Professional misconduct by chartered accountants arises when audit statements are certified without reasonable verification and care.

A chartered accountant who certifies audit statements without proper verification of books, trial balance, or third-party confirmations acts without the reasonable professional skill and care expected of the profession. Where the balance sheet and profit and loss account contain material discrepancies, such perfunctory certification is treated as gross negligence and omission, not a mere clerical lapse. The disciplinary provisions of the Chartered Accountants Act, 1949 therefore apply, and professional misconduct is established when incorrect audit statements are signed despite inadequate checking. On that basis, severe reprimand is an appropriate sanction.

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Issues: Whether the respondent chartered accountant was guilty of professional misconduct by reason of gross negligence and omission in certifying incorrect audit statements, and whether the misconduct warranted severe reprimand.

Analysis: The respondent admitted guilt before the disciplinary committee. The audited balance sheet and profit and loss account contained material discrepancies in closing stock figures, yet the balance sheet was signed without proper verification of the books, trial balance, or third-party confirmations. A chartered accountant is expected to exercise reasonable professional skill and care, particularly where his audit report is relied upon for income-tax assessment purposes. On the record, the incorrect certification was not a mere clerical lapse but a failure to discharge the duties expected of a professional auditor, amounting to gross negligence and omission within the disciplinary provisions of the Act.

Conclusion: The respondent was rightly held guilty of professional misconduct under clauses (7) and (8) of Part I of the Second Schedule read with sections 21(5) and 22 of the Chartered Accountants Act, 1949, and the penalty of severe reprimand was upheld.

Ratio Decidendi: A chartered accountant commits professional misconduct where he certifies audit statements without exercising reasonable verification and professional care, and such perfunctory certification amounts to gross negligence and omission under the disciplinary law governing the profession.

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