Home Case Index All Cases Companies Law Companies Law + NFRA Companies Law - 2023 (12) TMI NFRA This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (12) TMI 487 - NATIONAL FINANCIAL REPORTING AUTHORITYProfessional Misconduct - failure to disclose material facts known to him, which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement, where he is concerned with that financial statement in a professional capacity - failure to report material misstatements known to him to appear in a financial statement with which the EP is concerned in a professional capacity - failure to exercise due diligence, and being grossly negligent in the conduct of professional duties - failure to obtain sufficient information which is necessary for the expression of an opinion, or its exceptions are sufficiently material to negate the expressions of an opinion - failure to invite attention to any material departure from the generally accepted procedures to audit applicable to the circumstances - penalties and sanctions. HELD THAT:- The EP has made a series of serious departures from the Standards and the Law, in the conduct of the audit of DHFL for FY 2017-18. Based on the discussion, it is proved that EP had issued an unmodified opinion on the Financial Statements without any basis. The poor quality of the audit, incomplete documentation and attempt to mislead through baseless replies further compound the professional misconduct on the part of the EP. He demonstrated a lack of awareness and disregard for the mandatory provisions of the SAS and the law throughout the replies. Based on the discussion and analysis, it is concluded that the EP has committed Professional Misconduct as defined in the Act, as below: a. CA Jignesh Mehta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a Chartered Accountant is guilty of professional misconduct when he "fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity". This charge is proved as the EP failed to disclose in his report the material non-compliances of the Company regarding branch audits, consolidated financial statements and ICFR as explained in sections D. 1, D.2 and D.7 above. b. CA Jignesh Mehta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 6 of Part I of the Second Schedule of the Chartered Accountants Act) 1949 (No. 38 of 1949) as amended from time to time, which states that a Chartered Accountant is guilty of professional misconduct when he "fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity". This charge is proved as the EP failed to disclose in his report the material noncompliances of the Company regarding branch audits and consolidated financial statements as explained in sections D. 1 and D.2 above. c. CA Jignesh Mehta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a Chartered Accountant is guilty of professional misconduct when he "does not exercise due diligence or is grossly negligent in the conduct of his professional duties". This charge is proved as the EP, conducted the Audit of a Public Interest Entity in total disregard of his statutory duties, evidenced by multiple critical omissions and violations of the standards. The instances of failure to conduct the audit in accordance with the SAS and applicable regulations, and failure to report the material misstatements in the financial statements and non-compliances made by the Company are as explained in Paras D. 1 to D.8 above. d. CA Jignesh Mehta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a Chartered Accountant is guilty of professional misconduct when he "fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion". This charge is proved as the EP failed to conduct the audit in accordance with the SAS and applicable regulations as well as due to his total failure to report the material misstatements and non-compliances made by the Company in the financial statements as explained in Paras D. 1 to D.8 above. e. CA Jignesh Mehta committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 9 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a Chartered Accountant is guilty of professional misconduct when he "fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances". This charge is proved since the EP failed to conduct the audit in accordance with the SAS as explained in Paras D. 1 , D.3, D.4, D.5 and D.8 above but falsely reported in his audit report that the audit was conducted as per SAS. Thus, it is concluded that the charges of professional misconduct in the SCN, as detailed above, stand proved based on the evidence in the Audit File, the audit reports on the standalone financial statements and consolidated financial statements for the FY 2017-18 dated 30th April 2018, the submissions made by the EP, the audited financial statements of DHFL and other material on record. Sanctions and penalties - HELD THAT:- The professional misconduct has been detailed and proven on various counts in the body of this Order. Considering the nature and seriousness of violations and principles of proportionality, sanctions ordered as follows: a. Imposition of a monetary penalty of Rupees Five Lakh upon CA Jignesh Mehta. b. In addition, CA Jignesh Mehta has been debarred for Ten 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.
|