Chartered Accountant Debarred for Omitting Accrued Interest in Financial Statements
- Blog|News|Account & Audit|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 21 August, 2023
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After getting information about irregularities in the Financial Statement from the Financial Reporting Review Board (FRRB) of ICAI, the National Financial Reporting Authority (NFRA) initiated an investigation against the Chartered Accountant who is also the engagement partner of the company. Based on the investigation and after keenly observing the audit file submitted by the Engagement Partner (EP), NFRA framed EP with the following charges:
1. The Engagement Partner failed in reporting outstanding interest on the loan from banks which has resulted in the under-reporting of losses by 8 times. This material misstatement is pervasive and the auditor is charged with non-compliance with sections 128 and 129 of the Companies Act, 2013 and AS 1 by not recognizing the accrued interest against the loan.
2. The company is consistently making losses and still it recognizes DTA in the financial statement. The auditor failed to report the recognition of DTA has significantly understated the loss of the company for the given financial year. Further, the audit file does not have convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized by the company. The Chartered Accountant clearly violated the provisions of AS 22.
3. The auditor failed in identifying the non-compliances with the format of financial statement prescribed under Division I of Schedule III of the Companies Act.
4. Auditor is required to assemble the final audit file within 60 days after the date of audit report. However, the auditor charged with failure in complying with the provision of SA 230 in assembling final audit file within 60 days.
NFRA charged the Chartered Accountant with a monetary penalty of Rs. 100,000 and debarred for one year from being appointed as an auditor or internal auditor of any entity.
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