This case involves disciplinary action taken by the Institute of Chartered Accountants of India (ICAI) against CA. Keshav Vishwanath Chaubey for professional misconduct related to his audit of a company. Here’s a detailed summary of the proceedings and the decision made by the Disciplinary Committee:
1. Background and Allegations: The complaint was filed against CA. Keshav Vishwanath Chaubey by CA. Nimai Gautam Shah, alleging professional misconduct. The allegations included violations falling within various items of Part I and Part II of the Second Schedule to the Chartered Accountants Act, 1949. These likely pertain to issues such as negligence, failure to exercise due diligence, and violations of auditing standards and regulations.
2. Investigation and Hearing: The Disciplinary Committee conducted an investigation into the matter as per the provisions of the Chartered Accountants Act and the related rules. The respondent, CA. Keshav Vishwanath Chaubey, was given an opportunity to present his case before the Committee. The hearing took place on March 19, 2024, during which the respondent provided both verbal and written representations.
3. Respondent’s Defense: During the hearing, CA. Keshav Vishwanath Chaubey presented several points in his defense:
- He claimed that during the period of alleged misconduct, he was facing personal difficulties due to the death of his brother and his own health issues.
- He admitted to making mistakes but emphasized that his intention was not to defraud anyone.
- He requested leniency considering his long-standing career of around 30 years in the profession.
4. Committee’s Findings: The Disciplinary Committee considered the respondent’s defense along with the findings of the investigation. Despite the respondent’s personal challenges, the Committee found him guilty of professional misconduct on multiple counts. They noted several deficiencies in the audit conducted by the respondent, including failure to report on significant events such as the commencement of Corporate Insolvency Resolution Process (CIRP) and violations of auditing standards and regulations. The Committee highlighted the respondent’s negligence and lack of due diligence in performing the audit.
5. Decision and Penalty: Considering the gravity of the misconduct and the respondent’s experience in the profession, the Committee decided to reprimand CA. Keshav Vishwanath Chaubey and imposed a fine of Rs. 25,000. The respondent was given 60 days to pay the fine from the date of receipt of the order.
In conclusion, the Disciplinary Committee found CA. Keshav Vishwanath Chaubey guilty of professional misconduct for various deficiencies in his audit work. Despite the respondent’s personal difficulties, the Committee determined that his actions constituted a breach of professional standards and warranted disciplinary action.
भारतीय सनदी लेखाकार संस्थान
(संसदीय अधिधनयम द्वारा स्थाधित)
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
PR/78/2019-DD/95/2019-DC/1359/2020
[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. Nimai Gautam Shah (M. No. 100932),
…… Complainant
Versus
CA. Keshav Vishwanath Chaubey (M. No. 044900)
M/s. KMA & Co. (FRN 111899W),
Chartered Accountants
…… 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 (in person)
Date of Hearing: 19th March, 2024
Date of Order: 9th 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 Keshav Vishwanath Chaubey (M. No. 044900) (hereinafter referred to as the ‘Respondent’) is GUILTY of Professional Misconduct falling within the meaning of Item (2), (5), (6), (7), (8) and (9) of Part-I of the Second Schedule as well as Item (1) of Part II 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 19th March 2024.
3. The Committee noted that on the date of the hearing held on 19th March 2024, the Respondent was present through video conferencing and made his verbal representation on the Findings of the Disciplinary Committee, inter-alia, stating that during the alleged period of misconduct, he was not keeping well and was under mental trauma as his brother had expired. He accepted that the mistake made by him was on account of his ignorance, ill health and mental condition, but his intention was not to defraud anyone. Looking into his professional practice of around 30 years, he requested a lenient view in the case. The Committee also noted that the Respondent in his written representation on the Findings of the Committee, inter-alia, stated as under:
(a) The Complainant had not brought on record any communication about his intimation of his appointment as a resolution professional till the accounts were prepared, audited, and adopted.
(b) The fire took place only in the Unit II of the factory of the Auditee Company.
(c) Audit pertained to F.Y. 2017-18 whereby reporting of Cash losses and going concern was dropped from CARO 2016.
(d) Audit was conducted on test check basis, and he never claimed that there was 100% vouching or verification.
(e) On the one hand, the Complainant claims that all original data was lying with him since June 2018 and on other hand, he is demanding Tally data from the Respondent on 13th February 2019.
4. The Committee considered the reasoning as contained in the Findings holding the Respondent Guilty of Professional Misconduct vis-à-vis written and verbal representation of the Respondent.
5. Keeping in view the facts and circumstances of the case, material on record including verbal and written representations on the Findings, the Committee noted that the information about the Resolution of the Company was given by way of an advertisement in English and a vernacular language newspaper and was also uploaded on the website designated for the purpose by Insolvency and Bankruptcy Board of India. Thus, there was no doubt that being the auditor of the Company, the Respondent was required to be fully aware of such proceedings held against the Company and the appointment of a Resolution Professional especially when Respondent was associated with the management of the Company for holding various meetings with various stakeholders as well as insurance surveyors. Thus, the Committee held that Respondent was negligent in pointing out the defect in certification of the financial statement of the Company which constituted a breach of the provisions outlined in the Insolvency and Bankruptcy Code (IBC), 2016. Further, mere submission of bills was insufficient to establish the Company’s status as a Going Concern especially when the Respondent had not provided any evidence on record which indicates the Management’s future plans to revive the business. The Committee noted that the Respondent had contended to have audited provisional accounts of the Company for the period 01.04.2017 to 23.10.2017 (i.e., till the date when fire has occurred) signed as on 30.01.2018 and on comparing the provisional financial statements with the annual audited accounts of the Company for F.Y. 2017-18 signed as on 05.09.2018, it was found that there was a significant difference in the basis for preparation and the figures of provisional accounts vis a vis annual audited accounts of the Company for F.Y. 2017-18. The Committee also noted that if the Respondent had declared to have examined the Bank Books, Cash Book, Journal, Ledger, Purchase Register, Sales Register as well as Stock Register for tax audit and that if tally data was available with him, he would have provided all due working papers as envisaged in SA-230. The Company has violated the requirement of AS 9 and the Respondent being the auditor has not reported the same in his Audit Report. While considering the material impact of non-reporting of Order of commencement of CIRP led to omission of material information which was known to the Respondent, the Committee held that the non-disclosure of such significant event was not acceptable on the part of the Respondent being the auditor of the Company. Further, the usage of Firm name, ‘M/s. Keshav Chaubey & Co.’ which was no more approved for usage is in violation of Regulation 190 of CA Regulations 1988. The Committee held that issuance of Certificate by the Respondent without exercising due diligence resulted in non-discharge of other obligations by the Company leading to violation of the provisions of Companies Act, 2013. The Committee observed that the Respondent conducted his audit without proper books and vouchers. 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 CA. Keshav Vishwanath Chaubey (M. No. 044900), Thane be reprimanded and also a Fine of Rs. 25,000/- (Rupees Twenty-Five Thousand only) be imposed upon him payable within a period of 60 days from the date of receipt of the Order.
sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
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(MRS. RANI S. NAIR, IRS RETD.)
GOVERNMENT NOMINEE
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(SHRI ARUN KUMAR, IAS RETD.)
GOVERNMENT NOMINEE
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(CA. SANJAY KUMAR AGARWAL)
MEMBER
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(CA. COTHA S. SRINIVAS)
MEMBER
