CA. Nitin Shridhar Khandekar Vs CA. Gopal Subhashchandra Saboo (ICAI Disciplinary Committee)
ICAI Reprimands CA, Imposes ₹2 Lakh Fine for Audit Acceptance and Independence Lapses
Summary: The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI), Bench II (2026–27), by its order dated 3 October 2026, reprimanded CA. Gopal Subhashchandra Saboo and imposed a fine of ₹2,00,000 payable within 60 days from receipt for professional and other misconduct in connection with the statutory audit and tax audit of Santosh Packaging Private Limited for FY 2017–18. The punishment followed findings pronounced on 29 August 2026 in proceedings initiated on the complaint of CA. Nitin Shridhar Khandekar of M/s Khire Khandekar & Kirloskar.
The complainant firm was the existing statutory auditor, yet the respondent signed the financial statements on 3 September 2018 and the tax audit report on 29 October 2018, before the outgoing auditor’s resignation and the subsequent appointment formalities in March 2019. On the first charge, the respondent said that a letter addressed to the previous auditor was entrusted to the company director for delivery, but the Committee found no reliable positive evidence establishing its delivery. It held that the professional duty to communicate with the outgoing auditor rests on the incoming auditor and cannot be delegated to the client. This was misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.
The Committee also found non-compliance with the appointment-related requirement under Item (9) of Part I of the First Schedule and rejected reliance on the superseded wording referring to Section 225 of the Companies Act, 1956; it regarded the corresponding provisions of Sections 139 and 140 of the Companies Act, 2013 as relevant. On independence, the respondent’s inconsistent explanations attributing accounting work to himself, his brother or outside persons were unsupported by cogent records. The Committee emphasised the mandatory ethical responsibilities arising from SA 200 and the ICAI Code of Ethics.
Regarding the fourth charge, the Committee held that the respondent had failed to demonstrate adequate examination of supporting records and sufficient appropriate evidence for his audit and tax audit opinions, engaging requirements of professional competence, due diligence and scepticism. The findings held him guilty under the specified provisions of the First and Second Schedules. At the punishment hearing, conducted by video conference, he admitted his mistake, disputed certain aspects of the findings in written representations and requested leniency. After considering the record, the Committee ordered a reprimand and ₹2 lakh fine. The attached source also contains the detailed 33-page findings, which should be read with the four-page punishment order.
Summary: The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has reprimanded CA. Gopal Subhashchandra Saboo and imposed a fine of ₹2 lakh for professional and other misconduct involving acceptance of an audit without proper communication with the previous auditor, failure to verify appointment formalities, compromised independence and inadequate audit evidence.
The order dated October 3, 2026, follows the Committee’s findings dated August 29, 2026, in the complaint filed by CA. Nitin Shridhar Khandekar. The Committee emphasised that an incoming auditor cannot delegate the responsibility of communicating with the previous auditor to the client.
Background of the Case
The complainant’s firm, M/s Khire Khandekar & Kirloskar, was appointed statutory auditor of Santosh Packaging Private Limited for a term covering Financial Year 2017-18.
The respondent nevertheless undertook the company’s statutory audit and tax audit for FY 2017-18. He signed the financial statements on September 3, 2018, and completed the tax audit reporting on October 29, 2018.
The complaint raised four principal issues: communication with the previous auditor, compliance with requirements governing the change of auditor, independence arising from involvement in accounting work, and issuance of audit reports without adequate verification of supporting records.
Communication With Previous Auditor Cannot Be Delegated to Client
The respondent claimed that a letter dated July 1, 2018, seeking a No Objection Certificate had been handed to the company’s director for delivery to the previous auditor. He relied on assurances concerning delivery and the previous auditor’s consent.
The Committee found that the respondent had not produced evidence establishing delivery of the letter. A director’s declaration also indicated that the appointment had been accepted on the strength of his assurance, although he had been unable to obtain the NOC.
Referring to Clause (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949, read with the Code of Ethics, 2009, the Committee stressed the requirement of prior written communication supported by positive evidence of delivery.
It held that reliance on the client’s assurances did not discharge the incoming auditor’s obligation. The responsibility to communicate with the previous auditor could not be delegated to the client or auditee.
Subsequent Appointment Formalities Cannot Cure Earlier Lapses
The Committee noted that the respondent had completed the audit before the previous auditor’s resignation in March 2019. The resolutions concerning the respondent’s appointment were also passed subsequently.
The respondent argued that the company had assured him that the necessary secretarial formalities would be completed. He further submitted that the deficiencies were later rectified.
Rejecting this defence, the Committee held that compliance must exist when the audit assignment is accepted and the report is issued. Subsequent corrective action could not retrospectively cure an earlier failure to exercise due diligence.
The respondent was therefore held guilty under Clause (9) of Part I of the First Schedule.
Reference to Companies Act, 1956 Does Not Remove Compliance Obligation
The respondent contended that Clause (9) referred to Section 225 of the Companies Act, 1956, rather than the corresponding provisions of the Companies Act, 2013.
The Committee rejected this interpretation. Referring to Section 8 of the General Clauses Act, 1897, it applied the principle of statutory continuity to references to repealed and re-enacted provisions.
It held that an incoming auditor must ascertain compliance with the applicable requirements under Sections 139 and 140 of the Companies Act, 2013, before accepting and undertaking the engagement.
Accounting Involvement Compromised Auditor Independence
The Committee identified material contradictions in the respondent’s explanations concerning accounting services. At different stages, the work was attributed to himself, his brother and an independent person.
It found that his attempt to attribute the work to third parties was unsupported by cogent evidence and contradicted by his own statements.
The Committee concluded that the respondent had failed to maintain the independence expected of a statutory auditor. It also rejected the argument that the Guidance Note on Independence of Auditors was merely advisory, explaining that independence was a substantive requirement arising from SA 200 and the ICAI Code of Ethics.
Inadequate Audit Evidence and Documentation
The fourth charge concerned auditing without verifying supporting documents when the company’s records were reportedly lost.
The Committee found no satisfactory contemporaneous documentation demonstrating adequate examination of the books or performance of the necessary audit procedures.
It emphasised that responsibility for maintaining sufficient and appropriate audit documentation rests with the auditor. The respondent failed to establish that the reports were supported by sufficient appropriate audit evidence and was found deficient in professional competence, due diligence and professional scepticism.
Punishment Imposed
At the punishment hearing, the respondent admitted his mistake and sought leniency. After considering his representations and the established misconduct, the Committee ordered a reprimand and a fine of ₹2,00,000, payable within 60 days from receipt of the order.
