Page 404 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

Analysis
Misconduct: The clause refers to a member's failure to report a material misstatement in a financial statement,
despite having knowledge of it.
Materiality: The member can only be held guilty of misconduct if the misstatement is proven to be material,
meaning it could significantly affect the understanding of the financial statement.
Clause 5: The observations made under the preceding Clause (5) apply to this clause as well, indicating a
continuity in the standards of conduct.
Case Studies
Liability: Understatement of liability/provision/ contingent liability.
Submission to Tax Authorities: Statement and certificates submitted to tax authorities are misleading and
incorrect.
End Use of Funds: Issuing wrong certificate for end use of Funds to bank

(CNO-PE.1580) CLAUSE 7
A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he.
Clause (7) does not exercise due diligence or is grossly negligent in the conduct of his professional duties.
Analysis
Purpose: An auditor should apply reasonable skill, care, and caution, depending on the circumstances. They are
not detectives but should investigate suspicious matters thoroughly.
Negligence: The term "negligence" covers a range from fraud to minor negligence.
Gross Negligence: Professional Misconduct generally implies serious cases of gross negligence. Minor errors and
lapses do not constitute professional misconduct but should still be addressed for future care.
Case Studies
Representing: Repeated failure to represent client before tax authorities.
Obvious: Auditors fails to detect Fraud, which were apparent, obvious or there were indications w.r.t. Fraud
Time: Not able to complete audit as per given time schedule and statutory requirements.
Signing: Signing B/S and P&L A/c before approval from BOD Signing two B/S by applying different judgments
for same company same period.
Separate Notes: Giving opinion subjected to separate notes but such notes did not exist.
COD: Sending Audit report through value paid post. (COD)

(CNO-PE.1600) CLAUSE 8
A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he.
Clause (8): Fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions
(Instances where no S &A Evidence) are sufficiently material to negate the expression of an opinion.
Analysis
Responsibility: A Chartered Accountant is expected to express an opinion on the truth and fairness of financial
statements after verifying their authenticity.
Information: The Chartered Accountant must determine the extent of information needed before expressing an
opinion on the financial statements. The Chartered Accountant should not express an opinion without obtaining
the required data and information.
Disclaimer: If due to lack of information the report becomes so limited that it can't express a clear opinion, the
auditor should clearly express his disclaimer.
Example: If the auditor hasn't seen any evidence of the existence or valuation of the investment, which is the
only asset of a company, he should not claim that the balance sheet shows a true and fair view. For the manner
of auditor’s reporting in such situations, refer to SA 705(Revised), “Modifications to the Opinion in the
Independent Auditor’s Report”.

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