The Institute of Chartered Accountants of India (ICAI) Disciplinary Committee found CA. Ravi Gandhi guilty of professional misconduct. The charges stemmed from his failure to communicate with the previous auditor, CA. Naresh Kumar Saluja, before accepting an audit assignment for the financial year 2018-19, and for gross negligence in certifying Form AOC-4 with incorrect and incomplete information.
During the hearing on April 10, 2024, CA. Gandhi acknowledged the lack of communication with the prior auditor, attributing it to attempts at hand delivery and the complainant’s alleged non-cooperation. He also stated that he was not required to verify the previous auditor’s financial statement certification and that any errors in Form AOC-4 were inadvertent. However, the Committee determined that CA. Gandhi failed to provide evidence of communication with the former auditor and did not ensure compliance with Section 140 of the Companies Act, 2013. Consequently, the Committee upheld the findings of professional misconduct and imposed a fine of Rs. 25,000 on CA. Ravi Gandhi, payable within 60 days of the order dated May 28, 2024.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
PR/441/2019/DD/55/2020/DC/1583/2022
[DISCIPLINARY COMMITTEE [BENCH-II (2024-2025)]
[Constituted under Section 21B of the Chartered Accountants Act, 1949]
ORDER UNDER SECTION 21B (3) OF THE CHARTERED ACCOUNTANTS ACT. 1949 READ WITH RULE 19(1) OF THE CHARTERED ACCOUNTANTS (PROCEDURE. OF INVESTIGATIONS OF PROFESSIONAL AND OTHER MISCONDUCT AND CONDUCT OF CASES) RULES, 2007
In the matter of:
CA. Naresh Kumar Saluja …. Complainant
Versus
CA. Ravi Gandhi ……Respondent
Members Present: –
CA. Ranjeet Kumar Agarwal, Presiding Officer (in person)
Mrs. Rani S. Nair, IRS (Retd.), Government Nominee (through VC)
Shri Arun Kumar, IAS (Retd.), Government Nominee (in person)
CA. Sanjay Kumar Agarwal, Member (in person)
CA. Cotha S Srinivas, Member (through VC)
Date of Hearing : 10th April, 2024
Date of Order : 28th May, 2024
1. That vide Findings under Rule 18(17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committee was, inter-alia, of the opinion that CA. Ravi Gandhi, Meerut (hereinafter referred to as the ‘Respondent’) is GUILTY of Professional Misconduct falling within the meaning of Item (8) and (9) of Part I of the First Schedule and Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
2. That pursuant to the said Findings, an action under Section 21B (3) of the Chartered Accountants (Amendment) Act, 2006 was contemplated against the Respondent and a communication was addressed to him thereby granting opportunity of being heard in person / through video conferencing and to make representation before the Committee on 10th April 2024.
3. The Committee noted that on the date of the hearing held on 10th April 2024, the Respondent was present through video conferencing and made his verbal representation on the Findings of the Disciplinary Committee, inter-alia, accepting his mistake with regard to the charge of non-communication with the previous auditor i.e., the Complainant, before accepting 1:he audit assignment for the financial year 2018-19. He also informed that the Complainant got his fees directly’ from the Company only. The Committee also noted that the Respondent in his written representation on the Findings of the Committee, inter-alia, stated as under:
a) During the hearing; he was neither physically fit nor mentally ready to face the ‘proceedings. Thus, he missed to submit his defiance. The Complainant had actually created such a situation that Directors of the Company were left with no option other than to change the auditor of the Company, M/s. Abhinav Advertising Agency Private Limited.
b) The letter of communication was never accepted by the Complainant despite sincere attempts made by the Respondent. Due to the fact that both the Respondent and the Complainant were hailing from the same town, the Respondent never opted to send the I letter through post as hand delivery was found to be quicker and more convenient mode of delivery.
c) The Respondent has complied with the provisions in spirit but due to non-cooperation of the Complainant, acknowledgment of hand delivery could not be obtained. The fact of the matter is that the Complainant was well aware of the appointment of the Respondent and the reasons behind it as he discussed and fought with the Directors over phone many times (as evident from the Affidavit of the Accountant of the Auditee Company) and showed his highest degree of non-cooperation to the Respondent who is his professional brother hailing from same town.
d) The Respondent however had satisfied himself with the Management of the Auditee Company as regard compliance of the provisions of Section 140 of the Companies Act 2013 and was informed beside showing records of the Company that the copy of the notice was sent to the Complainant as well who although disputed the said appointment over phone but never gave any representation.
e) With respect to the responsibilities for Form A0C-4 certification, he stated that it is nowhere coming out that the Respondent, as a certifying professional was required to verify whether the Complainant has done the certification of Financial Statements correctly or not.
f) If the Complainant has given unsigned /partially certified copy by affixing only his stamp to the Company, then no responsibility can be affixed on the Respondent in this regard. Rather it is the Complainant who should be charged for non-exercise of reasonable care while carrying out the attest functions. Since, the attachment of Form A0C-4 was correctly verified from the original records of the company, therefore, there is no lapse on part of the Respondent as a certifying professional.
g) With regard to mentioning of CARO 2016 in Form AOC-4, the Respondent submitted that same is an inadvertent error/minor lapse in filling the Form AOC-4 which crept in due to oversight.
4. The Committee, considered the reasoning as contained in the Findings holding the Respondent Guilty of Professional Misconduct vis-a-vis written and verbal representation of the Respondent.
5. Thus, keeping in view the facts and circumstances of the case, material on record including verbal and written representation on the Findings, the Committee with respect to the first charge noted that the Respondent was given several opportunities to produce the evidence in his defence to show that written communication was made with the Complainant before accepting the statutory audit by him for the financial year 2018-19, however, he failed to produce anything in this regard: Thus, the Committee held that the Respondent failed to communicate with the previous auditor before accepting the audit as required in terms of the requirement of Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 read with Code of Ethics (Edition 2009) issued by ICA!.
5.1 With respect to the second charge, in absence of any evidence of compliance of provisions of Section 140 of the Companies Act, 2013, the Committee held that the Respondent failed to ensure compliance of Section 140 of the Companies Act, 2013.
Committee held that the Respondent was grossly negligent while certifying Form AOC-4 and provided incorrect and incomplete information therein.
5.3 Hence, professional misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 7th February 2024 which is to be read in consonance with the instant Order being passed in the case.
6. Accordingly, the Committee was of the view that ends of justice will be met if punishment is given to him in commensurate with his professional misconduct.
7. Thus, the Committee ordered that a Fine of Rs. 25,000/- (Rupees Twenty-Five Thousand only) be imposed upon CA. Ravi Gandhi, Meerut payable within a period of 60 days from the date of receipt of the Order.
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
Sd/-
(MRS. RANI S. NAIR, IRS RETD.)
GOVERNMENT NOMINEE
Sd/-
(SHRI ARUN KUMAR, IAS RETD.)
GOVERNMENT NOMINEE
Sd/-
(CA. SANJAY KUMAR AGARWAL)
MEMBER
Sd/-
(CA. COTHA S SRINIVAS)
MEMBER
