--- title: A displaced bank auditor said its successor skipped its clearance. The successor had written to someone else entirely. description: A bank branch auditor was replaced for running late, and complained that its successor never got its clearance. The Board found the successor had written to the right auditor, and closed the case. case_number: BOD 722/2024 file_number: PR/131/2020/DD/142/2020/BOD/722/2024 forum: board-of-discipline institute: icai decided_on: 2025-01-25 outcome: Not guilty clauses: Item (8) of Part I of the First Schedule order_pdf: https://disc.icai.org/wp-content/uploads/2025/02/35.-BOD-722-2024.pdf published: 2026-09-09 author: Jainam Shah keywords: bod 722 2024, item 8 part i first schedule, no objection certificate bank audit, communication with retiring auditor, state bank of india branch audit, board of discipline not guilty source: /icai/board-of-discipline/bod-722-2024 --- # A displaced bank auditor said its successor skipped its clearance. The successor had written to someone else entirely. A firm auditing a branch of a public sector bank was replaced mid-year for falling behind schedule. The firm that replaced it was accused of never getting its clearance before taking over.[^parties] ## What happened ```timeline A chartered accountant's firm is appointed statutory auditor of two branches of a public sector bank for a financial year. Within weeks the bank withdraws that appointment because the firm has not finished the audit within the time given, and hands one of the two branches to another chartered accountant's firm instead. The incoming firm learns from the bank who audited that branch the year before — a third firm altogether, not the one just removed — and writes to it asking for a no-objection to the new appointment. That firm replies that it has already given a no-objection once, to the removed firm, and will not give another one. It copies the removed firm on the reply. With the deadline closing in, a nationwide lockdown underway and a cyclone bearing down on the region, the incoming firm goes ahead and completes the audit without further correspondence. The removed firm, separately, writes directly to the incoming firm objecting to the appointment, citing its own removal as unfair. The removed firm complains to the Institute that the incoming firm never obtained its clearance before submitting the audit report. Years later, the Board of Discipline examines whether the incoming firm satisfied its duty to communicate with the outgoing auditor, and finds that it did. ``` Two details decided the case. The first was who actually counted as the outgoing auditor. The details of the previous auditor were not publicly available, and only the bank could supply them; the bank named the firm that had audited the branch for the year before, a firm the removed firm itself had approached for the same clearance a year earlier. That firm, not the removed firm, was the one the incoming firm was obliged to write to. The second was what happened once that firm refused. Rather than the incoming firm chasing the removed firm for a certificate, the removed firm wrote first — objecting to the appointment directly to the incoming firm, before the incoming firm had itself initiated any contact with it (para 11). ## The charge - **Item (8) of Part I** of the First Schedule to the Chartered Accountants Act, 1949 — taking on an audit previously held by another chartered accountant without first communicating with that auditor in writing.[^item8] The complaint framed this as a failure to obtain the removed firm's own clearance before the audit report was submitted. ## What the respondent said On the law itself, the incoming firm's position was that Item (8) requires only written communication with the previous auditor, not that auditor's permission.[^item8_sub] Since the identity of the previous auditor was not public information, it said, it had to rely on the bank — which named the firm that had audited the branch for the financial year 2018-19, and confirmed this in the appointment letter itself. Acting on that, the incoming firm said, it wrote to that firm on the very day of its own appointment, asking for a no-objection. The reply came back that a no-objection had already been given, to the removed firm, and would not be given again — and that reply copied the removed firm in. By then, the incoming firm said, the deadline was close, the country was under a national lockdown, and Cyclone Amphan was approaching West Bengal. Those pressures, it argued, left it with no real choice but to proceed with the audit without further delay, and it did so in good faith. Finally, it argued that the written communication requirement had been met twice over — once by its own email to the correct previous auditor, and again because the removed firm had directly told it of any objections itself — and that the removed firm, in any event, had no real standing to complain, given that its underlying grievance was with the bank that had removed it. ## What the Board held The Board framed