Facts of the Case

The disciplinary proceedings arose from a complaint filed by CA Rakesh Rastogi (M. No. 071136), Badaun, against CA Viral Rastogi (M. No. 431829), partner of M/s Ravindra Kumar & Associates. The complaint related to the tax audit of M/s Rastogi Computers for the Financial Year 2018-19, which the respondent accepted without first communicating in writing with the previous auditor, i.e., the complainant.

Under the ICAI Code of Ethics, prior written communication with the outgoing auditor is a mandatory professional requirement before accepting an audit assignment. The respondent admitted in his written submissions that he failed to communicate with the complainant before accepting the audit and expressed regret, attributing the lapse to inexperience and work pressure near the tax audit deadline.

Two additional allegations were also raised, namely that the respondent’s name did not appear on the Income Tax Department portal as statutory auditor and that the audit was completed within a single day, suggesting lack of due diligence.

Issues Involved

Whether acceptance of a tax audit assignment without prior written communication with the outgoing auditor constituted professional misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949, and whether disciplinary action under Section 21A(3) was warranted.

Petitioner’s Arguments

The complainant submitted that the respondent violated mandatory ethical requirements by accepting the tax audit without prior written communication and requested that the matter be decided on merits based on the documentary record already filed.

Respondent’s Arguments

The respondent admitted the lapse of not communicating with the outgoing auditor and tendered an unconditional apology, stating that he was newly qualified at the relevant time and that the omission was unintentional. He denied the other allegations and submitted evidence from the Income Tax portal confirming his appointment as auditor.

Court Order / Findings

The Board of Discipline examined the record and observed that while three allegations were initially raised, only the failure to communicate with the outgoing auditor was substantiated. The Board found that the respondent produced valid evidence establishing his appointment as statutory auditor and that completion of audit within a short time does not, by itself, indicate negligence.

With respect to the sustained allegation, the Board held that prior communication with the previous auditor is a mandatory ethical requirement intended to maintain transparency and integrity of the audit process. In view of the respondent’s admission and absence of documentary proof of compliance, the Board concluded that the respondent violated Clause (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 and was guilty of professional misconduct.

Important Clarification

The Board clarified that compliance with the requirement of prior written communication before accepting an audit assignment is fundamental to professional discipline and cannot be dispensed with on grounds of inexperience or work pressure. Even a single lapse in this regard constitutes professional misconduct.

Final Outcome

The Board of Discipline, exercising powers under Section 21A(3) of the Chartered Accountants Act, 1949, imposed a fine of ₹10,000 (Rupees Ten Thousand only) on CA Viral Rastogi (M. No. 431829) for professional misconduct.

 Source Link- https://www.mytaxexpert.co.in/uploads/1768890793_CA.RakeshRastogiM.No.071136vsCA..pdf

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