MNP Manufacturing Ltd., a listed company with a turnover of 2,500 crores, appointed three joint auditors: CA Anil & Associates, CA Raman &…

As per Clause (8) of Part I of First Schedule to the Chartered Accountants Act, 1949, a CA in practice is deemed to be guilty of professional misconduct if he accepts a position as auditor previously held by another chartered accountant or a certified auditor who has been issued certificate under the Restricted Certificate Rules, 1932 without first communicating with him in writing. Further, as per Clause (9) of Part I of First Schedule to the Chartered Accountants Act, 1949, a CA in practice is deemed to be guilty of professional misconduct if he accepts an appointment as auditor of a company without first ascertaining from it whether the requirements of Section 225 of the Companies Act, 1956 (1 of 1956), or sections 139 to 141 of the Companies Act, 2013 or any other law pertaining to appointment of auditors for the time being in force, in respect of such appointment have been duly complied with. Under this clause it is obligatory on the incoming auditor to ascertain from the Company that the appropriate procedure in the matter of his appointment has been duly complied with so that no shareholder or retiring auditor may, at a later date, challenge the validity of such appointment. For the purpose of ascertaining whether the Company has complied with the provisions of Section 140 of the Companies Act the incoming auditor should verify the records of the Company that whether a member of the Company has given special notice of the resolution as required under Section 140 (4) of the Companies Act, 2013 and to ensure that whether this special notice has been sent to all the members, of the Company as required under the Companies Act, 2013. In the given case, CA Neha accepted the audit appointment immediately on receipt of the company's appointment letter and certificate of compliance, without first ensuring that proper professional communication had been made with the outgoing auditor, CA Reena & Associates, who was not reappointed due to disagreements over certain audit observations. Therefore, CA Neha will be held guilty of professional misconduct under the Clause (8) and Clause (9) of Part I of First Schedule to the Chartered Accountants Act, 1949, if she accepts the appointment without communicating with previous auditor as well as for not verifying the compliance of statutory requirements.