Key Takeaways From the Findings of ICAI’s Research Committee on Instances of Misconduct & Gross Negligence
- News|Blog|Account & Audit|
- 2 Min Read
- By Taxmann
- Last Updated on 4 December, 2023
Financial statements provide vital information about a company’s financial performance and are important for investors and stakeholders. In order to ensure the credibility of the financial statement, an independent audit is required which assures a true and fair view of the accounting statements and reports of the company.
However, if an auditor fails in these duties, the very utility of independent audit is called into question. Therefore, ICAI takes note of the lapses on part of the auditor to exercise due diligence with utmost seriousness. The Research Committee of ICAI has published such instances of lack of due diligence they have come across in audited accounts and audit reports, in order to create awareness among CAs to avoid such lapses. The research committee has noticed multiple irregularities in the annual accounts of the company signed by the chartered accountant:
(a) Alleged lapses by auditor and observations by the Research Committee on such lapses: The annual accounts were not signed by any director of the Company, the place where the annual accounts were signed was also not mentioned and were undated. The annual accounts were illegible & totally unclear. Respondent submitted a copy of financial statement which was approved by the Directors of the Company and affirmation was given by the directors on affidavit.
(b) Relevant Clause of CA Act violated: A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he does not exercise due diligence, or is grossly negligent in the conduct of his professional duties. [Clause (7) of Part I of the First Schedule of the Chartered Accountants Act,1949]
(c) Key Takeaways: Before signing the audit report, a chartered accountant shall ensure that the annual accounts of the client company must bear the sign of the directors, date of signing, and the place where annual accounts are approved. Further, a chartered accountant shall ensure that the annual accounts must be legible and clear to the stakeholders.
In this story, we have discussed many more instances of misconduct where a CA fails to perform his duty as required under the financial reporting framework and the Chartered Accountants Act and drawing key takeaways from these instances observed by the research committee of ICAI.
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