Facts of the Case

A complaint was filed by CA Kamal Kumar Garg against CA Rupesh Nagpal alleging professional misconduct in relation to acceptance of tax audit assignments of M/s Mega Enterprises and M/s Radica Enterprises for the Financial Year 2012–13.

The complainant was the tax auditor of the said entities for the earlier year. It was alleged that the Respondent accepted the tax audit assignments for the subsequent year without first communicating in writing with the complainant, who was the existing auditor, as mandated under the Chartered Accountants Act, 1949 and the Code of Ethics.

The Respondent accepted the tax audit and issued audit reports without obtaining prior written communication or no-objection from the complainant.

Issues Involved

Whether the Respondent accepted tax audit assignments previously held by another Chartered Accountant without first communicating with him in writing, and whether such conduct constituted professional misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The complainant contended that he was the continuing auditor for the relevant entities and that the Respondent violated mandatory ethical requirements by accepting the tax audit without any prior written communication. It was argued that such conduct undermines professional discipline and violates the standards prescribed by the Institute.

The complainant further submitted that prior communication is compulsory irrespective of any understanding between auditors or clients.

Respondent’s Arguments

The Respondent admitted that he did not communicate with the complainant before accepting the tax audit assignments. He submitted that the lapse occurred in good faith and without malafide intention.

The Respondent contended that the complainant had conducted the audit for the earlier year at the request of the incoming auditor and that the complainant was unable to take up the professional assignment for subsequent years. He accepted that failure to communicate was his mistake and assured that he would be careful in future.

Court Order / Findings

The ICAI Board of Discipline examined the complaint, written submissions of both parties, and the relevant provisions of the Chartered Accountants Act, 1949. The Board noted that the Respondent categorically admitted that he did not communicate with the complainant prior to accepting the tax audit of M/s Mega Enterprises and M/s Radica Enterprises for Financial Year 2012–13.

The Board referred to Item (8) of Part I of the First Schedule, which clearly mandates prior written communication with the existing auditor before acceptance of an audit assignment. The Board held that non-compliance with this requirement constitutes professional misconduct, irrespective of intent or subsequent explanations.

Accordingly, the Board concluded that the Respondent was guilty of professional misconduct.

Important Clarification

The Board clarified that prior written communication with the existing auditor is a mandatory professional obligation, and any acceptance of audit without such communication constitutes professional misconduct, even if done in good faith or due to oversight.

Final Outcome

The ICAI Board of Discipline held CA Rupesh Nagpal (M. No. 093500) Guilty of Professional Misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 read with Section 21A(3).

By order dated 10 January 2022, the Board Reprimanded the Respondent.

Source Link- https://www.mytaxexpert.co.in/uploads/1768900081_CA.KamalKumarGargM.No.523961FerozpurCityvsCA.RupeshNagpalM.No.093500Chandigarh.pdf

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