Facts of the Case

The complainant, CA Rahul Bansal, partner of M/s NPRA & Associates (earlier M/s AVRP & Associates), alleged that his firm was appointed as the first statutory auditor of M/s Darzi-On-Call Services Pvt. Ltd. for Financial Year 2015–16 and that Form ADT-1 had been duly filed. It was contended that the complainant neither resigned nor was removed from office. However, the respondent, CA Puneet Gupta, allegedly conducted statutory audits of the company for Financial Years 2015–16 and 2016–17 without obtaining a No Objection Certificate (NOC) from the complainant, thereby violating Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

The respondent asserted that he was appointed as the first auditor by the Board of Directors, had no reason to believe that any outgoing auditor existed, and that the complainant was only engaged for incorporation and related compliance work. The company’s director also disputed the complainant’s appointment as auditor and alleged misuse of digital signatures and incorporation documents.

Issues Involved

Whether the respondent Chartered Accountant was guilty of professional misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 for accepting statutory audit assignment without obtaining NOC from the complainant, and whether the complainant was in fact a validly appointed outgoing auditor.

Petitioner’s Arguments

The complainant argued that his firm was appointed as first auditor through a valid board resolution dated 31.08.2015 and ADT-1 filing, and that the respondent failed to exercise due professional diligence by not seeking NOC before accepting the audit. It was contended that the complainant continued to hold office as first auditor and that acceptance of audit without NOC constituted clear violation of professional ethics.

Respondent’s Arguments

The respondent submitted that he was appointed as first auditor by a board resolution dated 18.08.2016 and had no knowledge of any outgoing auditor. He contended that the complainant was merely engaged as a consultant for incorporation purposes and that the documents relied upon by the complainant were forged and unauthorised. It was further submitted that the matter arose due to communication gaps, staff changes and missing records, and that the complainant raised the issue after an unexplained delay.

Court Order / Findings

The Board of Discipline examined the board resolutions, ADT-1 filings, correspondence, and deposition of the company’s director. The Board noted that both parties claimed appointment as first auditor but the appointment dates differed. The Board relied significantly on the company director’s letter dated 12.04.2019 and sworn deposition, wherein it was categorically stated that the complainant was never appointed as auditor and had unauthorisedly uploaded documents using digital signatures obtained during incorporation work.

The Board observed that the complainant was in possession of the company’s digital signatures and incorporation documents and failed to return them despite repeated requests. It was held that the complainant’s alleged appointment as auditor was based on fake and bogus documents. The Board further noted that the complainant approached the ICAI in 2018 whereas the alleged cause of action arose in 2015, raising doubts about the genuineness of the complaint. The complainant also failed to appear before the Board.

On these facts, the Board concluded that the respondent, being appointed as first auditor in 2016, had no reason to believe that there was an outgoing auditor, and therefore the requirement of obtaining NOC did not arise.

Important Clarification

The Board clarified that the obligation to obtain NOC arises only when there exists a validly appointed outgoing auditor. Where the alleged appointment of a prior auditor is found to be based on forged or unauthorised documents, acceptance of audit by another Chartered Accountant does not attract misconduct under Item (8) of Part I.

Final Outcome

The Board of Discipline, ICAI, held that CA Puneet Gupta was NOT GUILTY of professional misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949. The case was closed under Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, by order dated 12.06.2024.

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