Facts of the Case

A complaint was filed by CA Hamesh Madaan, New Delhi, alleging professional misconduct by CA Sonika Aggarwal in relation to acceptance of statutory audit of M/s Ornatus Solutions Private Limited for Financial Year 2015–16. The complainant firm had been appointed as statutory auditor of the company earlier and alleged that the Respondent accepted appointment as auditor without first communicating in writing with the complainant as the retiring auditor.

It was further alleged that the Respondent accepted the audit assignment without ascertaining whether the mandatory requirements of Sections 139 and 140 of the Companies Act, 2013 relating to removal and appointment of auditors were duly complied with by the company. The complainant contended that no proper notice of removal was served and that statutory procedures were bypassed.

Issues Involved

Whether the Respondent accepted statutory audit without prior written communication with the retiring auditor in violation of Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949, and whether acceptance of audit without ensuring compliance with Sections 139 and 140 of the Companies Act, 2013 constituted professional misconduct under Item (9) of Part I of the First Schedule.

Petitioner’s Arguments

The complainant submitted that no valid prior written communication was received seeking no objection before acceptance of audit by the Respondent. It was argued that the Respondent relied merely on management representations and failed to verify statutory compliance regarding removal of the existing auditor. The complainant further pointed out discrepancies in dates of resignation, appointment letters and filings before the Registrar of Companies.

Respondent’s Arguments

The Respondent contended that she had sent letters seeking no objection from the complainant and that there was no statutory requirement to obtain an explicit no-objection certificate. She submitted that she relied upon documents provided by the company including Board resolutions, AGM minutes and appointment letters. The Respondent also argued that responsibility for compliance with Sections 139 and 140 primarily rests with the company.

Court / Authority Order and Findings

The Board of Discipline examined the documents placed on record including appointment letters, AGM resolutions, correspondence exchanged between the parties and statutory provisions. The Board observed that Item (8) of Part I of the First Schedule mandates prior written communication with the retiring auditor before acceptance of audit, and mere absence of response does not amount to compliance.

The Board further observed that an incoming auditor is duty-bound to independently verify compliance with Sections 139 and 140 of the Companies Act and cannot rely solely on management representations. The Board noted inconsistencies in the dates and sequence of events and held that the Respondent failed to establish due diligence before accepting the audit assignment.

Accordingly, the Board concluded that the Respondent committed professional misconduct under Items (8) and (9) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Important Clarification

The Board clarified that incoming auditors must ensure strict compliance with ethical and statutory requirements before accepting audit assignments. Prior written communication with the retiring auditor and verification of statutory removal procedures are mandatory safeguards and cannot be treated as mere formalities.

Final Outcome

The ICAI Board of Discipline held CA Sonika Aggarwal (M. No. 510834) guilty of Professional Misconduct falling within the meaning of Items (8) and (9) of Part I of the First Schedule to the Chartered Accountants Act, 1949. In exercise of powers under Section 21A(3) of the Act, by order dated 19 April 2023, the Board reprimanded the Respondent.

Source Link- https://www.mytaxexpert.co.in/uploads/1768820294_CA.HameshMadaanNewDelhivsCA.SonikaAggarwalM.No.510834Noida.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.