TMI Blog2016 (9) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... countants Act, 1949, he would be guilty of professional misconduct within the meaning of clause (7) thereof. It is apparent that the misconduct contemplated by clauses (5) and (6) are severe vis-a-vis clause (7). Taking into account said fact and that we are deciding the reference in the year 2016 we are of the opinion that accepting the decision of the Council at its meetings held on January 16 and 17, 2011 in so far it concludes the respondent guilty of misconduct contemplated by clause (7) of Part I of Second Schedule read with Sections 21 and 22 of the Chartered Accountants Act, 1949, ends of justice would suffice if penalty of severe reprimand contemplated by Section 21(6)(c) of the Chartered Accountants Act, 1949 is inflicted up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or foul play was noticed or detected it was to be reported to the General Manager (Vigilance) as also to the Zonal Inspectorate and the General Manager as well. Guidelines issued for the concurrent audit required to check the new accounts opened and particularly the current accounts and see whether the operations therein were unusual. To verify that the loans and advances were duly sanctioned as per guidelines of the bank. To verify the securities and documents received and in particular whether they were entered in the register. To check reconciliation of entries in the suspense accounts. To report any noticeable unauthorized use of discretionary powers. To report whether users had been made aware of the confidentiality of passwords. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich unearthed the fraud had acknowledged that there was no control on the branch by the branch incharge and that the Chief Manager and the Senior Manager perpetrated the fraud in a manner that a normal audit could not detect the same. The respondent also highlighted the observations of the special audit report that vouchers were prepared to falsify certain entries. The respondent also highlighted that the special audit report brought out that most of the fraudulent entries pertained to the period pre and post July 01, 2003 to June 30, 2004. It was pointed out that the periods spanning the fraud was four financial years and neither year routine audit could detect the same. It was followed by an explanation, with reference to the vouchers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e system and procedures from the view point of internal control and statutory compliance. The Council further observed that in the instant matter the entries/transactions emanating out of the fraud perpetrated by a senior level Branch Manager remained undetected for nearly three years escaping attention of many officers and also the various auditors involved during the period of three years. The Respondent was only one of the three concurrent auditors involved with the Bank Branch in these three years period beginning from July 1st 2003 to June 30th 2004 whereas the fraudulent activities as per the Respondent had started a year before he had taken over as concurrent auditor and continued even after the Respondent s term. 8.3 The Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Council, however while noting the terms of reference of the Respondent s appointment was of the further view that although the fraudulent transactions were carried out in the Branch wherein the Respondent had acted as a concurrent auditor but had the Respondent while carrying out his professional duties acted with more care and caution, such modus operandi/or at least certain transactional entries would have been disclosed/unearthed by him in course of his routine crosschecking particularly wherein the terms of reference very well covered checking of such kind of transactions also. The Council, therefore, was thus of the view that the Respondent had basically acted negligently to some extent in performing his duties as a concurrent audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity to the respondent to present his case. All material documents have been considered by the Disciplinary Committee. The Council has very fairly considered the respondent s response to the report of the Disciplinary Committee and has re-appraised the material to conclude that whereas the respondent cannot be held guilty of professional misconduct within the meaning of clauses (5) and (6) of Part I of Second Schedule read with Sections 21 and 22 of the Chartered Accountants Act, 1949, he would be guilty of professional misconduct within the meaning of clause (7) thereof. 9.Misconducts listed in (5), (6) and (7) of Part I of Second Schedule read with Sections 21 and 22 of the Chartered Accountants Act, 1949 are as under:- (5) f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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