Auditors and company secretaries engaged in fraudulent certification to face strict penalties, cancellation of licence

Auditors and company secretaries who have made false or incorrect certification will face penalties, including cancellation of their licences, said an official at the ministry of corporate affairs (MCA).

“The ministry, which has entrusted professionals such as chartered and cost accountants and company secretaries to ensure that integrity of documentation is maintained, has observed fraudulent and irresponsible certification happening,” said the official, who declined to be named.

The ministry has decided to take strict action after it found fraudulent certification being done by professionals in publicly traded firms—affecting a large number of shareholders—as well as privately held ones.

“The concerned professional can be debarred from submitting any document on the MCA portal and the ministry may ask their respective institutions to take disciplinary action against them,” said the official. Digital signatures of errant professionals will automatically be rejected by MCA21, the ministry’s portal through which documents are filed.

As many as 15 professionals can be charged with negligence a month, the official said.

While chartered accountants are governed by the Institute of Chartered Accountants of India (Icai), cost accountants are regulated by the Institute of Costs and Works Accountants of India (Icwai) and company secretaries by the Institute of Company Secretaries of India (Icsi).

With most of the data being submitted electronically, where the computer system automatically accepts filings that have been digitally signed, the ministry’s regional directors and registrar of companies have more time to scan data for detecting possible frauds and oversights by professionals. “Although the ministry had observed such instances before, overload of paperwork gave them little time to inspect,” said the official.

A formal notice will be put up on the ministry’s website on Wednesday.

The ministry through an 8 April circular, addressed to regional directors and registrar of companies, had warned these professionals against fraudulent certification.

“Professionals tend to connive with companies and this step is good as it imposes responsibilities on the professionals,” said B.M. Sharma, president of Icwai. “We will also take due steps if any such professional is referred to us for inquiry by the ministry.”

Wrong submissions will face a preliminary inquiry by regional directors, the report of which will be submitted to the ministry. The ministry will take a final decision on the penalty after the concerned professional institute conducts an inquiry, according to the notice.

To ensure correct data is entered, there will be regular checking of such submissions. In addition to penal actions against companies and their officers for furnishing incorrect or false information, action would also be taken against such professionals, the circular had said.

The concerned professionals will be given time to explain their position, the circular said.

Anil Murarka, president of Icsi said, “We will take strict disciplinary action against company secretaries involved in such wrongdoings as forwarded by the ministry.” Murarka said that Icsi’s disciplinary committee on its own also has been taking action against professional misconduct of members.

“Wrongdoers need to be taken to task,” said G. Ramaswamy, president of Icai. “A lot of times things happen through oversight. (In such cases) the ministry needs to be lenient with them.”

Source : LiveMinit