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2022 (9) TMI 1479 - NFRA - Companies LawProfessional misconduct - Non-compliance with the auditing standards by the Statutory Auditor - material misstatements of various figures and disclosures - False reporting by Auditor in Independent Auditor's Report - Failure to comply with Standards on Auditing - Failure to report non compliances with Accounting Standards and provisions of the Companies Act 2013. False reporting by Auditor in Independent Auditor's Report - HELD THAT:- The EP has accepted that the disclosure about SBN was not part of Financial Statements. In fact, once the company has not made a disclosure on SBN, the Auditor was duty bound to question the same and make a mention of the same in the audit report. On the contrary the EP has tried to mislead us by stating that he sent an unsigned disclosure to the company which was ultimately not placed in the Financial Statements. This reply is an attempt to cover up and mislead thereby reflecting a reckless and unprofessional behavior on the part of the EP. Failure to comply with Standards on Auditing (SAs) - HELD THAT:- The EP was charged with non-compliance to SA 200, SA 210, SA 220, SA 260, SA 265, SA 300, SA 315, SA 320, SA 330, SA 500, SA 505, SA 520, SA 580, SA 700, SA 710 and SA 720 - on examining the reply of the EP regarding non communication with the company and Systems breakdown in the paragraphs and found them not acceptable. Therefore, the EP has not complied with the aforementioned SAs. Non compliances with Accounting Standards (AS) and Provisions of the Companies Act 2013 - HELD THAT:- The EP has made a series of serious departures from the Standards and the Law, in conduct of the audit of TDML for FY 2016-17. Based on discussion, it is proved that EP had issued unmodified opinion on the Financial Statements without any basis. The poor quality of Audit followed by the cover up in terms of Cash Flow Statement that did not exist at the time of Audit, incomplete documentation and attempt to mislead through evasive replies further compounds the professional misconduct on the part of the EP. The charge is proved since the EP failed to conduct the audit in accordance with the SAs but falsely reported in his audit report that the audit was conducted as per SAs - all the charges of professional misconduct in the SCN stand proved based on the evidence in the Audit File, the Audit Report dated 30th May 2017 issued by the EP, the submissions made by the CA, and the Annual Report of TDML for the FY 2016-17. Penalty - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed, is evident from the fact that a minimum punishment is laid down by the law - The EP in the present case was required to ensure compliance with SAs to achieve the necessary audit quality and lend credibility to Financial Statements to facilitate its users. As detailed in this order, substantial deficiencies in Audit, abdication of responsibility and inappropriate conclusions on the part of CA Rajiv Bengali establish his professional misconduct. Despite being a qualified professional, CA Rajiv Bengali has not adhered to the Standards and has thus not discharged the duty cast upon him. Considering the fact that professional misconducts have been proved and considering the nature of violations and principles of proportionality, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, order: (i) Imposition of a monetary penalty of Rs. Five Lakhs upon CA Rajiv Bengali. (ii) In addition, CA Rajiv Bengali is debarred for Five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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