Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Council Of The Institute Of Chartered Accountants Of India Versus CA G.S. Johar & Anr.

Professional misconduct - default of audit party - Chartered Accountants Act - wrong method of valuation of inventory - Held that:- At the time of hearing the stand taken by the respondent was that PCL was a trading company and followed Weighted Average Cost Method, which was in contravention of Accounting Standard-2 (AS-2), which specifically laid down the method of valuation of inventory as cost or market value whichever is less. But the committee held that it was not taking cognizance of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tment entries between AIL and PCL which ought to have raised a doubt about the genuineness of the transactions and ought to have been detected and reported by the respondent. - Suffice it to highlight that in paras 26 and 27 of the report the Committee highlighted the modus operandi adopted by PCL and AIL to form a loop with no cash flow coming in, but sales, stocks and receivables increases. The obligation of the auditor concerning transactions which are merely book entries was highlighted .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es of the auditor to maintain the working papers and documents and noted that in spite of repeatedly directed to do so, the respondent did not produce the papers and took the plea that since the year 2003 he had surrendered the certificate of practice, therefore he was not keeping the past record. - The report of the Disciplinary Committee is based on the accounting standards to be followed and breach thereof. Having not filed any response to the report of the Disciplinary Committee, and fin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ister of members of the Institute of Chartered Accountants for a period of 5 years. - CHAT.A.REF 2/2013 - Dated:- 3-2-2017 - MR. PRADEEP NANDRAJOG & MR. YOGESH KHANNA JJ. Petitioner Represented by: Mr.Rakesh Agarwal, Advocate with Mr.Pulkit Agarwal, Advocate Respondents Represented by: None PRADEEP NANDRAJOG, J. 1. A complaint dated December 26, 2000 was received by the Council from the Assistant General Manager, State Bank of India, New Delhi against G.S.Jauhar & Co. of which the respon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s, including the complainant bank (acting in a consortium), sanctioned and granted various capital facilities from time to time to PCL in respect of its business of marketing computers and software. That as per terms of the sanction of the capital it was incumbent upon PCL to ensure that drawings on the account were covered by the advance value of the stock hypothecated to the complainant bank. Various banks and financial institutions had also extended financial assistance to M/s.Altos India Ltd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s sales of software reported developed by PCL was shown to third parties who would in turn show delivery to AIL as a purchaser and from AIL sales were shown to PCL. This loop was repeated many times. IDBI estimated the value of current assets generated through the said process to the tune of ₹ 362 crores being only paper entries, required to be written off. In these circumstances the consortium became suspicious and directed to carry out a special audit. M/s.G.Jai & Associates was assi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e financial position of the company. 3. The complaint was forwarded to the respondent who submitted a written statement of his defence on April 05, 2004, taking the stand that an auditor cannot be held responsible for preventing fraud by a company. The respondent also disputed the report submitted by M/s.G.Jai & Associates. The response was submitted for rejoinder to the complainant who filed the rejoinder on August 09, 2004. Respondent was handed over the rejoinder and he submitted his comm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uditor failed to comment on the same, which in turn established that the auditor was in connivance with the management of the company to defraud the bank and the public. That the respondent was the statutory auditor of PCL since inception and lastly audited the balance sheet for the year ending December 31, 1996. Further, the respondent was the statutory auditor of AIL for the years 1985-86 to 1991-92. The Committee noted that the complainant failed to produce copies of the monthly stock stateme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stand that he was not to look into the statements and his role was to certify the balance sheet only was noted by the Committee. 5. The Committee noted the following findings given by the special auditor in regard to the stock:- 2. Stocks 2.1 Analysis/review of the sales to certain parties accounts (whose accounts are clubbed under the supplier s sub ledger) revealed that SWT sales have been, inter alia, made to the certain selected parties during the year 01.01.1996 to 31.12.1996. 2.2a) Certai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uses weighted average cost (for the main group) for valuing the various stocks. This cost is arrived by determining the weighted average cost of opening stock plus purchases during the year. Moreover, the weighted average cost as determined at the end of year as per the audited accounts is applied throughout the year. For instance, in the current stock statements (January to June 1997), the weighted average cost as determined for the year ended 31.12.1996 is being applied. In the present days of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

