--- title: A firm claimed to be a company's first auditor. The company's own director said that firm had never held the post. description: A chartered accountant said a rival had audited his client company for two years without ever seeking his no-objection. The company's own director told the Board he had never been its auditor at all. case_number: BOD 706/2023 file_number: PR/418/2018/DD/85/2019/BOD/706/2023 forum: board-of-discipline institute: icai decided_on: 2024-06-12 outcome: Not guilty clauses: Item (8) of Part I of the First Schedule order_pdf: https://disc.icai.org/wp-content/uploads/2024/06/14.-BOD-706-2023.pdf published: 2026-09-09 author: Jainam Shah keywords: bod 706 2023, no objection certificate audit, first auditor appointment, item 8 part i first schedule, board of discipline not guilty source: /icai/board-of-discipline/bod-706-2023 --- # A firm claimed to be a company's first auditor. The company's own director said that firm had never held the post. A chartered accountant told the Board of Discipline that a rival member had audited his client company for two years without ever writing to him for a no-objection certificate.[^parties] The company's own director told the Board that the complainant had never been its auditor at all. ## What happened ```timeline A chartered accountant firm is engaged by a newly incorporated private company. According to the firm, a board resolution appoints it as the company's first statutory auditor, and Form ADT-1 is filed recording the appointment. The firm says it is never removed and never resigns. A rival chartered accountant separately audits the company's books for its first two financial years, on the strength of a different board resolution and a director's letter naming him the company's first auditor instead. Three years later, the firm discovers that the rival has been conducting the audits and complains to the Institute, saying no one ever wrote to it for a no-objection certificate before the rival took on the work. The rival answers that the company's own directors deny ever appointing the complainant firm as auditor at all, and that the firm was engaged only to handle the company's incorporation and related filings. The Board calls the company's director as a witness. She tells the Board, in person, that the company appointed the rival as its auditor and never appointed the complainant firm. ``` Two things decided the case. The first was that both sides could point to paperwork naming them the first auditor — a board resolution and Form ADT-1 for the complainant, a differently dated board resolution and director's letter for the respondent — and the dates on the two sets did not match (para 7). The second was a letter the company's director had written to the respondent, well before the complaint was filed. It said the complainant firm had been engaged only for the company's incorporation work, that the firm had signed and filed documents naming itself the auditor without the company's knowledge, and that the firm was still holding the directors' digital signatures and incorporation papers despite repeated requests to return them (para 8). ## The charge Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 requires a chartered accountant to write to the retiring auditor before accepting an audit that another member already holds.[^item8] It has nothing to do with the quality of the audit that follows — it exists so that an auditor is never quietly replaced. The complaint alleged that the respondent had broken that duty by auditing the company for two years without ever writing to the complainant. The Board never reached the question of what the letter should have said, because it first had to decide who the retiring auditor actually was. It held that the complainant never held that position, so there was no communication duty to break — and found the respondent not guilty. ## What the respondent said The respondent said the dispute had already been resolved once, informally, in 2019 — that he had discussed the confusion with both the company and the complainant and understood the matter closed because of missing paperwork and a change of staff on the complainant's side, not any wrongdoing of his own (paras 4.1–4.2). On the substance, he said he was the company's first auditor, appointed by its board when the company had only just begun operating, and that he had no reason to think anyone had audited it before him. He first heard from the complainant's firm in 2019 — three years after the audits in question — and when he raised the claim with the company, its directors confirmed in writing that they had never appointed the complainant as auditor, only as a consultant for incorporation and other compliance work (para 4.3). He also pointed to the appointment letter the complainant relied on, saying it carried no email address, phone number, website or company stamp, and that no professional fee owed to the complainant appeared anywhere in the company's accounts (para 4.4). ## What the Board held The Board noted that both parties had produced board resolutions naming themselves the company's first auditor, on different dates, and could not reconcile the two on paper alone (para 7). What tipped the balance was the company director's own letter, addressed to the respondent well before any complaint was filed. It recorded that the complainant firm had done only the company's incorporation work, that it had signed and uploaded documents appointing itself auditor without the company's knowledge, and that it still held the company's digital signatures and incorporation certificate despite being asked to return them. On that basis the Board found the complainant's claim to be first auditor rested on "fake and bogus documents" (para 8). It also noted that the complaint was filed in 2018 over audits from 2015, and that the complainant never once appeared before the Board in person (para 8). The company's director then appeared as a witness and, in person, told the Board that the company had appointed the respondent as its auditor and had never appointed the complainant. The Board treated that testimony — coming from the company's founder and majority shareholder — as decisive:[^coram] > the witness being a majority shareholder Director since inception, confirmed that the Respondent > was the first auditor and he has audited the books of account of the Company, therefore, the > question of getting NOC from the Complainant does not arise (para 10) ## The order > in conclusion, in the considered opinion of the Board, the Respondent is 'NOT GUILTY' of Other > Misconduct falling within the meaning of Item (8) of Part-I of the First Schedule to the > Chartered Accountants Act, 1949 (para 11) A not-guilty finding closes the matter at the Findings stage. There is no separate punishment hearing, and the Board ordered the case closed under Rule 15(2) of the 2007 Rules. ## Why it matters *This section is ours, not the Board's.* **A no-objection certificate duty only exists if you were actually the auditor being replaced.** The complainant's case assumed the answer to that question; the Board did not. If your claim to an engagement rests on paperwork the client disputes, resolve that first. **Hold onto anything you sign on a client's behalf.** The letter that undid the complainant's case was the company's own record that he still held its directors' digital signatures and incorporation papers after being asked to return them. Return client property when asked, and keep a record that you did. **Appear before the Board.** The complainant never did, and the Board noted it. A case argued only on paper, against a respondent and a witness who both showed up, starts from behind. This summarises a public order and links the primary source. It is general information, not legal or professional advice. [^parties]: *CA. Rahul Bansal (M.No. 520268)*, partner of *M/s NPRA & Associates* (formerly *M/s AVRP & Associates*, merged in December 2015), Delhi, was the complainant. *CA. Puneet Gupta (M.No. 516247)*, Delhi, was the respondent. The company at the centre of the dispute was *M/s Darzi-On-Call Services Pvt Ltd*; its director, who testified before the Board, is not named here as she was not a party to the proceedings. [^item8]: Item (8) of Part I of the First Schedule requires a chartered accountant to communicate with the retiring auditor, in writing, before accepting a position as auditor previously held by another member. [^coram]: The findings were signed by CA. Rajendra Kumar P (Presiding Officer), Dolly Chakrabarty, IAAS (Retd.) (Government Nominee), and CA. Priti Savla, Member (through video conference).