The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) issued an order regarding a complaint against CA. Chander Mohan (Membership No. 092633). The complaint was filed by the Registrar of Companies, Punjab and Chandigarh, alleging professional and other misconduct. The committee’s findings, dated December 30, 2024, concluded that CA. Chander Mohan was guilty. Following a hearing on January 20, 2025, where the Chartered Accountant presented his defense, the committee reviewed the case. It was determined that the CA failed in his duties as an auditor. Specifically, he gave an unmodified opinion on a company’s financial statements despite clear indicators of financial distress, such as negative net worth and operating losses. He also failed to appropriately verify external confirmations and report on violations of the Companies Act, 2013, regarding share application money. The committee found his misconduct established and, as a result, ordered that he be reprimanded and fined Rs. 20,000, to be paid within 60 days.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Setup by an Act of Parliament)
[DISCIPLINARY COMMITTEE [BENCH-IV (2024-2025)]
[Constituted under Section 21B of the Chartered Accountants Act, 1949]
ORDER UNDER SECTION 219(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/G/121/2022/DD/88/2022/DC/1717/2023]
In the matter of:
Sh. Shyam Sunder
Versus
CA. Chander Mohan
MEMBERS PRESENT:
1. CA. Ranjeet Kumar Agarwal, Presiding Officer
2. Shri Jiwesh Nandan, lAS (Retd.) Nominee
3. MS. Dakshita bas, I.R.A.S. (Retd.);Government Nominee
4. CA. Mangesh P. Kinare, Member
5. CA. Abhay Chhajed, Member
DATE OF HEARING : 20th January 2025
DATE OF ORDER : 08th February 2025
1. That vide .Findings dated 30/12/2024 under Rule 18(17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committed was inter-alia of the opinion that CA. Chander Mohan (hereinafter referred to as the Respondent”) is GUILTY of Professional and Other Misconduct falling within the meaning of Item (2) of Part IV of First Schedule and Item (7) of Part I of 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 an opportunity of being heard in person/ through video conferencing and to make representation before the Committee on 20thJanuary 2025.
3. The Committee noted that on the date of the hearing on 20thJanuary 2025, the Respondent was present through video conferencing. During the hearing, the Respondent stated that he had already submitted his written representation dated 08th January 2025 on the Findings of the Committee. He submitted that there was no Chinese Director or investment in the Company and no FEMA and RBI Rules were violated as alleged in the complaint. The amount of Rs. 68.20 lakhs towards share application money pending allotment was appearing in the books of accounts of the Company prior to audit period. He further submitted that share application money was received from directors of the Company and their family members. At present the said money has been refunded and Company has been converted into LLP. The Committee also noted the written representation of the Respondent dated 08th January 2025 on the Findings of the Committee, which, inter alia, are given as under: –
a) Section 42 of the Companies Act 2013 came in force from 1st April 2014, whereas the amount of share application money was received prior to Financial Year 2013-14.
b) There were no requirements under the provisions of the Companies Act or under any other regulatory provisio6s to make any such disclosure either in the Financial statements or in the audit report.
c) There was no obligation, according. to the provisions of law, on the auditor to give any additional disclosure in the audit report about the share application received prior to Financial Year 2013-14.
d) In audit report(s), it was already disclosed that balance are subject to confirmation.
4. The submissions of the Respondent were heard and completed in the meeting of the Committee held on 20/01/2025 and the decision was deferred. The Committee, thereafter, in its meeting held on 03/02/2025 considered the submissions of the Respondent and documents on record and took decision.
5. The Committee considered the reasoning as contained in the Findings holding the Respondent ‘Guilty’ of Professional and Other Misconduct vis-a-vis written and verbal representation of the Respondent. The Committee noted that the issues/ submissions made by the Respondent as aforestated have been dealt with by it at the time of hearing under Rule 18.
6. Thus, keeping in view the facts and circumstances of the case, material on record including written and verbal representation of the Respondent on the Findings, the Committee upon perusal of the indicators as reflected in the Financial Statements for Financial Years 2013-2014 to 2018-2019 related to material uncertainties involved in Company’s ability to continue as going concern; negative net worth; substantial operating losses for all these years and no revenue from operations, viewed that the Respondent being Auditor of the Company should have enquired from the Management of the Company as it cast significant doubt on entity’s ability to continue as going concern. Considering the fact in instant case, the Respondent was required to express qualified/modified opinion in his Audit Report.
7.As regards matter related to external confirmations, the Committee observed that mere submitting that the balances are subject to confirmations and reconciliation was specifically mentioned in Notes to Accounts cannot be construed as sufficient. The auditor is required to perform necessary tests to avoid the risks and to ensure that sufficient audit evidences are obtained to confirm the balances as shown in the financial statements.
8. Further as regards the matter related to share application money pending allotment, the Committee observed that the Respondent was required to verify the pending amount of share application money reflected in financial statements of the Company for financial years 2013-2014 to 2017-2018. The Committee observed that such an inappropriate disclosure has failed to receive the attention of the Respondent; whereas the Respondent has accepted the disclosure made by the Management of the Company. In view of this, the Committee was of the view that the Company had violated the requirements of Section 42 of the Companies Act, 2013 and the Respondent being Statutory Auditor of the Company failed to report the same in his Audit Report(s).
9. Moreover, the Committee was of the view that the Respondent has given unmodified opinion, wherein the Company had negative net worth, substantial operating Losses incurred for all the years and there was no revenue from operations. The Respondent also failed to justify his role in securing audit evidence with regard to balance confirmation of sundry debtors, creditors and loans and advances. Further, share application money pending allotment has been disclosed by the Company in its balance sheet continuously from financial years 2013-14 to 2017-18, but no allotment of shares has been made by the Company and no refund was issued to the share application holders from whom the share application money has been received in violation of the provisions of the Companies Act, 2013. Hence, the Professional and Other Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 30/12/2024 which is to be read in consonance with the instant Order being passed in the case.
10. Accordingly, the Committee was of the view that the ends of justice would be met if punishment is given to him in commensurate with his Professional and Other Misconduct.
11. Thus, the Committee ordered that the Respondent i.e. CA. Chander Mohan be REPRIMANDED and also imposed a fine of Rs. 20,000/- (Rupees Twenty thousand only) upon him, which shall be paid within a period of 60 (sixty) days from the date of receipt of the Order.
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
Sd/-
(SHRI JIWESH NAN DAN, 1.A.S. {RETD.})
GOVERNMENT NOMINEE
Sd/-
(MS. DAKSHITA DAS, I.R.A.S.{RETD.})
GOVERNMENT NOMINEE
Sd/-
(CA. MANGESH-P KINARE)
MEMBER
Sd/-
(CA. ABHAV CHHAJED)
MEMBER
