Professional misconduct requires knowing omission; mere negligence or error of judgment by an auditor is not enough.

A chartered accountant is liable for professional misconduct only where a material omission is shown to be knowing and culpable; mere negligence or an error of judgment is insufficient. The HC held that the auditor was not bound to suspect irregularity absent material raising suspicion, and on the facts there was no proof that he knew the managing agents' term had expired or consciously suppressed that fact in the accounts. His conduct was therefore at most an excusable mistake, not professional misconduct, and the exoneration by the Council was upheld.

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Issues: Whether the respondent-chartered accountant was guilty of professional misconduct or gross negligence in failing to detect and report the irregular continuation and remuneration of the managing agents, and whether the evidence established that he knowingly omitted a material fact from the financial statement.

Analysis: The governing standard for an auditor is not perfection but reasonable care and skill in the circumstances. An auditor is not an insurer, nor is he bound to be suspicious in the absence of material that ought to excite suspicion. On the facts found, the respondent had acted on the footing that the managing agents were validly in office, and there was no proof that he actually knew that their term had expired when he audited the accounts. The record did not establish a conscious suppression of a material fact known to him. At most, the conduct disclosed an excusable error of judgment and not the moral culpability associated with professional misconduct. The delay in initiating proceedings also reinforced the view that the charge was not made out on the evidence.

Conclusion: The allegation of professional misconduct was not proved, and the finding of the Council exonerating the respondent was upheld.

Ratio Decidendi: A chartered accountant is guilty of professional misconduct only when the material omission is shown to be knowing and culpable; mere negligence or an error of judgment, without proof of conscious disregard of a known material fact, does not amount to professional misconduct.

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