Facts of the Case

A complaint was filed by CA Arun S. Jain, Partner of M/s J M T & Associates, Mumbai, against CA Prashant Ramesh Surve, Partner of M/s Surve & Associates, Mira Road. The complaint related to the statutory audit of M/s British Electric Insulating Co. Private Limited for the Financial Year 2017–18.

The complainant was the statutory auditor of the company prior to the Respondent’s appointment. It was alleged that the Respondent accepted the statutory audit of the company without first communicating in writing with the complainant, as required under the Chartered Accountants Act, 1949 and the Code of Ethics.

The complainant contended that he was neither informed nor consulted prior to the Respondent’s acceptance of the audit assignment and that such acceptance was contrary to established professional etiquette.

Issues Involved

Whether the Respondent accepted the statutory audit assignment previously held by another Chartered Accountant without prior written communication with the previous auditor, 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 argued that the Respondent violated mandatory ethical requirements by accepting the statutory audit without communicating with him in writing. It was contended that prior communication is an essential safeguard to ensure smooth professional transition, settlement of dues and avoidance of professional disputes.

The complainant submitted that non-compliance with this requirement amounted to professional misconduct irrespective of the Respondent’s intent.

Respondent’s Arguments

The Respondent admitted that he did not communicate in writing with the complainant prior to accepting the statutory audit of the company. He submitted that he had prepared a letter for communication but the same was not served on the complainant due to human error on the part of his staff.

The Respondent acknowledged his lapse, accepted his mistake and tendered an apology for not following the procedure prescribed by the Institute. He stated that he had nothing further to submit in the matter.

Court Order / Findings

The ICAI Board of Discipline examined the complaint, written submissions of the Respondent, and relevant provisions of the Chartered Accountants Act, 1949 and the Code of Ethics. The Board noted that the Respondent categorically admitted that he did not communicate with the complainant before accepting the statutory audit assignment.

The Board referred to Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949, which mandates that a member shall communicate in writing with the retiring auditor and retain positive evidence of such communication before accepting an audit assignment.

The Board observed that failure to comply with this mandatory requirement constitutes professional misconduct, regardless of whether the omission was intentional or due to negligence. Accordingly, the Board held the Respondent guilty of professional misconduct.

Important Clarification

The Board clarified that prior written communication with the previous auditor is a mandatory professional obligation, and failure to ensure actual delivery of such communication cannot be excused on the ground of internal or staff-related errors. Compliance must be complete and demonstrable.

Final Outcome

The ICAI Board of Discipline held CA Prashant Ramesh Surve (M. No. 156500) 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.

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