Professional Misconduct / negligence of a practicing Chartered Accountant

In the matter of CA Rajesh Versus Disciplinary Committee [2012 (12) TMI 510 - GUJARAT HIGH COURT]

**Editorial Comments:

The case pertains to negligence of a practicing Chartered Accountant and disciplinary enquiry and action taken by the ICAI, by recommending removal of name of the CA from the register of members of ICAI. This was  on a complaint from the Central Excise Department. On cursory reading of the judgment, author feels that the CA and his counsel had tried to make out case more on technical grounds, instead of first showing that the CA had taken proper care and diligence by deputing competent assistants, for checking and verification, and that checking, verification was completed by audit team  and again checked and verified by senior assistants, before finalizing and signing the report by the CA. It was also not explained that the client also had competent officers and staff and had designed suitable system for internal check and controls about compilation of information about facts and figures which are incorporated in the report submitted by the CA, and in the given circumstance auditor can reasonably rely on the same.

 The mistakes were admitted but reasons for such mistakes could not be found and conveyed except saying that the mistakes were of clerical, typographical mistakes due to copy paste method adopted. It was not submission that in spites of reasonable care in checking such mistake remain undetected  due to oversight, eye sight illusion on figures, communication errors in course of checking etc. The CA could not make out a case that he had taken reasonable care which could be taken and is expected to be taken by a CA who is signing the report. It was not also a case that in assignments of audit and attestation, the CA who signs the report has to heavily rely on workings done by the team of client and audit team of CA and that it is not humanly possible for the signatory of the report to check and verify each and every figure contained in the report and that signatory had to rely on the work of properly organized and instructed audit team.  

Contributed by: CA Dev Kumar Kothari

Refer: CA Rajesh Versus Disciplinary Committee [2012 (12) TMI 510 - GUJARAT HIGH COURT]

Professional negligence: disciplinary scrutiny when an auditor fails to show reasonable care, verification, and supervisory reliance. The disciplinary enquiry addressed whether the chartered accountant exhibited the reasonable care and supervisory verification expected of a signatory, including deputing competent assistants, ensuring systematic checking and senior cross verification, and reasonably relying on client workings and internal controls; admitted clerical errors attributed to copy paste were not shown to be consistent with acceptable professional procedures or documented supervisory safeguards.