had an understanding of the design of the accountant and the internal control system of the company. The committee highlighted that balance sheets of PCL, with reference to the notes to the accounts, showed the method of valuation of Inventory as Weighted Average Cost Method, whereas in Schedule 7 - Inventories, it was stated : valued at cost or market value whichever is less . The committee opined that both disclosures were contrary to each other. The committee further noted that at the time o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lassification of the inventory ought to have been disclosed in the notes to the accounts. The committee further noted that during the period January 01, 1996 to December 31, 1996 huge payments were made by PCL on behalf of AIL but no disclosure of the same was made by the auditor in the report as contemplated by law. Further, there were suspicious adjustment entries between AIL and PCL which ought to have raised a doubt about the genuineness of the transactions and ought to have been detected an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, from 1988-89 onwards that the increase in stock was always higher than the net profit. 27. The modus operandi which was adopted by PCL and AIL was booking as sales of a software reportedly developed by PCL to an outsider party which in turn would be passed on to AIL as purchaser which again would be supplied to PCL as sales. In this process, this loop getting repeated many times but there was no cash flow while the sales and stock/receivables kept on increasing. However, the Company was requir .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

presented merely by book entries are not prejudicial to the interests of the company. 29. However, it is apparently clear that the respondent as Statutory Auditors of the Company for all these years was unable to assess the modus operandi of these transactions which were in the nature of book entry only even though the same was a statutory requirement within the meaning of Section 227(1A)(b) of the Companies Act, 1956, which makes it incumbent on the Auditor to enquire whether such type of trans .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

udit reports for all these years, it has been observed that the respondent also did not comments about the internal control procedures of the Company. The respondent did not apply the necessary checks which is expected of an auditor in the circumstances which were prevalent at that time and did not carry out the comprehensive checks about the actual funds having been received by the Company and about the profits whether they were actually in existence or not. 30. The Committee further noted that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the presence of such risk factors and the auditor s response to them. 50. The auditor must document matters which are important in providing evidence to support the audit opinion, and the working papers must include the auditor s reasoning on all significant matters which require the auditor s judgment, together with the auditor s conclusion thereon. Because of the importance of fraud risk factors in the assessment of the inherent or control risk of material misstatement, the auditor documents f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tandard, refers to the working papers prepared or obtained by the auditor and retained by him, in connection with the performance of his audit. 3. Working papers: .. aid in the planning and performance of the audit; .. aid in the supervision and review of the audit work; and .. provide evidence of the audit work performed to support the auditor s opinion. 32. In view of above, it is very clear that the auditors are required to maintain the working papers and document the same for his reference p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pany from the Complainant. The Committee had given necessary directions to the Complainant to procure these documents from the Official Liquidator of the Company which they were not able to produce even after adjourning the matter number of times. The Committee felt that even in the absence of these documents, there were sufficient papers on record to show that the respondent had not been able to diligently carry out his role as the auditor of the Company for all the years under question. 33. Th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re in public domain and the Respondent as the Statutory Auditor ought to have retained his working papers in those circumstances. Moreover, the Regulation 14 of the Chartered Accountants Regulations, 1988 specify a period of 10 years or more for entertaining a complaint or information but in the said matter the Committee observed that this complaint is not barred as per the Chartered Accountants Regulations, 1988. 35. The Committee felt that an auditor needs to plan and perform this audit with a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

espondent ought to have applied his professional skepticism and should not have accepted these transactions as genuine. Moreover, in view of the Committee, the manner in which the transactions were booked in the books of accounts of the Company ought to have raised an alarm that the financial statements were suspected to have material misstatements which as a prudent auditor, the respondent did not try to assess and accordingly failed in his duties to carry out the audit in a diligent manner and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     Latest Happenings     ↓  

Highlight: Rate of exchange of conversion of the foreign currency with effect from 22th September, 2017 - Notification

Highlight: Companies (Acceptance of Deposits) Second Amendment Rules, 2017 - Notification

Highlight: Implementing Electronic Sealing for containers by exporters under self-sealing procedure prescribed by Circular 26/2017-Cus dated 1st July, 2017 and Circular 36/2017 dated 28 th August, 2017. — reg. - Circular

Highlight: Amendment to Paragraph 2.72 (b) of the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20 - Public Notice

Notification: Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items 2012

Circular: Amendment to Paragraph 2.72 (b) of the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20

Notification: Companies (Acceptance of Deposits) Second Amendment Rules, 2017

Notification: Rate of exchange of conversion of the foreign currency with effect from 22th September, 2017

Forum: Trans1 return

News: Exchange Rate of Foreign Currency Relating To Imported and Export Goods Notified

