Acceptance of Internal Audit without communicating Previous Auditor in writing: ICAI DC found Auditor not Guilty considering evidence of communication sent via registered post to the previous auditor.
The recent decision by the ICAI Board of Discipline concerning the acceptance of an internal audit appointment without prior written communication to the previous auditor has sparked significant debate in the accounting community. This case, involving CA. Deepak Gulati and his alleged oversight, highlights critical aspects of professional conduct under the Chartered Accountants Act, 1949.
The dispute centered around whether CA. Deepak Gulati adequately communicated with the previous auditor, CA. Sukumar Datta, as required by regulatory guidelines. The complaint alleged that Gulati had accepted the internal audit role without fulfilling this prerequisite, a violation under Item (8) of Part-I of the Act.
During the proceedings held on 7th May 2024 at ‘ICAI Bhawan’ in New Delhi, CA. Gulati, represented by his counsel Shri. S. S Sharma, presented crucial evidence. He showcased a registered postal communication sent to CA. Sukumar Datta on 4th August 2018, the same day he received the appointment letter. This communication, verified by the Karol Bagh Post Office, acknowledged the dispatch but noted that tracking records were no longer available post-March 2020.
The Board of Discipline examined the evidence presented and deliberated on whether the communication satisfied the legal requirement. Despite the absence of a tracking sheet, the postal confirmation and the date of dispatch were deemed sufficient proof of compliance with the Act’s stipulations.
Consequently, the ICAI Board of Discipline, led by CA. Rajendra Kumar P and Ms. Dolly Chakraborty, IAAS (Retd.), concluded that CA. Deepak Gulati was ‘Not Guilty’ of professional misconduct.
[PR/394/2018/DD/41/2019/BOD/733/2024]
CONFIDENTIAL
BOARD OF DISCIPLINE
(Constituted U/S 21A of The Chartered Accountants Act, 1949)
FINDINGS UNDER RULE 14 (9) READ WITH RULE 15 (2) OF THE CHARTERED ACCOUNTANTS (PROCEDURE OF INVESTIGATIONS OF PROFESSIONAL AND OTHER MISCONDUCT AND CONDUCT OF CASES) RULES, 2007
CORAM: (PRESENT IN PERSON)
CA. Rajendra Kumar P, Presiding Officer
Ms. Dolly Chakraborty, (IAAS, Retd.), Government Nominee
IN THE MATTER OF:
CA. Sukumar Datta (M. No. 055016), Kolkata- 700016
Versus
CA. Deepak Gulati (M. No. 086403), Partner, M/s Deepak Gulati & Associates
Date of Final Hearing : 07th May 2024
Place of hearing : ‘ICAI BHAWAN’ NEW DELHI
PARTIES PRESENT
Respondent : CA. Deepak Gulati
Counsel for the Respondent : Shri. S. S Sharma, Advocate.
FINDINGS:
BRIEF BACKGROUND OF THE CASE:
1. The Complainant was the Internal Auditor of the Institute of Indian Foundrymen (IIF) for the Financial Year 2017-18. The Complainant alleged that the Respondent has accepted his appointment as Internal Auditor of the Company without first communicating in writing with the Complainant, being the previous internal auditor as required under the provision of Item (8) of Part-I of the First Schedule to the Chartered Accountant Act, 1949.
CHARGES ALLEGED:
2. Respondent has accepted his appointment as Internal Auditor of the Company without first communicating in writing with the Complainant, being the previous Internal Auditor as required under the provision of Item (8) of Part-I of the First Schedule to the Chartered Accountant Act, 1949.
BRIEF OF THE PROCEEDINGS HELD:
3. The details of the hearing of this matter are mentioned as hereunder: –
| S. No | Date of meeting | Status of Hearing |
| 1. | 7 th May 2024 | Matter heard and hearing is concluded. |
BRIEF SUBMISSIONS OF THE RESPONDENT:
4. The Respondent in his written submissions stated as under:
4.1 Tracking sheets are not downloaded for every correspondence and therefore were not submitted in this case. Additionally, upon contacting the postal department, they informed that tracking sheets are only available for a limited period online before they are removed from the system.
4.2 Further, the Respondent submitted that the acknowledgement in question was submitted to the Directorate on 12th December 2019, approximately 4.5 years ago. Had this issue been raised at that time, the Respondent would have obtained and submitted the tracking sheet accordingly.
OBSERVATION OF THE BOARD:
5. The Board noted that the Complainant vide e-mail dated 6th May 2024 submitted that he could not attend the hearing scheduled on 7th May 2024 due to his preoccupation for important assignment. He further submitted that he has nothing more to say or submit and leave the matter before the learned members of the Board of Discipline to decide the misconduct of the Respondent based on his earlier submissions.
6. The Respondent appeared along with his counsel and provided evidence of the communication made with the previous auditor specifically the letter written by him and submitted to the Postal Department on 24th April 2024. In response, the Postmaster, Karol Bagh Post Office, New Delhi responded and the relevant paragraph is reproduced hereunder :
“… the article No. RD188030173IN was booked on 04.08.2018. As per your request letter, it is intimated that the relevant record has been weeded out up to 31.03.2020 on dated 04.10.2021.”
7. During the hearing, the Board enquired from the Respondent about the date of the communication. In response, the Counsel appearing on behalf of the Respondent confirms that it was sent on 04th August 2018 i.e., on the same day on which the Respondent received the letter of appointment.
8. The Board thus observed that from the above, it is clear that the Respondent has sent the required communication to the Complainant for seeking No Objection by Registered Post with Acknowledgement Due and the same is also confirmed by the Postal Department.
9. Considering the facts of the matter as well as the sufficiency and validity of the evidence produced before the Board by the Respondent, the Board concludes that the Respondent is ‘Not Guilty’ of the alleged misconduct for the required communication mandate as per the Chartered Accountants Act 1949.
CONCLUSION:
10. Thus, in conclusion in the considered opinion of the Board, the Respondent is held ‘Not Guilty’ of the Professional Misconduct falling within the meaning of Item (8) of Part-1 of the First Schedule to the Chartered Accountants Act, 1949. Accordingly, the Board passed an order for closure of the case in terms of the provisions of Rule 15 (2) of the Chartered Accountants (Procedure of
Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.
| Sd/-
CA. Rajendra Kumar P Presiding Officer |
Sd/-
Dolly Chakrabaity, IAAS, (Retd.) Government Nominee |
Date: 12-06-2024
