ICAI Investigate on financial misconduct Non-Practicing CA’s

Bombay High Court : Directive to ICAI for former CA professional ethics enforcement

This Bombay High Court ruling in Principal Commissioner of Income Tax vs. M/s Buniyad Chemicals Ltd. underscores the regulatory responsibilities of The Institute of Chartered Accountants of India set up by an act of parliament. The Institute of Chartered Accountants of India is established under the Chartered Accountants Act in addressing financial misconduct by former CAs. The bench of Justice M.S. Sonak and Justice Jitendra Jain questioned whether ICAI is taking action against CAs who, despite surrendering their COP, are involved in illegal financial activities.

Key Takeaways from the Bombay High Court Judgment:

Key Takeaways from the Bombay High Court Judgment in the matter of Principal Commissioner of Income Tax vs. M/s Buniyad Chemicals Ltd  

• ICAI’s Duty to Investigate Non-Practicing Chartered Accountants: The court has directed The Institute of Chartered Accountants of India to inquire into Chartered Accountants who, despite surrendering their Certificate of Practice, misuse their professional background for fraudulent activities.
• Mukesh Choksi & Accommodation Entries: Mukesh Choksi, director of Buniyad Chemicals, admitted to Practicing as a Chartered Accountant from 1978 to 1993 before surrendering his Certificate of Practice. And engaging in accommodation entry business since 2000 to aid tax evasion through shell companies. Moreover that Facing multiple tax department actions, including searches in 2002, 2006, and 2009.
• Court’s Concern on ICAI’s Oversight: The HC questioned whether ICAI has the power to act against individuals who misuse their Chartered Accountant background after surrendering Certificate of Practice. It highlighted that professional accountability should extend beyond active practice to prevent financial fraud.
• ICAI’s Regulatory Mandate Strengthened: The Institute of Chartered Accountants of India has been directed to examine whether Choksi’s actions constitute professional misconduct under the Chartered Accountants Act, 1949. This ruling reinforces The Institute of Chartered Accountants of India’s disciplinary role in tackling financial irregularities within the profession.
• ICAI Directed to Conduct Inquiry : The Bombay HC has now instructed ICAI to investigate whether Mukesh Choksi’s actions amount to professional misconduct under the Chartered Accountants Act, 1949. If found guilty, ICAI could initiate disciplinary proceedings.

In summary Bombay High Court ruling on ICAI ethics enforcement on former CA.

This Bombay High Court ruling is a significant directive for the ICAI to take strict action against CAs operating without a COP also engaged in misconduct. High Court judgement strengthens ICAI’s authority to act against former professionals misusing their expertise. Also Emphasizes professional accountability beyond active practice. High Court ask to reinforce judicial oversight on financial irregularities. And Sends a clear message against fraudulent practices like accommodation entries for CA’s. Bombay High Court Judgment Sets a precedent for stricter oversight of financial misconduct by ex- Chartered Accountants.

ICAI FAQs on Auditor’s Opinion for UDIN Purposes:

Key Points from the Document

1. Compulsory Field : Auditor’s Opinion is mandatory only for GST & Tax Audit, Audit & Assurance Functions
2. Portal Options : Question: “Is Auditor’s Opinion on financial statements applicable to this audit?”
   • If Yes:
     • Select opinion type: Unmodified, Qualified, Adverse, Disclaimer
     • Indicate additional reporting: KAM, EOM, Other Matter, Going Concern
     • Choose Entity Type: Listed / Non-Listed
   • If No: No extra fields.
3. Modified Opinions (SA 705)
   • Qualified Opinion: Material but not pervasive misstatement or lack of evidence.
   • Adverse Opinion: Material and pervasive misstatement.
   • Disclaimer: Material and pervasive inability to obtain evidence.
4. When to Select “No” : Only when true and fair view of financial statements is not required.
5. Not Required For : Concurrent audit, stock audit, revenue audit, internal audit, valuation, system audit, compilation under SRS 4410.
6. Tax Audit (Sec 44AB) : Opinion required under Clause 3(b) of Form 3CB.
7. Special Cases
   • Maharashtra Charitable Trust Act: Opinion required.
   • Going Concern: Report as per SA 570.
   • Audit Trail & IFC reporting: Modifications here do not affect main opinion for UDIN.

• Details of ICAI FAQ on UDIN :link