ICAI Disciplinary Action: CA Suspended for Two Months Over Unverified Financials and Forged Bank Certificate Claims
The integrity of the financial ecosystem relies heavily on the professional diligence of auditors. When financial statements are certified without rigorous verification, it not only jeopardizes the interests of stakeholders but also undermines the credibility of the entire accounting profession. In a significant regulatory decision, the Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has penalized a practicing professional for failing to exercise due diligence.
In the matter of Superintendent of Police, CBI, Anti-Corruption Branch, Chennai Vs CA T.R. Sarathy, the ICAI Disciplinary Committee concluded that the respondent was guilty of severe professional misconduct. The regulatory body mandated the removal of the respondent's name from the Register of Members for a period of two months. This ruling, documented under File No. PR/207/14-DD/223/14-DC/1137/2019 via an order dated 1 May 2023, serves as a stern reminder of the statutory obligations placed upon auditors under the Chartered Accountants Act, 1949.
Background of the Disciplinary Proceedings
The genesis of this disciplinary action traces back to a formal grievance lodged by the Superintendent of Police, Central Bureau of Investigation (CBI), Anti-Corruption Branch, Chennai. The complaint was deeply intertwined with a broader criminal investigation regarding the transfer of credit facilities belonging to M/s Swastik Enterprises. The borrower's accounts were taken over by Canara Bank from Punjab National Bank, Nungambakkam, Chennai.
According to the investigating authorities, this takeover was marred by procedural violations and a suspected conspiracy, which ultimately inflicted a wrongful loss amounting to ₹18.35 crore upon Canara Bank. While the CBI pursued the criminal dimensions of the conspiracy, the ICAI Disciplinary Committee restricted its jurisdiction strictly to evaluating the professional conduct of the respondent Chartered Accountant. The core issue was whether the respondent had adhered to the ethical and professional standards required when issuing financial documents that facilitated the aforementioned banking arrangements.
The Core Allegations
The disciplinary inquiry was anchored on two primary charges of professional misconduct, falling under Clauses (2) and (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
1. Certification of Financial Statements Without Verification
The first major allegation asserted that the respondent had affixed his signature to the balance sheets and profit and loss accounts of M/s Swastik Enterprises for the financial years ending 31 March 2008 and 31 March 2009, without undertaking any substantive examination of the underlying books of accounts or supporting documentation.
During the proceedings, the Committee undertook a comparative analysis of two distinct sets of financial statements for the same entity. One set had been audited and signed by another professional, CA A. Srinivasan, and was submitted to the Income Tax Department for the assessee. The second set, bearing the respondent's signature, was utilized by the borrower to secure enhanced credit limits from the banking institution.