---
title: An accountant used another auditor's inflated balance sheet to get a client's bank credit, then took a cut of it.
description: An accountant used another auditor's inflated balance sheet to get a client bank credit, then took a share of what it released. The Board reprimanded him after a three-year High Court detour.
case_number: BOD 326/2017
file_number: PR/206/2014-DD/222/14/BOD/326/2017
forum: board-of-discipline
institute: icai
decided_on: 2020-01-06
punished_on: 2024-06-12
outcome: Reprimand
clauses: Item (2) of Part IV of the First Schedule
order_pdf: https://disc.icai.org/wp-content/uploads/2024/06/16.-BOD-326-2017.pdf
published: 2026-09-09
author: Jainam Shah
keywords: bod 326 2017, other misconduct, item 2 part iv first schedule, section 22 chartered accountants act, fudged balance sheet, foreign bills purchase limit, credit monitoring arrangement data, madras high court writ petition, board of discipline reprimand
source: /icai/board-of-discipline/bod-326-2017
---

# 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.[^parties]

## What happened

```timeline
An accountant in Chennai handles a trading concern's dealings with its bank, though another
chartered accountant holds the job of auditing its accounts.

For a proposal seeking a large foreign-bills credit facility, the concern's figures come not
from the balance sheet it has filed with the income tax department, but from a second version
of the same two years' accounts, signed by the other accountant without an audit being carried
out. The second version shows several crore more in capital than the first.

The bank sanctions the facility on the strength of that proposal. The concern draws on it
without any of the exports it is meant to finance, backed instead by transport bills and
delivery paperwork made out to a firm that does not exist. Bank staff later describe the
accountant as the one who deals with the concern's account, as though he owns it.

Large sums move out of the concern once the facility is drawn: a fee paid to a financial
services firm that had worked the loan file, most of which is passed back to the accountant; a
car bought in his name; and a cheque made out to his wife. A police officer investigating the
concern's affairs complains to ICAI.

The hearing is adjourned twice at the accountant's request. On the day of the final hearing he
seeks a further adjournment, citing an unavailable lawyer and documents lost in a flood; the
Board declines and hears the case without him. It finds him guilty of Other Misconduct. He
challenges the finding in the Madras High Court, which stays the proceedings for over three
years before sending the case back to the Board to decide his punishment. Given a fresh
hearing, he is reprimanded.
```

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:

| | Filed with the tax department | Signed for the bank, unaudited | Difference |
|---|---|---|---|
| Capital, 31 March 2008 | Rs. 4,73,29,295 | Rs. 7,58,12,495 | Rs. 2,84,83,200 |
| Capital, 31 March 2009 | Rs. 4,60,69,879.69 | Rs. 7,84,12,865 | Rs. 3,23,42,985 |

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.[^item2]

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)[^bracket]

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].[^bracket2]

A reprimand is the lightest sanction the Board can impose under Section 21A(3), ahead of a fine
and removal from the Register.[^reprimand] 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.[^coram]

## 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.

[^parties]: The complainant was *Ms. M. Roopa, IPS*, then Superintendent of Police, Central
    Bureau of Investigation, Anti-Corruption Branch, Chennai — not a chartered accountant. The
    respondent was *CA. Devarajan K.E. (M.No. 212049)*, of West Mambalam, Chennai.

[^item2]: Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949,
    read with Section 22 of the Act, covers "other misconduct" — conduct that discredits the
    profession but is not captured by the more specific items listed elsewhere in the Schedule.

[^bracket]: The order's own quotation names the other chartered accountant who signed the
    inflated financial statements. This page substitutes "[another chartered accountant]" for
    that name, consistent with referring to third parties by role rather than by name throughout;
    nothing else in the quotation is altered.

[^bracket2]: The order's operative sentence names the respondent directly, as "CA. Devarajan K.E.
    (M.No.212049)". This page substitutes "[the Respondent]" for the name and membership number,
    to keep the same anonymisation used throughout; nothing else in the quotation is altered.

[^reprimand]: Section 21A(3) gives the Board of Discipline a graduated set of punishments, of
    which a reprimand is the lowest, ahead of removal of the member's name from the Register for
    a limited period and a fine. Check the current sub-section before relying on any figure — the
    amounts have been amended over time.

[^coram]: The findings, dated 6 January 2020, were signed by CA. Sushil Kumar Goyal (Presiding
    Officer) and Mrs. Rani Nair (IRS, Retd.) (Government Nominee). The punishment order, passed on
    12 June 2024, was signed by a different Board: CA. Rajendra Kumar P (Presiding Officer), Ms.
    Dolly Chakrabarty (IAAS, Retd.) (Government Nominee) and CA. Priti Savla (Member).