropriation were not adequately reported in the main audit report or brought to the notice of regulatory authorities.
References in annexures, without incorporation through a specific reference in the main report, were insufficient. Referring to SA 240, it emphasised consideration of reporting responsibilities, including external reporting where legally required.
Punishment Imposed
At the punishment hearing, the respondent sought leniency but filed no written representation despite an opportunity.
Considering the seriousness of the established misconduct, the Committee imposed a reprimand, one-month removal from membership and ₹50,000 fine, payable within 60 days from receipt of the order.
