Due diligence in concurrent audit reporting: delayed disclosure of banking irregularities amounted to professional misconduct, but the penalty was reduced.

Failure by a concurrent auditor to promptly report material banking irregularities and breaches of sanctioned limits constituted professional misconduct because due diligence required immediate detection and reporting through audit channels. The absence of mala fides and the explanation offered did not excuse the delay, and the disciplinary inquiry was not disturbed as it was fairly conducted without breach of natural justice. The misconduct finding was sustained, but the proposed six-month removal from membership was reduced to a reprimand because the long lapse of time made the original sanction excessive.

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Issues: (i) Whether the respondent, a chartered accountant appointed as concurrent auditor, was guilty of professional misconduct for failing to exercise due diligence in reporting serious banking irregularities; and (ii) whether the proposed penalty of removal from membership for six months was warranted or ought to be modified.

Issue (i): Whether the respondent, a chartered accountant appointed as concurrent auditor, was guilty of professional misconduct for failing to exercise due diligence in reporting serious banking irregularities.

Analysis: The respondent was under a duty to promptly detect and report irregularities, excesses, and sanctioned-limit breaches through flash reports and related audit reporting. The evidence showed that the irregularities were not reported immediately and were instead reported only after the bank's internal inspection, with a delay of nearly two months. The explanation based on family circumstances was not accepted, and the Court held that the absence of mala fides did not prevent the conduct from amounting to professional misconduct where due diligence was not exercised. The Court also held that interference with the disciplinary findings was unwarranted because the inquiry was fairly conducted and no violation of natural justice was shown.

Conclusion: The respondent was held guilty of professional misconduct for failure to exercise due diligence.

Issue (ii): Whether the proposed penalty of removal from membership for six months was warranted or ought to be modified.

Analysis: Although the misconduct finding was upheld, the Court took into account the long lapse of time since the disciplinary proceedings and considered that imposing removal from membership at such a belated stage would be excessive. The Court held that a lesser sanction would adequately serve the ends of justice while still reflecting the proved misconduct.

Conclusion: The proposed penalty of removal from membership for six months was modified to a reprimand.

Final Conclusion: The disciplinary finding was sustained, but the sanction was reduced to a lesser punishment in view of the prolonged delay in the proceedings.

Ratio Decidendi: Failure by a chartered accountant to promptly report material audit irregularities, in breach of the duty of due diligence, constitutes professional misconduct, but the appropriate sanction must remain proportionate to the misconduct and the circumstances of delay.

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