CA faces Rs 20 lakh penalty and 10-year debarment for failing to submit audit files under Section 132(4)

NFRA found CA committed professional misconduct by failing to submit audit files and related documentation and not responding to show cause notice under Section 132(4) of Companies Act, 2013. The authority established gross negligence in professional duties and non-compliance with NFRA requests under Chartered Accountants Act, 1949. NFRA imposed Rs 20 lakh penalty and 10-year debarment from audit appointments for the CA and audit firm. Order effective after 30 days from issuance.

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Issues Involved:
1. Failure to maintain audit files and cooperate with NFRA.
2. Professional misconduct by CA Anil Chauhan.
3. Penalty and sanctions imposed.

Summary:

1. Failure to Maintain Audit Files and Cooperate with NFRA:
The National Financial Reporting Authority (NFRA) initiated an investigation into the professional conduct of CA Anil Chauhan, the statutory auditor of Seya Industries Limited (SIL) for FYs 2018-19 and 2019-20, following information from SEBI about non-compliance with accounting standards and misreporting in financial statements. Despite repeated requests, the Engagement Partner (EP) failed to submit the required audit files and other information to NFRA, leading to the conclusion that the EP either did not have the documents or was unwilling to cooperate. This failure was deemed a professional misconduct under Section 132(4) of the Companies Act, 2013.

2. Professional Misconduct by CA Anil Chauhan:
The EP was charged with gross negligence and failure to exercise due diligence in conducting the statutory audit of SIL, as well as non-compliance with NFRA's requests for information. The EP's actions were found to be in violation of SA 230 (Audit Documentation) and the Code of Ethics. The persistent failure to maintain and submit audit files and to respond to NFRA's communications was seen as a violation of professional standards and regulatory requirements, constituting professional misconduct.

3. Penalty and Sanctions Imposed:
Given the established professional misconduct, NFRA imposed a monetary penalty of Rs Twenty Lakhs on CA Anil Chauhan and debarred him and his firm, M/s Anil Chauhan & Associates, for ten years from being appointed as auditors or internal auditors, or from undertaking any audit of financial statements or internal audit of any company or body corporate. The order will take effect after 30 days from the date of issuance.

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