[Opinion] Can NFRA Hold Auditor of a Listed Company Guilty Under Clause 2 of Part III of First Schedule of CA Act?

CA Srinivasan Anand G. – [2024] 158 taxmann.com 290 (Article)

Backdrop

Pursuant to information received from the Securities and Exchange Board of India (SEBI) about the non-compliance with the accounting standards by the company; misreporting in the financial statements; and non-cooperation by the auditor, the National Financial Reporting Authority (NFRA) initiated investigation into the professional conduct of statutory auditors of a Mumbai based listed company under Section 132(4) of the Companies Act, 2013 (‘Act’ hereafter).Despite multiple repeated reminders from NFRA, the CA who was Engagement Partner neither responded nor submitted the audit file. Due to non-co-operation, the NFRA passed an ex-parte order (Order No. 002/2024, dated 05.01.2024) concluding that Non-co-operation by way of failure to supply the information called for, and non-compliance with the requests of NFRA, amounted to professional misconduct as defined in clause 2 of Part-III of First Schedule of The Chartered Accountants Act, 1949.

Clause 2 of Part-III of First Schedule of the Chartered Accountants Act, 1949

Clause 2 of Part-III of First Schedule of the Chartered Accountants Act, 1949 provides that a member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he does not supply the information called for, or does not comply with the requirements asked for,

• by the Institute,
• Council or any of its Committees,
• Director (Discipline),
• Board of Discipline,
• Disciplinary Committee,
• Quality Review Board or
• the Appellate Authority

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