Independent verification of audit balances required; inconsistent certification and unreported material changes justify professional misconduct findings.

A chartered accountant must independently verify material balances, confirm disputed figures and ensure audit reports accurately reflect changes in accounts; failure to reconcile inconsistent balances, obtain proper confirmation, or report a material revision in audited figures amounts to professional misconduct. The Delhi High Court affirmed that certifying the complainant's deposit at one figure and later reducing it without a credible factual basis, while also neglecting to check the annexure against the members' register or secure independent confirmation in a known dispute, justified disciplinary action. The court also upheld the sanction of removal from the register for one year as proportionate to the gravity of the misconduct.

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Issues: (i) Whether the respondent was guilty of professional misconduct in certifying inconsistent balances in the audit reports without proper verification and confirmation; (ii) Whether the proposed penalty of removal of name from the register for one year was warranted.

Issue (i): Whether the respondent was guilty of professional misconduct in certifying inconsistent balances in the audit reports without proper verification and confirmation.

Analysis: The respondent certified the complainant's deposit at Rs. 6.88 lakhs for two years and later reduced it to Rs. 3.88 lakhs without a credible factual basis. The explanation based on dishonoured cheques did not match the amount difference, and the alternative explanations were unsupported and internally inconsistent. The respondent also failed to verify the annexure against the members' register and did not obtain independent confirmation despite a known dispute in the society. The material change in balances was not reported in the audit report.

Conclusion: The respondent was held guilty of professional misconduct.

Issue (ii): Whether the proposed penalty of removal of name from the register for one year was warranted.

Analysis: In view of the gravity of the misconduct, the disciplinary findings were accepted and the recommended sanction was considered appropriate.

Conclusion: The penalty of removal of the respondent's name from the register for one year was upheld.

Final Conclusion: The disciplinary findings were affirmed and the respondent was subjected to the specified professional sanction.

Ratio Decidendi: A chartered accountant must independently verify material balances and obtain proper confirmation where discrepancies or disputes are apparent; failure to do so, coupled with an unreported material change in audited figures, constitutes professional misconduct.

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