The Comproller & Auditor General of India (CAG) has issued a report No. 32 of 2014 setting out the results of the performance audit of “Appreciation of Third Party (Chartered Accountant) Certification in Assessment Proceedings of the Department of Revenue”.

The report makes for shocking reading because it exposes the utterly careless manner in which the Chartered Accountants have conducted audits and issued certificates in blatant disregard of all basic norms.

According to the CAG’s report, there has been short levy of taxes to the extent of Rs 2,813.11 crore in the 367 cases which were surveyed, as a result of wrong audit reports issued by CAs.

The report also points out that there are 616 cases where CAs have committed mistakes in allowance of exemption or deductions, charging of tax on book profit under Section 115JB, adoption of arm’s length price and reporting on cash payments exceeding Rs 20,000 per day.

The CAG report gives several illustrations of such carelessness and also provides the names and membership numbers of the CAs who have conducted the audit.

The report also laments that no action u/s 288 of the Act has been taken by the department against the erring CAs.

It may be recalled that the ITAT has recently in Vijay V Meghani vs. DCIT (ITAT Mumbai) passed severe strictures against the CA profession for alleged falling standards. The Tribunal has also advised the ICAI to take action against erring members and to tackle the issue on a war footing.

In response to the criticism advanced by the ITAT, the ICAI had issued a stern response that the comments of the ITAT are “sweeping” and “not warranted”. The ICAI also assured that it would take steps to “expunge” the comments made by the ITAT.

Now, it requires to be seen what action the ICAI will take in the light of the scathing criticism of the CAG. Though the report of C&AG can't be taken on face value, but its time for fraternity to be thoughtful.