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2023 (8) TMI 130 - NFRA - Companies LawProfessional Misconduct - Acceptance of appointment as EQCR without ensuring eligibility criteria - Failure to Perform the role of EQCR Objectively - penalty and sanctions. Acceptance of appointment as EQCR without ensuring eligibility criteria - HELD THAT:- The audit firm had the option to engage some other person, but CA Riya Agarwal had the option to refuse such appointment, if she felt that she was not qualified - the charge for acceptance of the role as Engagement Quality Control Reviewer without having prior experience is established. Such lapses have been viewed seriously by international regulators as well. Failure to Perform the role of EQCR Objectively - HELD THAT:- The EQCR partner performed the review by routinely ticking a yes/no checklist and signing on some of the WPs prepared by the ET. The work of EQCR partner is not separately identifiable from that of the ET, which raises serious doubts on the performance of her statutory obligations. Accordingly, it is established that the EQCR Partner failed in her assigned role in the Statutory Audit of BCL by virtue of noncompliance with the requirements of SQC 1, SA 220 and SA 230 - Such lapses have been viewed seriously by international regulators as well. Penalty and sanctions - HELD THAT:- It is the duty of an EQCR partner to conduct the review of the work of the ET and ensure that the Independent Auditor's Report issued is appropriate, as it provides useful information to the stakeholders and public, based on which they make decisions on their investments or do transactions with the public interest entity - Without a credible Audit, Investors, Creditors and Other Users of Financial Statements would be handicapped. The entire corporate governance system would fail and result in a breakdown in trust and confidence of investors and the public at large if the auditors do not perform their job with professional scepticism and due diligence and adhere to the standards. 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. Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, and also keeping in mind that the EQCR Partner has accepted all the charges and taken responsibility for the lapses pointed out in the SCN, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered the imposition of a monetary penalty of Rs.1 Lakh upon CA Riya Agarwal.
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