Accountant sanctioned for audit appointment violations & misconduct under Companies Act, 2013

CA Akash Goel was found guilty of accepting an audit appointment without complying with legal requirements and failing to adhere to Standards on Auditing. The EP's professional misconduct included lack of due diligence, negligence, and non-compliance with various SAs. As a result, a penalty of Rs 100,000 and a one-year debarment from audit-related roles were imposed under Section 132(4)(c) of the Companies Act, 2013.

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Issues Involved:
1. Acceptance of audit appointment without complying with mandatory legal and ethical requirements.
2. Failure to comply with Standards on Auditing (SAs).
3. Professional misconduct by the Engagement Partner (EP), CA Akash Goel.
4. Penalty and sanctions imposed on CA Akash Goel.

Summary:

I. Acceptance of Audit Appointment Without Complying with Mandatory Legal and Ethical Requirements:

CA Akash Goel accepted the branch audit appointment for Dewan Housing Finance Limited (DHFL) without verifying the legal validity of his appointment. The appointment was issued by an "Authorized Signatory" without the approval of the Board and shareholders, violating Section 139 of the Companies Act, 2013. The EP admitted during the oral hearing that the requirements of both the Companies Act, 2013 and the Chartered Accountants Act, 1949 were not met. This non-compliance constitutes professional misconduct under Section 132(4)(c) of the Companies Act, 2013.

II. Failure to Comply with Standards on Auditing (SAs):

CA Akash Goel failed to comply with several Standards on Auditing (SAs) during the conduct of the audit. Specific violations include:

- Non-Compliance with SA 210 "Agreeing the Terms of Audit Engagements": The EP did not issue an audit engagement letter containing all required details as per SA 210, resulting in an invalid appointment and a flawed understanding of the audit scope.
- Non-Compliance with SA 230 "Audit Documentation": The EP's audit documentation did not provide evidence of the nature, timing, and extent of audit procedures performed, results obtained, and conclusions reached. The absence of sufficient documentation violates SA 230.
- Non-Compliance with SA 700 "Forming an Opinion and Reporting on Financial Statements": The EP issued an unmodified opinion despite not receiving around 50% of the material requisitioned for audit, violating SA 700.
- Non-Compliance with Other SAs: The EP failed to comply with several other SAs, including SA 300, SA 315, SA 320, SA 450, SA 500, SA 510, SA 520, SA 530, and SA 580, as detailed in the judgment.

III. Professional Misconduct by the Engagement Partner (EP), CA Akash Goel:

CA Akash Goel was found guilty of professional misconduct due to his failure to ascertain the validity of his appointment, lack of due diligence, gross negligence, and non-compliance with SAs. The specific charges established include:

- Failure to ascertain compliance with Section 139 of the Companies Act.
- Gross negligence and lack of due diligence in professional duties.
- Failure to obtain sufficient information necessary for expressing an opinion.
- Failure to highlight material departures from generally accepted audit procedures.

IV. Penalty and Sanctions Imposed on CA Akash Goel:

Considering the professional misconduct and the nature of violations, the following sanctions were imposed on CA Akash Goel under Section 132(4)(c) of the Companies Act, 2013:

- Imposition of a monetary penalty of Rs 100,000 (One Lakh).
- Debarment for one year from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of any company or body corporate.

This order will become effective after 30 days from the date of issue of this order.

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