NFRA Penalizes CA for Failure to Exercise Due Diligence in Certifying Form 10 DA

In its Order No.0001/2024, dated 03.01.2024, NFRA has fined a CA Rs. 50 Lakhs for lapses in issuing certificate to a listed company in Form 10DA with regard to the correctness of deduction claimed by it under section 80JJAA of the Income-Tax Act, 1961. The major lapse includes-

(a) Failure to verify reorganisation of business with various parties

(b) Failure to exclude employees whose contribution was paid by the Government

(c) Failure to report additional employees during FY 2020-21

(d) Failure to verify payment of additional employee cost by account payee cheque/draft/electronic means

(e) Failure to verify emoluments limit of Rs 25,000 per month for new employees

This story also discusses the key takeaways including-

(a) NFRA’s jurisdiction over auditors of listed companies, other than statutory auditors

(b) Reliance on MRL

(c) Cross-check with annual report while issuing certificates to companies

(d) Apply mind and analyse relevant provisions while interpreting them and document the interpretation arrived at along with the reasons and basis

(e) Reliance on statutory audit report on FS/IFC

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