--- title: A company swapped its auditor without telling the old one. The replacement admitted skipping the required letter. description: An incoming auditor took over a company's statutory audit without writing to the auditor he was replacing, as professional rules require. He admitted the lapse in writing and was fined Rs. 25,000. case_number: BOD 719/2024 file_number: PR/703/2022/DD/614/2022/BOD/719/2024 forum: board-of-discipline institute: icai decided_on: 2024-08-27 punished_on: 2024-09-25 outcome: Fine clauses: Item (8) of Part I of the First Schedule order_pdf: https://disc.icai.org/wp-content/uploads/2024/10/28.-BOD-719-2024.pdf published: 2026-09-09 author: Jainam Shah keywords: bod 719 2024, item 8 part i first schedule, communication with the retiring auditor, statutory auditor change, form adt-1, board of discipline fine source: /icai/board-of-discipline/bod-719-2024 --- # A company swapped its auditor without telling the old one. The replacement admitted skipping the required letter. A Chennai chartered accountant's firm was two years into a five-year term as a company's statutory auditor when it found somebody else's name on the company's own regulatory filing. The company had brought in a new auditor without ever telling the firm it was leaving.[^parties] ## What happened ```timeline A Chennai chartered accountant's firm is appointed statutory auditor of a manufacturing company for a five-year term and completes the first year's audit. The company then falls behind on the audit fee, blaming a slow business and later the pandemic, and the amount owed keeps growing. The firm tells the company it will only continue the audit once a quarter of the outstanding fee is paid. No reply comes back. Checking the company's own filings with the corporate affairs ministry, the firm finds that somebody else has certified the accounts for the following year. No resignation or removal was ever recorded against the firm, and the form appointing the new auditor carries a reference number that does not look genuine. The firm complains to the Institute. The new auditor neither replies to the complaint nor appears at the hearing, though he had earlier written to the Institute apologising for never communicating with the firm he was replacing. The Board finds him guilty of the one charge it examines and fines him. ``` The case turned on that earlier letter. Asked by the Disciplinary Directorate for supporting documents, months before any hearing was fixed, the incoming auditor wrote back conceding the one point that mattered. Nobody appeared for him at the final hearing to add anything to it or take anything away — only the complainant's counsel was present (para 5). ## The charge Part I of the First Schedule to the Chartered Accountants Act, 1949 has just the one clause here. - **Item (8) of Part I** — a chartered accountant must write to the previous auditor before accepting an audit that auditor already holds. The writing is the whole duty: it exists so that an auditor cannot be quietly displaced without ever finding out.[^item8] The Board found the incoming auditor guilty under this clause alone, and fined him. The complaint had also pointed to an implausible reference number entered on the company's appointment filing for the new auditor.[^adt1] The Board never turned that into a charge: it noted that neither the reference number nor the company's unpaid audit fee had been raised as a specific allegation against the incoming auditor, and that neither affected the one finding it was making (para 8). ## What the respondent said He did not contest the complaint, and did not appear at the hearing. The only defence on record is a letter he sent the Disciplinary Directorate when it asked him for documents: > I wish to tender my unconditional apology for not communicating with the previous auditor before > accepting the assignment. I will abide by the decision of the esteemed Disciplinary Committee. > However, please note that I have not filed form AOC-4, nor have I certified the said form with > respect to FY 2020-21 for M/s Karthigeya Plastics & Technologies Private Limited. (para 5) He conceded the one thing the complaint turned out to need — that he had gone ahead as the new auditor without writing to the firm he was replacing — while separately denying any hand in the filing that had exposed the change. ## What the Board held The Board set the admission against what its own record showed: the complainant firm's five-year term as the company's statutory auditor ran from April 2019 to March 2024, it had signed the accounts for the first year of that term, and it had never resigned or been removed. Despite that, the company's records showed the incoming auditor taking over for a term running from April 2021 to March 2026 (para 6). That gap was exactly what Item (8) exists to close, and the Board treated the apology as proof it had not been closed. It held: > In view of the above and based on the available records coupled with the admission of the > Respondent, the Board concluded that the Respondent is 'Guilty' of Professional Misconduct falling > within the meaning of Item (8) of Part-I of the First Schedule to the Chartered Accountants Act, > 1949 (para 9) With no submission on the other side to weigh against the letter, the Board reached the same conclusion in its final order (para 10). ## The order > Thus, upon consideration of the facts of the case, oral submissions and the consequent misconduct > of [the Respondent], the Board decided to impose a Fine of Rs. 25,000/- (Rs. Twenty-Five Thousand > only) upon [the Respondent]. (para 3)[^bracket] A fine sits in the middle of the Board's punishment scale — heavier than a reprimand, lighter than having his name removed from the Register.[^fine] The finding was recorded on 27th August 2024; the fine followed just under a month later, once the incoming auditor had been given the chance to be heard on punishment in person.[^coram] ## Why it matters *This section is ours, not the Board's.* **Write to the outgoing auditor yourself before accepting an audit — don't rely on the company's paperwork.** The appointment filing here looked complete, but nobody had actually told the firm being replaced. Confirm in writing that the previous auditor knows, before the assignment starts. **A letter written to answer one question can decide an unrelated case.** This apology was volunteered while responding to a routine request for documents, months before any hearing was fixed, and it became the entire finding against him. Assume anything you put in writing to the Institute will be read as an admission. **Checking a client's own regulatory filings can catch a change nobody announced.** The outgoing firm found the switch only by pulling the company's own filing, not because anyone told it. If a client goes quiet on payment, check what it has filed publicly rather than assume nothing has moved. This summarises a public order and links the primary source. It is general information, not legal or professional advice. [^parties]: The complainant was *CA. T. T. Durairaj Kandiar (M. No. 024005)*, on behalf of *M/s Durairaj & Associates (FRN 03379S)*, Chennai. The respondent was *CA. Anand K. (M. No. 208250)*, also of Chennai. [^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. [^adt1]: The order gives two different dates for the company's filing that appointed the new auditor — 27th November 2021 in the account of events (para 2) and 17th November 2021 in the Board's own findings (para 6). This page does not repeat either date, since the order does not resolve which is right. [^bracket]: The order's operative paragraph names the respondent directly, both times. This page substitutes "[the Respondent]" for the name; nothing else in the quotation is altered. [^fine]: Section 21A(3) gives the Board of Discipline a graduated set of punishments — reprimand, removal of the member's name from the Register for a limited period, and a fine — of which this order used the fine. Check the current sub-section before relying on any figure; the amounts have been amended over time. [^coram]: The findings, dated 27th August 2024, were signed by CA. Rajendra Kumar P (Presiding Officer), Ms. Dolly Chakrabarty (Government Nominee) and CA. Priti Savla (Member), after a final hearing held on 12th June 2024 at which only the complainant's counsel appeared. The punishment order, passed on 25th September 2024 after the respondent was heard in person by video conference, was signed by a two-member Board of the same Presiding Officer and Government Nominee, without CA. Priti Savla.