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BOD 735/2024Fine

An incoming auditor took over a company's audit without writing to the outgoing auditor, or asking about unpaid fees.

7 min readJainam Shah

An outgoing auditor was never told he had been replaced, and never heard from his successor — not before the change, and not about the fee still owed. The Board fined the incoming auditor a lakh.

Held
FineGuilty of professional misconduct
Forum
Board of Discipline (First Schedule)
Clauses
Item (8) of Part I of the First Schedule
Decided
punished
File no.
PR/281/2019/DD/285/2019/BOD/735/2024
Source
Original order (PDF)

A chartered accountant audited a company's accounts for years and was never told he had been replaced. The accountant who replaced him never wrote to him at all.1

What happened#

A chartered accountant audits a private company's accounts for several years running. The audited books for his last year on the assignment record a substantial fee still payable to his firm, of which only part is ever paid.
He does not resign. The company's own notice for its next annual general meeting speaks only of appointing auditors until the meeting after that — it does not name a replacement, and it does not say the incumbent is retiring.
Another chartered accountant takes over the company's statutory audit from the following financial year and holds it for five years running. He never writes to the outgoing auditor before accepting the position, and never asks whether any fee remains unpaid for the year just gone.
The outgoing auditor writes to his successor by registered post and by email, asking about the position. He gets no reply, and takes the matter to the Institute of Chartered Accountants of India.
The Board of Discipline hears the case. The incoming auditor appears in person and, confronted with the allegation, admits he never sought the outgoing auditor's no-objection and admits a fee was still owed. The Board finds him guilty; a separate hearing on punishment, months later, fines him a lakh.

Two things decided the case, and neither of them was contested.

The first was the company's own paperwork. Its notice for the next annual general meeting, produced by the outgoing auditor, said nothing about a change of auditor — no resignation recorded, no successor named (para 9). Nothing in the file showed the company had ever told him he was being replaced.

The second was what the incoming auditor said himself, at the hearing. He did not dispute that he had taken over the audit for the financial years March 2012 to March 2017. He did not dispute that he had never obtained a no-objection from the outgoing auditor. And he did not dispute that a fee remained outstanding for the outgoing auditor's last year on the assignment (paras 9, 11). The exact amount stayed unsettled — the outgoing auditor's own account of it shifted between ₹7.72 lakh, the figure in the audited books, and ₹4.72 lakh, what he said was still owed after part-payments he could no longer document — but the Board did not need to resolve that. What mattered was the admission that something remained unpaid, not how much.

The charge#

  • Item (8) of Part I — accepting an audit already held by another chartered accountant, without writing to them first.2

The charge as framed combined two things: taking over the audit without writing to the outgoing auditor, and doing so without ensuring his outstanding fee had been settled. The Board treated both as established facts within the same charge, and convicted under this one clause alone (paras 8–13).

What the respondent said#

The order records no defence to either part of the charge. The incoming auditor attended the hearing in person, but what the findings set down is admission rather than argument: he did not rebut the claim that he had never communicated with the outgoing auditor (para 9), and he confirmed at the hearing that a fee was still outstanding (para 11). No explanation is recorded for either.

What the Board held#

On communication, the Board set out what Item (8) requires — that before accepting a position an outgoing auditor already holds, a chartered accountant must write to them first — and noted that the provision leaves no room for assuming silence is consent:

before accepting the position as an auditor in any organization, a practicing Chartered Accountant shall communicate with the outgoing auditor in writing and any violation of this provision will make a Chartered Accountant liable for misconduct (para 10)

Nothing in the file showed that communication had happened, and the incoming auditor did not claim otherwise. The Board treated the company's silence on any change of auditor, and the incoming auditor's own admission, as enough to establish the point (para 9).

On the fee, the Board did not attempt to fix an amount. It relied on the admission alone — that something was still owed for the outgoing auditor's last year on the audit (para 11) — and held that established too, as part of the same charge.

On both counts together, the Board held:

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 13)

The order#

At the punishment hearing, the incoming auditor appeared again, confirmed he had received the findings, and was given the chance to be heard before punishment was fixed. The Board then held:

the Board decided to impose a Fine of Rs.1,00,000/- (One Lakh Only) upon [the Respondent] (para 3)3

A fine sits in the middle of the Board's punishment scale — heavier than a reprimand, lighter than having a member's name removed from the Register.4 A three-member Board recorded the guilty finding; a two-member Board, sitting later, fixed the punishment.5 The fine followed the findings by close to five months, once the incoming auditor had been heard on punishment.6

Why it matters#

This section is ours, not the Board's.

Write to the outgoing auditor before you accept the assignment, not after. Five years of taking over an audit without a word to the person who held it before you was enough, on its own, for the Board to find the charge proved. Send the letter, keep a copy, and wait for a reply.

A company's silence about a change of auditor is not the same as a resignation. The company here never said its previous auditor was retiring; its own notice simply spoke of auditors being appointed. Ask the outgoing auditor directly, in writing, rather than reading intent into what the company has not said.

An outstanding fee from your predecessor is your business before you accept the audit, not after you are asked about it. The incoming auditor here never raised the question until the Board did. Ask, and get the answer in writing, before the engagement begins.

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

Footnotes#

  1. The complainant was CA. Nitin S. Bangad (M. No. 049693) of M/s S.M. Bangad & Co., Aurangabad — the outgoing statutory auditor. The respondent was CA. Ashish Ashok Baheti (M. No. 148353), of Ambajogai in Beed district, Maharashtra — the incoming statutory auditor. The order records no firm name against the respondent. ↩

  2. Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 requires a chartered accountant to communicate with the retiring auditor, in writing, before accepting a position as auditor previously held by another member. ↩

  3. The order's operative paragraph names the respondent directly, twice, before the figure: "the consequent misconduct of CA. Ashish Ashok Baheti (M. No. 148353) … the Board decided to impose a Fine of Rs.1,00,000/- (One Lakh Only) upon CA. Ashish Ashok Baheti (M. No. 148353)." This page substitutes "[the Respondent]" for both occurrences of the name and membership number; nothing else in the quotation is altered. ↩

  4. 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. ↩

  5. The findings were signed by CA. Rajendra Kumar P (Presiding Officer), Ms. Dolly Chakrabarty (Government Nominee) and CA. Priti Savla (Member), all present in person. The punishment order was passed, by video conference, by a two-member Board of the same Presiding Officer and Government Nominee, without CA. Priti Savla. ↩

  6. The order gives two different dates for the same final hearing — 26th June 2024 in its heading, 25th June 2024 in the hearing log — and does not reconcile them. The findings were signed 27th August 2024. The punishment hearing followed a communication dated 2nd January 2025, was held by video conference, and the fine was imposed the same day, 10th January 2025. ↩

Written by Jainam Shah. Found guilty under Item (8) of Part I of the First Schedule; the Board ordered a fine. General information, not legal or professional advice — read the order itself before relying on it.

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