CA. Haresh Babulal Shah was found guilty of professional misconduct by the Institute of Chartered Accountants of India’s Disciplinary Committee. The charges stemmed from his audit work for M/s Taneja Aerospace and Aviation Limited during the financial years 2008-09 to 2010-11. The misconduct included non-compliance with several Accounting Standards (AS-1, AS-2, AS-3, AS-9, AS-13, AS-15, AS-16, AS-20, AS-22, AS-26, AS-29), Auditing Standard (SA-700), CARO 2003, and Schedule-VI to the Companies Act, 1956. During the hearing, CA. Shah stated that the issues primarily involved subjective or hyper-technical matters related to inventory and revenue recognition in a nascent industry, and that he had consistently qualified his audit reports. Despite his explanation, the Committee upheld its findings. Consequently, the Committee ordered that CA. Haresh B. Shah be reprimanded and fined Rs. 2,00,000, payable within 60 days of receiving the order.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
PPR/254/2016-DD/94/INF /2016/DC/1593/2022
[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
strong>IPPFt/25412016-D13/94/1NF/2016/DC/1593/20221
In Re.
CA. Haresh Babulal Shah …..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 Agaiwal, 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 Haresh Babulal Shah (hereinafter referred to as the ‘Respondent’) is GUILTY of Professional Misconduct falling within the meaning of Item (5), (6), (7) and (8) 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, stating that from 1994, he did not accept any audit or Tax assignment. From 2015 whatever assignment he had, he discontinued all audit and tax practice. He now only works on advisory on mergers and acquisitions-He-further-stated-that-all-the-charges-where-he was-held-guilty were only for non-exercise of due diligence where work is to be mainly done by junior staff, who also did not have any practical experience in that particular industry. He further requested the Committee for the least possible punishment as these proceedings have weighed on him for so long. The Committee also noted that the Respondent in his written representation on the Findings of the Committee, inter-alia, stated as under:
a) It was only in regard to certain matters where in Respondent’s humble view, the matters raised were of a highly subjective, debatable, or hyper-technical nature that he had made extensive submissions. Most of the Matters arose in relation to presentation, valuation and classification of inventory and revenue recognition which was because of unique nature of industry. The auditee was the first listed Company in aerospace industry which was a startup with multiple and unexpected legal and financial hurdles. The Respondent as Company an auditor faced these challenges due to paucity of time in finalising the accounts in the defined time period.
b) None of the matters/charges had any financial implications and as an auditor, the Respondent qualified audit report, CARO Report and Corporate Govemance Report year after year even for earlier years. Despite some deficiencies in presentation, classification, representations and notes to accounts, true and fair view was not impacted after taking into account multiple qualifications year after year.
c) The Respondent has been found guilty by the Committee in the case of an audit of a private sector aviation Company which arose more than 15 years ago. At that time, private sector aviation was in its infancy in India. There was limited information available by way of comparative study or precedent, and mergers and acquisitions and their accounting treatment (and therefore audit issues related to the same) were very new areas. While the issues where he has been found guilty may appear serious in hindsight; these were all uncharted areas when he took the decisions in his professional capacity.
d) Considering the complexity of the matter and the fact that Respondent has already accepted that there were indeed certain deficiencies on his part; despite his slight disappointment with some of the findings, the Respondent accept the findings of the honourable Disciplinary Committee and does not wish to pursue the matter any further.
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. Keeping in view the facts and circumstances of the case, material on record including verbal and written representation on the Findings, the Committee held that the Respondent made certain non-compliances with regard to AS-1, AS-2, AS-3, AS-9, AS-13, AS-15, AS-16, AS-20, AS-22, AS-26, AS-29, SA-700, CARO 2003, Schedule-VI to the Companies Act, 1956 in the General Purpose ‘Financial Statements of M/s Taneja Aerospace and Aviation Limited for the financial year 2008-09 to 2010-11.
5.1 Hence, professional misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 7’h 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. Haresh B. Shah be Reprimanded and also a Fine of Rs. 2,00,000/- (Rupees Two Lakh only) be Imposed upon him payable within a period of 60 days from the date of receipt of the Order.
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(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
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(MRS. RANI S. NAIR, IRS (RETD.))
GOVERNMENT NOMINE
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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 MEMBER
