An accountant used another auditor's inflated balance sheet to get a client's bank credit, then took a cut of it.

An accountant prepared a trading concern's paperwork for a bank credit facility, working from a balance sheet another chartered accountant had signed without auditing it. When the facility was drawn, a share of the money moved to the accountant himself.¹

What happened#

Two things decided the case, and a third does not add up on its own terms.

The first was the gap between two balance sheets for the same concern, the same two years, that were supposed to record the same business:

In the 2008 figures, the entire difference matched two items that appeared in the tax-filed balance sheet and vanished from the bank version: unsecured loans of Rs. 2,52,11,610 and customer advances of Rs. 32,71,590, folded into capital instead (para 5.1–5.2). The accountant used the bank version, not the version the concern had actually filed with the tax department, to prepare the credit proposal (para 4–5).

The second was a letter a fee-recipient's own director had written to investigators years before the hearing, recounting that the accountant had handled the entire loan file for the concern and had, for that reason, been paid 80 percent of the fee the concern had paid out — a sum the letter put at Rs. 18,16,000 (para 8).

The third was the total the charge itself relied on. The concern was said to have paid the accountant Rs. 46,46,500. The three payments the Board itself set out against that figure — the fee, the car, and the cheque to his wife — add up to about Rs. 41,50,310 (para 7). Nothing in the findings accounts for the remaining roughly four and a half lakh.

The charge#

• Item (2) of Part IV, read with Section 22 — the First Schedule's general clause for "other misconduct." It carries no fixed list of prohibited acts; it catches conduct that discredits the profession and is not covered by any of the Schedule's more specific items.²

A third allegation — that the accountant had himself helped prepare the inflated balance sheet, rather than merely used it — never reached a hearing on the merits. At the screening stage the Board found a case to answer only on the other two: submitting the inflated figures to the bank, and conspiring in the bogus export paperwork behind the credit facility. The accountant was examined on those two alone, and the Board's guilty finding rests on them (para 1).

What the respondent said#

The findings record one line of defence. At the screening stage, the accountant said he had declared all the fee receipts to the tax authorities. He did not dispute that the money had reached him, did not address the difference between the two balance sheets, and did not answer the allegations about the bogus export paperwork. Asked to produce evidence to support even the one point he had raised, he produced none (para 11).

What the Board held#

On the balance sheet, the Board treated the accountant's own conduct as decisive. He could not simply say the figures were not his responsibility because he had not audited them himself, the Board held, given that the proposal bearing them carried his name and address and that he had admitted preparing the credit data built on top of them:

Preparing of CMA data on the basis of the financial statements signed by [another chartered accountant] appears to be a deliberate act on the part of the Respondent to help the Proprietor of the Concern as alleged by the Complainant. Accordingly, the Board holds the Respondent guilty on this charge (para 6)³

On the money, the Board weighed the payments against a run of statements: a bank manager who described the accountant as dealing with the concern's account as its de facto owner; a colleague of the concern's proprietor who described how the bogus export bills had been put together and who among them the accountant had told he would arrange them; and a senior bank official who spoke of the arrangement between the accountant, the proprietor and the bank's own manager (para 10). The accountant's wife, questioned separately, confirmed she had no business dealings of her own with the concern or its proprietor and had received her cheque from her husband (para 9).

Weighing the whole record, the Board held:

Accordingly, the Board looking into the records of the case, decided to hold the Respondent GUILTY of "Other Misconduct" falling within the meaning of Clause (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with section 22 of the said Act (para 12)

The order#

The Board reached that finding in January 2020. The punishment took more than four years to follow.

The accountant took the finding to the Madras High Court, which stayed the disciplinary proceedings within weeks and did not dispose of the writ petition until three years later, sending the matter back to the Board to decide the punishment on the existing record. Given a fresh notice, the accountant asked to submit a written response before being heard in person; the Board allowed it, and he did both. It then held:

Thus, upon consideration of the facts of the case and written response submitted besides hearing the oral arguments advanced as well as the consequent misconduct of the Respondent, the Board decided to Reprimand [the Respondent].⁴

A reprimand is the lightest sanction the Board can impose under Section 21A(3), ahead of a fine and removal from the Register.⁵ The order gives no reasons of its own for choosing it; the reasoning behind the finding is the one the Board recorded more than four years earlier, in the findings the High Court had sent back for a final order.⁶

Why it matters#

This section is ours, not the Board's.

Your name on a bank proposal is your responsibility, whoever signed the numbers underneath it. The accountant here had not audited the inflated balance sheet himself, but the credit proposal carrying his name was built on it. If you prepare a client's figures for a lender, check them against what the client has actually filed elsewhere, not against whatever set of numbers you are handed.

Two versions of the same year's accounts are a discoverable fact, not a hidden one. The gap between the two balance sheets here was the tax-filed liabilities folded quietly into capital. Anyone comparing a client's lender-facing figures against its tax filings can catch the same thing.

A finding of guilt and the punishment for it can be years apart. A stay from a High Court pauses the punishment, not the underlying finding. If a client or colleague is mid-litigation over a disciplinary order, do not read the delay as doubt about the outcome.

This summarises a public order and links the primary source. It is general information, not legal or professional advice.