the question as whether the incoming firm had failed to communicate with the auditor who had immediately preceded it, as Item (8) requires, before accepting the audit for the financial year 2019-20 (para 10). It found that the incoming firm had acted in good faith by writing to the auditor the bank identified, and that this auditor's reply had not itself objected to the appointment — it had simply pointed the incoming firm toward the removed firm (para 10). On what followed, the Board held: > the purpose of the statutory requirement to communicate with the outgoing auditor, which is > to ascertain any professional objections, was substantively fulfilled, as the Complainant > Firm voluntarily raised their concerns directly (para 11) The Board also noted that nothing in the record showed any irregularity in the audit itself, and that ICAI's own Ethical Standards Board had separately clarified that the removed firm's removal by the bank was not unjustified (para 12) — so there was no independent ground to say the incoming firm should have declined the assignment. It concluded: > the Respondent Firm appears to have acted within the bounds of Professional Ethics and > Statutory requirements. The principle of substance over form applies in this instance, and > the Respondent's actions effectively satisfied the intended purpose of the Code of Ethics. > Thus, the Board held the Respondent Not Guilty for the Charge alleged (para 13) ## The order > in the considered opinion of the Board the Respondent is Not Guilty of Professional > Misconduct falling within the meaning of Clause (8) of Part I of First Schedule to the > Chartered Accountants Act, 1949 read with section 22 of the said Act. Accordingly, the > Board passed an order for closure of the case in terms of the provisions of Rule 15 (2) of > the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct > and Conduct of Cases) Rules, 2007 (para 14) No punishment follows a not-guilty finding.[^rule] The bank had reassigned the audit in May 2020; the Board heard the case, once, in December 2024, and signed its findings the following January.[^coram] ## Why it matters *This section is ours, not the Board's.* **The auditor you owe a letter to is whoever held the position immediately before you — verify that from the appointing body, not from whoever is complaining.** Here the firm that filed the complaint was not the one Item (8) actually required contact with; the bank was the only reliable source for who was. **Writing counts even when the answer is no, or you get redirected instead of answered.** The requirement is to communicate, not to secure permission. Send the letter, keep the reply, and proceed once you have it — whatever it says. **An objection raised unprompted by the other side can do the work a formal request would have.** The removed firm here wrote to the incoming firm on its own initiative, and the Board treated that as satisfying the very purpose the communication rule serves. If you have concerns about a firm replacing you, put them on record yourself rather than waiting to be asked. This summarises a public order and links the primary source. It is general information, not legal or professional advice. [^parties]: The complainant was *CA. Murari Lal Rajoria (M.No. 062901)*, of *M/s ML Rajoria & Associates*, Birpara, West Bengal. The respondent was *CA. Satish Kumar (M. No. 302258)*, of *M/s. S Kumar & Associates (FRN-327642E)*, Kolkata. A third firm features in the facts without being a party to the case: *M/s. Pradip K. Agarwala & Associates*, the statutory branch auditor for the financial year immediately before the one in dispute, whom the respondent approached for a no-objection certificate. [^item8]: Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 makes it professional misconduct for a chartered accountant to accept a position as auditor previously held by another chartered accountant without first communicating with that auditor in writing. [^item8_sub]: The respondent's submission characterised Item (8) as follows: "a Chartered Accountant in practice is Guilty of Professional Misconduct if they accept a position as auditor previously held by another Chartered Accountant without first communicating with the prior auditor in writing. The law mandates communication with the previous auditor, but not permission" (para 5). [^rule]: Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 — where the Board finds a member not guilty, it records that finding and orders the complaint closed. There is no punishment hearing. [^coram]: The findings were signed by CA. Rajendra Kumar P (Presiding Officer) and Ms. Dolly Chakrabarty (Government Nominee), both present in person. The final hearing was held on 14 December 2024 at ICAI Bhawan, Kolkata, and the findings are dated 25 January 2025. The bank's original appointment of the complainant firm was made on 2 May 2020; it withdrew that appointment on 16 May 2020 and appointed the respondent firm on 18 May 2020, the same day the respondent wrote seeking the no-objection certificate.