Forum: Credit on Repair of Company Car & Its Insurance

Circular: Promote the officers of the Indian Revenue Service (Customs and Central Excise) to the grade of Principal commissioner of customs, GST & CX

Circular: Allocate the charges amongst the Members of the Central Board of Excise and Customs

Circular: Strategy for audits in 2017-18 consequent to GST - Audit by Central Excise and service Department to continue for the accounting year 2016-17 and for the past period

Circular: Appoint the IRS (C&CE) officers as Principal Commissioner (Revision Application) and ex-officio Additional Secretary

Circular: Time limit for filing intimation for composition levy under Rule 3(1) of the CGST Rules, 2017 extended to 16-8-2017

Circular: Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Central Goods and Service Tax Rules, 2017

Circular: C.B.E. & C. Advisory on Customs related matters on introduction of Goods and Services Tax regime

Circular: List of Reduced Tax Liabilities under GST regime in comparison to present combined Indirect Tax rates

Circular: Works Contract for construction of Flats, Complex — Builders to pass on GST benefit to buyer otherwise anti-profiteering provisions of Section 171 of GST Act to apply

Circular: Clarification regarding applicability of section 16 of the IGST Act, 2017, relating to zero rated supply for the purpose of Compensation Cess on exports – Regarding.

Circular: Clarification on Inter-state movement of various modes of conveyance, carrying goods or passengers or for repairs and maintenance- regarding

Forum: Duty Drawback & Input Credit - under GST

News: RBI Reference Rate for US $

Highlight: Addition u/s 23(1)(a) - deemed rent - once the property is let out and at any point of time this remained vacant during the same cannot be brought to tax under the head House properties income.

News: Haryana constitutes screening committee on anti-profiteering

Highlight: Valuation of imported goods - it is necessary to re-examine the matter of both license agreement as well as supply contract simultaneously, to see if the enhanced royalty was in the guise of adjustment of the price of components.

Notification: Levy of anti dumping duty on New/unused pneumatic radial tyres with or without tubes and/or flap of rubber (including tubeless tyres) having normal rim dia code above 16 originating in, or exported from China PR

Highlight: Cenvat credit availed on Club Membership for the Director is not admissible as it cannot be said to be remotely connected with the activity of manufacture

Circular: Amendments in Hand Book of Procedures 2015-20 –reg.

News: Jaitley asks biz not to wait till last day to file GST returns

Circular: Implementing Electronic Sealing for containers by exporters under self-sealing procedure prescribed by Circular 26/2017-Cus dated 1st July, 2017 and Circular 36/2017 dated 28 th August, 2017. — reg.

Article: 20 Things You must know about E Way Bills in GST Law

Article: ‘DUTY DRAWBACK’ CANNOT BE EQUATED WITH ‘REBATE OF DUTY’

Highlight: Notification regarding GST rate for branded cereal, pulses and flour

News: Notification regarding GST rate for branded cereal, pulses and flour

Highlight: Anti-dumping duty on import of bus/truck tyres from China

Highlight: Cabinet approves Extension of time period of the Scheme "Special Industry Initiative for J&K" (Sll J&K) - Udaan

Highlight: Non-payment of service tax - maintenance and repair charges - appellants had knowingly and deliberately shown the repair charges as job work charges to mislead about their taxability - demand confirmed.

Highlight: BAS - execution of the project of smart card for vehicle registration – implementing the SOC-VRC project - The fact that the Government has outsourced some part of the work and paid certain consideration for such outsourced work, does not make the activity subject to service tax.

News: Cabinet approves Extension of time period of the Scheme "Special Industry Initiative for J&K" (Sll J&K) - Udaan

Highlight: Constitution of National Anti-profiteering Authority (NAA) under GST-reg. - Trade Notice

Highlight: Amendments in Hand Book of Procedures 2015-20 –reg. - Various amendments are made in Chapter-4 of Hand Book of Procedures 2015-2020.

Circular: Constitution of National Anti-profiteering Authority (NAA) under GST-reg.

Highlight: Sharing of expenses - BAS - promotion of business of group companies - sharing of expenditure for common facilities cannot be treated as service by one to another in such arrangement.

News: RBI Reference Rate for US $

Article: Credit of unsold stock [Section 140(3)] - Actual Credit as well as Notional Credit - Part-I - GST Transitional provisions

Circular: Certain Clarifications sought on Construction Services provided in the Real Estate Sector – reg.

News: Anti-dumping duty on import of bus/truck tyres from China

News: Fast-track GST refund, else ₹ 65K cr may be stuck: Exporters



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version