Institute of Chartered Accountants of India removed a CA's name for one year for failing to report material financial irregularities and going concern risks in audit of a company involved in ₹1,150 crore fund diversion.
ICAI Penalizes CA for Audit Lapses in ₹1,150 Crore Siphoning Case
The Institute of Chartered Accountants of India (ICAI) has removed a chartered accountant’s name from the register for one year for professional misconduct in failing to report large-scale financial irregularities and going concern uncertainties during an audit.
The audit in question pertained to a company where ₹1,150 crore was allegedly siphoned off through fictitious transactions and related-party deals. The Disciplinary Directorate found that the CA failed to exercise due diligence under SA 250 and SA 570, neglected red flags, and did not qualify the audit report despite clear indicators of material misstatements and liquidity crises.
ICAI held that auditors have a statutory duty under Section 143 of the Companies Act, 2013 to report fraud and disclose going concern risks. The failure to do so, particularly in cases involving systemic financial manipulation, constitutes serious breach of professional ethics.
'An auditor is not a mere watchdog but a bloodhound; passive acceptance of management representation without verification is unacceptable,' ICAI observed.
The order serves as a stern warning to auditors to prioritize professional skepticism, especially in high-risk sectors. Firms must strengthen internal review mechanisms to prevent similar lapses.
Citations
- Companies Act, 2013, Section 143
