Page 409 - CA Final PARAM Digital Book.

Also, before such appointment is made, the written consent of the auditor to such appointment and a
certificate from him or it that the appointment, if made, shall be in accordance with the conditions as may be
prescribed shall be obtained from the auditor. Provided also that the certificate shall also indicate whether
the auditor satisfies the criteria provided in section 141. Also, that the company shall inform the auditor
concerned of his or his appointment and also file a notice of such appointment with the Registrar within
fifteen days of the meeting in which the auditor is appointed.

Also, a member in practice shall be held guilty of professional misconduct as per clause 8 of Part I of the First
Schedule where he accepts a position as auditor previously held by another Chartered Accountant without
first communicating with him in writing.

In the current case, Mr. Sunil was appointed statutory Auditor of M. Autotech Limited after Mr. Ram resigned
from the position of auditor on 31-07-2022 for the financial year 2022-23. Mr. Sunil received the appointment
letter duly signed by the Board of Directors. Mr. Sunil received the letter of appointment on 31-07-2022,
which he accepted on 01-08-2022. On 15-08-2022, Mr. Sunil fixed a meeting with Mr. Ram to understand the
reasons for his resignation and any concerns he should be aware of about the company. Prior to this, no
communication happened between Mr. Sunil and Mr. Ram. The Board of M. Autotech Limited filed ADT-1
with the registrar on 31-08-2022.

Hence, Mr. Sunil did not verify whether the requirement of section 139 of the Companies Act, 2013 has been
complied with or not, as in the current case, there was no approval by the company at a general meeting
convened within three months of the recommendation of the Board. Under Section 139(8), approval by a
company at general meeting as discussed above is mandatory requirement. Therefore, he has not ascertained
from company whether requirements of section 139 and 140 of Companies Act, 2013 have been complied
with. Moreover, Mr. Sunil did not communicate with a retiring auditor in such a manner as to retain in their
hands positive evidence of the delivery of the communication to the outgoing/previous auditor.

Therefore, Mr. Sunil is guilty of professional misconduct both under clause 8 and 9 of First Schedule to
Chartered Accountants Act, 1949.

QNO First Schedule, Part I,Cl,10 -- Charging Percentage of Debt Recovery Old Course – (M17R, M18E,
707.000 TITANIUM CNO – PE.1260 M18M, M20R)

PQR Pvt Ltd. approached CA. Whai, a Chartered Accountant in Practice, for debt recovery services. CA
Whai accepted the work and insisted for fees to be based on 2% of the debt recovered.
OR
Alora Pvt. Ltd. approached CA. Neha, a practicing Chartered Accountant since 1998, for recovery of debts
amounting Rs 20 crore. CA Neha accepted the work and requested to charge fees @ 1.5% of the debt
recovered. Later on she raised a bill for debts recovered and charged ` 27 lacs for recovering 90% of the
debts.
Answer Part I -- Relevant Laws
▪ Clause (10) of Part I of the First Schedule to the Chartered Accountants Act, 1949

Part II -- Requirements of Relevant Laws
➢ This clause prohibits a Chartered Accountant in practice to charge, to offer, to accept or accept fees
which are based on a percentage of profits or which are contingent upon the findings or results of
such work done by him.

➢ Regulation 192
However, this restriction is not applicable where such payment is permitted by the Chartered
Accountants Act, 1949. The Council of the Institute has framed Regulation 192 which exempts debt
recovery services where fees may be based on a percentage of the debt recovered.

Part III – Case Discussion
➢ In the given case, CA. What has insisted for fees to be based on percentage of the debt recovered
(which is exempted under Regulation 192).

Part IV – Conclusion
➢ Hence, CA. What will not be held guilty for professional misconduct.
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