Flawed auditing of accounts of the scam-tainted Megacity (Bangalore) Developer and Builders Ltd., owned by Forest Minister C.P. Yogeshwar, has proved costly for a city-based Chartered Accountant (CA).
After the end of the disciplinary proceedings spread over six years, the Council of the Institute of Chartered Accountants of India (CICAI), in its recent order, has found that M.L. Srinath is “guilty” of professional misconduct for flawed auditing of accounts of the company for the year-ended March 31, 2005.
He has been found guilty on five types of professional misconduct as per Clauses 5, 6, 7, 8 and 9 of Part-I of the Second Schedule to the Chartered Accountants Act, 1949, which relates to professional misconduct in relation to chartered accountants in practice.
As punishment, the CICAI has decided to recommend to the High Court the removal of Mr. Srinath’s name from the Register of Members for a period of one year, during which he will be banned from signing any documents either as a CA in practice or on behalf of a firm of CAs in a professional capacity.
Now, on receipt of a petition from the CICAI, the High Court will afford the third opportunity to the CA to defend himself before passing the order confirming, rejecting or modifying the order/punishment given by the CICAI.
The CICAI’s order has affirmed the findings and recommendation of the disciplinary committee, which had inquired into the complaint filed by Ravindra Beleyur, president of Megacity (Bangalore) Developers & Builders Ltd. Site Members’ Welfare Association against the CA in 2006.
Some of the wrongdoings by the CA as found by the disciplinary committee include a wrong statement that the company had followed accrual-basis accounting while documents showed it was cash-basis accounting; failure to audit one of the company’s bank accounts; inadequate verification of sundry creditors; non-confirmation of balances of sundry creditors, current liabilities; secured loans, and share application, fixed assets and advance/loans given to the directors of the company.
The disciplinary committee and the CICAI did not accept his claim that the management of the company did not make available to him certain records. It said the CA could have either summoned the records or made remarks about non-availability of records in his audit report.
“As regards the charge related to follow of cash-basis accounting, the Council noted that the Respondent’s [CA] contention that it was only a typographical error in all the successive years was not tenable and such a line of defence only spoke of the carelessness with which the CA approached his assignment every year,” the CICAI noted in its order.
