Wednesday, August 3

ICAI recommends action against auditor for profession misconduct

The Institute of Chartered Accountants of India (ICAI), which has been set up by an Act of Parliament, has decided to recommend to the High Court that a member CA R Laxminarayan of C C Chokshi & CO be removed from the Register of Members for one year for professional misconduct.
The ICAI has said it is recommending this step after due consideration of the report of their Disciplinary Committee and after detailed hearings on a complaint against the pension fund’s auditor for negligence and non-observance of laid down accounting standards.
This decision by the ICAI comes amidst the protracted long drawn court case between Britannia Industries and its Pensioners Welfare Association (PWA). The PWA had charged the referred auditor (CA R Laxminarayan) for “serious misconduct in deliberate permitting of the illegal withdrawal and refund to Britannia Industries Limited of little over Rs 12 crore from the Pension Fund” amongst others as one of the reasons for non-payment of pensions to the retiring officers and managers from April 2003.

The Income Tax Department has issued a showcause notice to Britannia for this withdrawal which is not permitted by the Income Tax and Pension Fund rules, as per Calcutta High Court order. Hence, Britannia had to return the amount and deposit it in a nationalised bank.
The PWA has been fighting a legal battle with Britannia Industries stating that Britannia had stopped the payment of “due pension to Managers and Officers (as per the Fund rules) who retired after March 2003, attempting to retrospectively convert the Defined Benefit Pension Funds to Defined Contribution Scheme”.
It was in this context that CA R Laxminarayan was appointed both as a consultant and the auditor for the Pension Funds in 2003, and PWA is alleging that the referred auditor was negligent in carrying out his professional duties in ignoring the statutory accounting standards. It had also not disclosed the conflicting paid consultancy role to Britannia at the same time which had affected his independence as auditor.
When contacted, Deloitte India which has a pact with C C Chokshi & CO in India, declined to comment.

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