The Institute of Chartered Accountants of India’s Disciplinary Committee (Bench-II) issued an order against CA. Purushottam Gupta for professional misconduct. The complaint, filed by the Joint Commissioner, Office of the Registrar of Co-Operative Societies, Bhopal, alleged negligence in his duties as a Concurrent Auditor for a bank during a period of fund misappropriation from May 2013 to January 2015. The Committee found CA. Gupta guilty of professional misconduct under Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
Despite CA. Gupta’s representation arguing he was not solely responsible and referencing another case, the Committee maintained that concurrent audit requires 100% checking in key areas, not test checking, especially given the general nature of his appointment. The Committee noted that the special audit report specifically identified the period when CA. Gupta was the concurrent auditor for the misappropriation and that he failed to exercise due diligence, overlooked the fraud, and did not report it to senior management. Consequently, the Disciplinary Committee ordered that CA. Purushottam Gupta be reprimanded and fined Rs. 50,000, payable within 60 days.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
PRIG/385/17/DD/168/2018/DC/1499/2021
[DISCIPLINARY COMMITTEE [BENCH-II (2024-2025)]
[Constituted under Section 216 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/G/385117/DD/168/2018/DC/1499/2021]
In the matter of:
Shri B.S Shukla, Jt. Commissioner,
Versus
CA. Purushottam Gupta
M/s, Singh Sushi! Kumar & Co
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 (through VC)
CA. Sanjay Kumar Agarwal, Member (in person)
CA. Cotha S Srinivas, Member (in person)
Date of Hearing : 28th March, 2024
Date of Order : 17th 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 CA. Purushottam Gupta (hereinafter referred to as the ‘Respondent’) is 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 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 28’h March 2024.
3. The Committee noted that on the date of the hearing held on 28’h March 2024, the Respondent was present through video conferencing and made his verbal representation on the Findings of the Disciplinary Committee in which while reiterating the submissions made during the course of hearing, he also stated that the Commissioner for Cooperation had appointed the Special Audit Committee and the report issued by them is the only basis for the complaint against him. However, the said report unequally states that Statutory Auditor is responsible and not the Concurrent Auditor. Further, the Hon’ble Committee had held CA. Ramdas Rajpal, who was the Concurrent Auditor for the financial year 2014-15 of the same bank not guilty in respect of the disciplinary case filed against him. The Respondent never worked with that bank subsequent to the period in respect of which charges have been alleged against him.
4. The Committee considered the reasoning as contained in the Findings holding the Respondent Guilty of Professional Misconduct vis-à-vis verbal representation of the Respondent. As regard the reference to another disciplinary case in the representation of the Respondent, the Committee was of the view that each disciplinary case is distinct and is decided on merits by the Competent Authorities i.e. Board of Discipline/Disciplinary Committee on the basis of documents and submissions on record. Thus, comparing 2 distinct disciplinary cases as ‘apple to apple’, is not warranted.
5. Keeping in view the facts and circumstances of the case, material on record including verbal representation on the Findings, the Committee was of the view that the Concurrent Audit attempts to shorten the interval between a transaction and its examination by an independent person. There is an emphasis in favour of substantive checking in key areas rather than test checking. Hence, a Concurrent Auditor has to do 100% checking of bank transactions or carry out the checking as per the appointment letter and Test checking of transactions are not permitted or not to be carried out during Concurrent Audit of Banks. The Committee noted that when an appointment letter is general then auditor is expected to do substantive checking rather than test checking.
5.1 The Committee noted that in the Special Audit Report, it is clearly stated that the said misappropriation of funds was carried out during the period 06’h May 2013 to 30th January 2015 for which the Concurrent Audit responsibilities were bestowed on the Respondent only.
5.2 The Committee viewed that Concurrent Audit is essentially a management process integral to the establishment of sound internal accounting functions and effective controls and setting the tone for a vigilant internal audit to preclude the incidence of serious errors and fraudulent manipulations. The Committee observed that e-KYC of old accounts were also done during such period and there were lacunas in compliance relating to KYC pertaining to the period when the Respondent was the concurrent auditor, hence it was his duty to verify the KYC of 811 the accounts which created suspicion. However, he gave excuses. The Committee observed that the Respondent, being the Concurrent Auditor of the Bank, failed to exercise due diligence in the conduct of his professional duties. He failed to report the fraud which is subject matter of extant complaint and deliberately overlooked the misappropriation of funds. He neither took any steps to report the said misappropriations in his report nor intimated the same to senior management about such manipulations.
5.3 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. Purushottam Gupta be Reprimanded and also a Fine of Rs. 50,000/- (Rupees Fifty Thousand 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 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
