The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) found CA. Tirumavalavan CK (Membership No. 204906) guilty of professional misconduct. The charges stemmed from his role as a concurrent auditor for Tamil Nadu Mercantile Bank, where he failed to verify transactions from February to November 2013 with due diligence. This oversight, which was discovered during a 2019 bank inspection, involved his failure to report unauthorized debits, credits, and inter-sol transactions. The committee determined that his negligence constituted a violation of Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
Despite multiple opportunities, the Chartered Accountant did not appear at the final hearing. In his written response, he argued that the complaint was filed years after the events, making it difficult to access old documents, and he pointed to alleged systemic issues within the bank. The committee, however, dismissed these claims, emphasizing that his appointment terms required him to independently verify all transactions. Acknowledging the demanding nature of concurrent audits and the relatively small amount of money involved (approximately Rs. 8 lakhs), the committee issued its punishment. The CA was reprimanded and fined Rs. 20,000, which must be paid within 90 days. Failure to pay the fine will result in his name being removed from the Register of Members for 30 days.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
DISCIPLINARY COMMITTEE (BENCH-Ill (2024-2025))
(Constituted under Section 21 B 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
PR/215/2021/DD/23112021/DC/1658/2022
In the matter of:
Shri N Surendran,
Head of Internal Audit,
Tamil Nadu Mercantile Bank Ltd., Thoothukdi,
56 & 57, Beach Road,
Thoothukdi – 628001
Versus
CA. Tirumavalavan CK (M.No. 204906)
MEMBERS PRESENT:
CA. Charanjot Singh Nanda, Presiding Officer
Smt. Anita Kapur, Government Nominee
Dr. K. Rajeswara Rao, Government Nominee
CA. Piyush S. Chhajed, Member
Date of Hearing: 18th July 2024
Date of Order:24th October, 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 dated 22nd December 2023, the Disciplinary Committee was, inter-alia, of the opinion that CA. CK Tirumavalavan (M. No. 204906) (hereinafter referred to as the “Respondent”) was GUILTY of Professional Misconduct falling within the meaning of Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
2. That charge against the Respondent was that he had not performed his professional duty with due diligence as a concurrent auditor of the Tamil Nadu Mercantile Bank, Coimbatore Main Branch (016) (hereinafter referred to as ‘the Complainant Bank’! `the Bank’) as he had failed to verify the transactions from February, 2013 to November, 2013 through vouchers with the day books which came into light after an inspection conducted in 2019 by the Inspection Department of the Bank.
3. That pursuant to the said findings, an action under Section 216(3) of the Chartered Accountants Act, 1949 was contemplated against the Respondent and a communication was addressed to him thereby granting an opportunity of being heard in person/through video conferencing and to make representation before the Committee on 18th July 2024.
4. The Committee noted that on the date of the hearing held on 18th July 2024, the Respondent was not present. The Committee noted that, during earlier hearings held on 2thl May 2024 and 25th June 2024, the Respondent had sought an adjournment on the grounds of his son’s marriage/family circumstances. The Committee also noted that in the previous hearing held on 25th June 2024, the Respondent was advised to appear before the Committee at the next date of hearing and in case he fails to appear, the Committee would proceed further based on the documents/ information already available on record. Hence, looking into the absence of the Respondent, the Committee decided to proceed ahead on the. basis of documents and submissions on record. The Committee noted that the Respondent vide his written representation dated 30th April 2024 on the findings of the Committee had inter-alia stated as under:
a) The proceedings were initiated after lapse of 7 years and since he has no documents available as the period related is more than 7 years old hence he was allowed to inspect the alleged transactions with reference to relevant vouchers. He further contended that the instant complaint was filed after lapse of two years of special audit report which was dated 03.04.2019.
b) That he required information regarding action taken on audits conducted after 30.06.2014.
c) That Bank was raided for statutory transactions to be disclosed to Income Tax Department in 2023. This shows that bank has been in habit of hiding details. System Breakdown was also found in savings bank account where the bank had transferred crores of rupees in the same year 2023. From the same situation in 2013 could be examined.
5. Keeping in view the facts and circumstances of the case, along with the material on record, the Committee noted that as per the format of concurrent audit report brought on record by the Complainant, the Respondent, being concurrent auditor, had accepted to undertake to check/ verify all the nature of transactions that took place in the branch which led to a wide responsibility and such verification also included transfer of funds between accounts based at the same branch. It was viewed that no-doubt that being main branch there would be voluminous transactions that would be taking place leading to voluminous verification responsibility, however, considering the terms of his appointment as well as the framework of audit as reflected from the Format of concurrent audit, he was required to report on unauthorized debit/ credit inter-sol transactions too and the Respondent failed to do the same. It was, accordingly, viewed that the Respondent was grossly negligent in the performance of his professional duties. It was viewed that as per terms of his appointment, he was required to conduct concurrent audit independently and cover internal checking of all the transactions including verification of the said nature of entries. He could not escape from his responsibility by pointing lapses on other functions who could have also revealed the said defect. It was viewed that in case the Respondent had reported the said lapse in respect of any account, the Complainant Bank would have taken timely corrective measure and the said fraud could be avoided. Thus, the Committee observed that the Respondent had not performed his professional duty with due diligence and accordingly, the Respondent was held Guilty for Misconduct within the meaning of Item (7) of Part 1 of the Second Schedule to the Chartered Accountants Act, 1949.
6. The professional misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s findings dated 22′ December 2023 which is to be read in conjunction with the instant Order being passed in the case.
7. The Committee further noted that with respect to audit period of the Respondent, the Complainant Bank had pointed out only 5 transactions and the amount involved was not material i.e. around Rs. 8 lakhs only. Considering the said aspects, the Committee noted that the task of concurrent audit involves cumbersome procedures and day to day supervision which may pose difficulties for any professional.
8. The Committee, considering the above, viewed that the ends of justice will be met if appropriate punishment commensurate with his professional misconduct is given to him.
9. Accordingly, the Committee, upon considering the nature of charge and the nature of default ordered that the CK Tirumavalavan (M. No. 204906) be reprimanded and a fine of Rs. 20,000/- (Rupees Twenty Thousand only) be imposed upon him, to be paid within 90 days of the receipt of the order and in case of failure in payment of fine as stipulated, the name of the Respondent be removed for a period of 30 days from the Register of Members.
Sd/-
(CA. CHARANJOT SINGH NANDA)
PRESIDING OFFICER
Sd/-
(SMT. ANITA KAPUR)
GOVERNMENT NOMINEE
Sd/-
(DR. K. RAJESWARA RAO)
GOVERNMENT NOMINEE
Sd/-
(CA. PIYUSH S CHHAJED)
MEMBER
DATE: 24th October, 2024
PLACE: New Delhi
