Page 447 - CA Final PARAM Digital Book.

Author’s Note
➢ After 2007 amendment, going to high court is not required as per revised disciplinary proceedings

➢ Whenever question says fraud was not detected / handled properly also refer that there is failure
to apply principles of SA 240.

Second Schedule, Part I,Cl,7 --Putting Digital Signature on Resignation Old Course-- (N22R)
QNO Letter of Previous Auditor
756.500
TITANIUM CNO – PE.1540
Comment on the following with reference to the with reference to the Chartered Accountants Act, 1949
and Schedules thereto:

Aagam Private Limited requested CA Sheetal, a practicing Chartered Accountant, to digitally sign the
form related to resignation of Mr. Rohit, one of the Director of Aagam Private Limited, along with the
copy of Resignation Letter to be uploaded on the website of Registrar of Companies. The signature of
Mr. Rohit was simply copied and pasted by another Director of Aagam Private Limited. CA Sheetal,
without verifying the genuineness of the resignation letter, digitally signed the form and the said form
was uploaded on the website of Registrar of Companies.
Answer As per Clause (7) of Part I of Second Schedule to the Chartered Accountants Act, 1949, a Chartered
Accountant in practice is deemed to be guilty if he does not exercise due diligence or is grossly negligent in
the conduct of this professional duties.

In the given case, Aagam Private Limited requested CA Sheetal, a practicing chartered accountant, to
digitally sign the form related to resignation of Mr. Rohit, one of the Director of Aagam Private Limited,
along with the copy of Resignation Letter to be uploaded on the website of Registrar of Companies. The
signature of Mr. Rohit was simply copied and pasted by another Director of Aagam Private Limited.

CA Sheetal, without verifying the genuineness of the Resignation Letter, digitally signed the Form and the
said form was uploaded on the website of Registrar of Companies.
Due to forged resignation letter, the resignation of Mr. Rohit from directorship of the Aagam Private
Limited had been occurred. It was noted that CA Sheetal had not taken any step to verify forged signature
on resignation letter which anyone would have taken in normal circumstances.

Consequently, CA. Sheetal would be held liable for professional misconduct as per Clause (7) of Part I of
Second Schedule to the Chartered Accountants Act, 1949.

QNO Second Schedule, Part I, Cl,7 --Certificate of Consumption Old Course-- (N10E, PM17, N18M)
757.000 TITANIUM CNO – PE.1600 / PE.1540
Mr. Mohan is a practising Chartered Accountant. He issued a certificate of consumption which did not
reflect the correct factual position of the consumption of raw material by the concerned entity. It is

found that the certificate is given on the basis of data appearing in the minutes of meeting of the Board
of Directors.
Answer Part I -- Relevant Standards & Laws
▪ Clause (2) of Part I of Second Schedule to the Chartered Accountants Act, 1949
▪ Clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949
Part II -- Requirements of Relevant Standards & Laws
➢ Clause (2) of Part I of the Second Schedule
A chartered accountant is held guilty of professional misconduct if he certifies or submits a report
of an examination of financial statements unless the examination of such statements and the
related records has been made by him or by a partner or employee in his firm or any other
chartered accountant in practice.

➢ Clause (7) of Part I of the Second Schedule
Clause (7) of Part I of Second Schedule to the Chartered Accountants Act, 1949 also applies to this
case which states that a Chartered Accountant in practice shall be deemed to be guilty of
professional misconduct, if he does not exercise due diligence or is grossly negligent in the conduct
of his professional duties.
Part III – Case Discussion
➢ Mr. Mohan has issued a certificate of consumption which does not reflect the correct factual
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