The National Financial Reporting Authority of India just laid down the law on a certain Chartered Accountant Auditor. They didn’t pull any punches and hit them with a fat penalty of Rs.1 Lakh for some seriously incorrect Accounting Treatment.
Yeah, you heard it right. This CA Auditor now has a not-so-nice surprise waiting for them in the form of a hefty penalty. Turns out, the National Financial Reporting Authority of India wasn’t too pleased with their accounting shenanigans.
So, here’s what went down. The Ministry of Corporate Affairs caught wind of some fishy business in the financial statements of Nicco for FY 2015-16. That set off alarm bells, leading the Financial Reporting Review Board (FRRB) of the ICAI to launch an investigation into the role of the Statutory Auditors. And guess who was in the hot seat? M/s G. Basu & Co., the statutory auditors of Nicco, and CA Gautam Guha, the EP for the statutory audit during that period.
After digging into the FRRB report and taking a quick peek at Nicco’s financial statements and the Audit File submitted by the EP, the investigators smelled something rotten. Yep, they found clear evidence of professional misconduct. It was serious enough to warrant a Show Cause Notice being slapped on the responsible party.
We went through all the charges listed in the Show Cause Notice and the EP’s responses, and let’s just say things didn’t look good for the EP. They dropped the ball big time during the statutory audit of Nicco.
The laundry list of failures includes several accounting deficiencies like not reporting a foreign currency liability of a whopping 1.83 Crore at the closing rates on the financial statement dates (31.03.2015 and 31.03.2016). That’s a major violation of AS 11, folks. On top of that, they mistakenly showed assets given on finance lease worth Rs.81 Crore, even though the lease agreements had gone belly up and the assets had turned into NPAs.
The EP also neglected to include several items as per the format given in Schedule III to the Companies Act, 2013.
They even made references to the outdated Companies Act, 1956, instead of the one that actually mattered, the Companies Act, 2013. That’s a serious faux pas, my friends. And if that wasn’t enough, they managed to feature two different values of Earning Per Share (EPS) in the same financial statements.
To top it all off, they conveniently left out important details in the notes to the financial statements. Not cool, EP, not cool. These glaring omissions and slip-ups somehow didn’t make it into the Independent Auditor’s Report.
So, here’s the verdict: the EP failed to report the Company’s non-compliance with Accounting Standards and the proper format of Financial Statements required by the Companies Act, 2013. They didn’t even bother following the Standards on Auditing (SA) that were relevant to the audit of the Company. Talk about a major dereliction of duty!
Now, the moment we’ve all been waiting for: the punishment. After finding the EP guilty of professional misconduct based on their numerous failures during the Statutory Audit, it’s time to pay up. Brace yourselves, because this Order slaps the EP with a monetary penalty of Rupees One Lakh (Rs.1,00,000).