NFRA has concluded the investigation of the SEBI complaint dated 25/08/2021, wherein CA Som Prakash Aggarwal (ICAI Membership No. 74813 and Partner of CA Firm M/s S. Prakash Aggarwal & Co.) has been found guilty of professional misconduct on multiple counts in the matter of audit of VIKAS WSP LIMITED (VWL), Sri Ganganagar for the FY 2019-20, including for non-reporting of the substantial fact that the company has failed to recognize the interest costs on bank borrowings.
Accordingly, NFRA has issued a detailed Order dated 12/09/2022, which has imposed a monetary penalty of Rs. 3 Lacs and debarred CA Som Prakash Aggarwal for 3 years from being appointed as Auditor of any Institution or Company/ Body Corporate, besides advising him to acquire proper knowledge of Standards on Auditing (SAs) and Indian Accounting Standards (Ind AS).
SEBI had complained that the company did not recognize the interest costs on its bank borrowings while preparing/ presenting the Financial Statements/ Profit and Loss Account for the FY 2019-20, which resulted in material/ significant overstatement of profits by the company, to the extent of Rs. 16.91 crore (about 88% of the PBT).
Based on the replies of CA Som Prakash Aggarwal to it’s SCN, the NFRA has observed/ concluded that the primary function of the Auditor in the present case was to ensure compliance with SAs to achieve the necessary audit quality to lend credibility to financial statements and facilitate its users. A critical, questioning attitude, an unwillingness to be satisfied by superficial explanations, not concluding on material matters without rigorous verification, diligent and methodical cross verification, proper planning and the meticulous execution of the audit plan etc. are fundamental to audit quality. As detailed in this order, CA Som Prakash Aggarwal despite being a qualified professional, has not conducted the said audit on these parameters, not adhered to the standards and has thus not discharged the duty cast on him. Under the circumstances, we proceed to order the following sanctions keeping in mind deterrence, proportionality and the signaling value of sanctions:
i) Imposition of a monetary penalty of R 3,00,000 (Three Lakhs only) upon CA Som Prakash Aggarwal.
ii) CA Som Prakash Aggarwal is debarred for three years from being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
Further, in view of poor understanding of Standards on Auditing and Ind AS, the NFRA has advised CA Som Prakash Aggarwal to undertake training on Standards on Auditing and Ind ASs from ICAI or any institution recognized by the ICAI or equivalent International Institution and submit the proof of completion of such training to NFRA within 6 months.
NFRA Order dt. 12/09/2022: NFRA Order debars CA Som Prakash Aggarwal for 3 years; imposes penalty of Rs. 3 lac (Audit of VIKAS WSP LIMITED FY 2019-20)
What is the process to initiate such enquiry by NFRA? I was not able to tally PBT of Vikas WSP. Good work done NFRA. Thanks
There should be similar accountability for advocates who many a times produce false witnesses, file false affidavits, seek unjustifiable adjournments. There should be a similar Regulator comprising of retired civil servants.
Mr. Sundar. Pls do not compare this situation with Advocates. Most of the Advocates are very genuine in their profession. Audit is important for the sake of all stake holders. Maintaining the reliability on the assignments is expected by various set up, the organisations, the Companies, and all the businessmen. Mr. CA Som Prakash Aggarwal were given some irrelevant replies while submitting the responses. He done the mistakes. The AS and Ind AS are only the informative as such the auditor can be taken some practical decisions, as given replies to the NRFA. The NRFA is a necessary authority in this situation and what is the lesson we should learn is, mainly that the auditor does not rely upon any things as given by management. The fee is only secondary and negligible. The auditor has to obtain for all replies for the questions are raised for clarifications. and please obtain the written explanations with proof. If not possible, please ignore such assignment and not accept the audit of such kind of company. THE MONEY is not IMPORTANT for any proacting Chartered Accountants because our profession is at most important. WISHES FOR A VERY BEST and HAPPY AUDTING ALL THE WAYS.