In this guide · 7 sections
- The auditor of a small society was held prima facie guilty under Clause (7) on three charges. After a hearing, the ICAI Disciplinary Committee held him not guilty on all three and closed the case (order dated 23 January 2026).
- The charges: the registered address (and, the prima facie opinion added, cash in hand) not physically verified; cash membership fees, against the State society rules and bye-laws, not reported; bank accounts not reconciled.
- He produced documents for each: cash certificates signed by the president for each year, bank reconciliation statements for every year, and receipts and passbook entries showing the cash fees were banked. He did not count the cash himself.
- The Committee noted that he "has provided adequate documentation and reasoning to demonstrate compliance" and had performed procedures "commensurate with the scope of the engagement".
- The documents were not the only reason. The Committee also relied on the limited scope of his role, the complainants' lack of evidence, the Registrar's acceptance of the rectification, and a "considerate view" of a small society. The lesson: have the evidence on file from the start, rather than count on the rest.
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Start freeThe first two articles in this series were about auditors held guilty. This one ends differently. An auditor was charged, held prima facie guilty by the Director (Discipline) — and then held not guilty on every charge by the ICAI Disciplinary Committee. Four documents he could produce helped save him: cash certificates, bank reconciliations, receipts and passbook entries. But a careful reading shows they were only part of why — and that is the more useful lesson.
This is the third article in Real orders, real lessons. As before, we describe what the order says without naming the member. Earlier: the "junior staff" defence and the ₹3,000 audit.
The case in brief
| Item | From the order |
|---|---|
| Forum | ICAI Disciplinary Committee (Bench IV, 2025-26), under section 21B of the Chartered Accountants Act, 1949 — read the order (PDF) |
| Entity | A small society registered under the Haryana Registration and Regulation of Societies Act, 2012, which mainly ran a temple and community meals |
| Engagement | Statutory audit for FY 2014-15 to FY 2018-19 |
| Who complained | Two individuals connected with the society (complaint filed in October 2020) |
| Prima facie opinion | Guilty under Clause (7) on all three charges (Director (Discipline), 2 May 2023) |
| Final outcome | Not guilty on all three charges; case closed under Rule 19(2) (order dated 23 January 2026) |
The three charges, and what answered each
| Charge | Prima facie view | What the auditor produced | Committee's finding |
|---|---|---|---|
| Did not physically verify the society's registered address (the prima facie opinion added: nor the cash in hand) | Cash was the only asset and most transactions were in cash, so physical verification was important; not visiting the client was not a good reason | He did not visit or count the cash; the president brought the documents to him, including cash certificates for each year which, he said, showed the cash as at the balance sheet date (Annexures K-1 to K-5). The address in his reports matched the registration certificate | Not guilty. The role "cannot be stretched" to verifying the physical address without a specific legal requirement or dispute, and the complainants gave no conclusive evidence. On cash: the absence of physical verification on a particular date did not by itself establish misconduct, as no discrepancy or misappropriation was shown |
| Did not report that membership fees were taken in cash, against the State society rules and the bye-laws | An auditor must report non-compliance with the entity's governing law | Receipts and the passbook showing the cash fees of 18 new members were deposited in the society's bank account; he told the Committee that, in his professional judgement, no comment was needed. The Registrar General later treated it as a rectified procedural lapse | Not guilty. The mistake was rectifiable and rectified, the amounts were accounted for, the matter had been addressed by the appropriate forum, and the auditor's role was to check overall compliance, "not to carry out forensic audit". The Committee took "a considerate view" as the society's members were devotees |
| Did not reconcile the bank accounts | Cash books and bank statements were on record, but no bank reconciliation statement | He first argued no reconciliation was required as the balances agreed; he then submitted reconciliation statements for all the years (Annexures O-1 to O-5) showing the balances matched | Not guilty. His "submissions and evidence sufficiently address this allegation"; the complainants gave no credible evidence, the dispute had been settled, and the Committee again took "a considerate view" |
The Committee's overall view: the charges were "not substantiated by cogent evidence", the auditor "had performed audit procedures commensurate with the scope of the engagement", and he "has provided adequate documentation and reasoning to demonstrate compliance with applicable rules and regulations to the best of his professional ability".
Why this case matters
Read it next to the first two orders in the series. In the first, the auditor could not produce his records and said the data had been deleted. In the second, he could only repeat that he relied on the client's documents. Here, the auditor could produce a document for each charge.
Note what happened on the bank charge. At the prima facie stage no reconciliation statement was on record, and the charge was framed. His first answer was that none was needed because the balances agreed. Only afterwards did he submit reconciliations for every year. The order does not say when they were prepared. Had they been in the file from the start, the charge might never have been framed.
And documents were not the whole story. The Committee also relied on the limited scope of his role, the complainants' lack of evidence, the Registrar's acceptance of the rectification, and a "considerate view" it took twice for a small society whose members were devotees. You cannot plan on the second set of reasons. You can plan on the first.
Four lessons for every audit file
1. Keep the evidence, not just the conclusion
A cash certificate, a bank reconciliation, a receipt, a passbook entry — small documents that answered charges years later. Keep them in the file, not on the client's premises or in an email thread. Note too that a certificate from the client is weak evidence on its own. Where cash is material, count it — usually on the audit date, rolled back to the balance sheet date through the cash book (see high cash in hand: audit questions). Here the certificates were accepted only because no discrepancy or misappropriation was shown. See audit working papers under SA 230.
2. Record your reasoning when you decide not to comment
On the cash membership fees, the auditor told the Committee why, in his professional judgement, no adverse comment was needed: the cash had been deposited and the substance of the transaction was recorded. The order does not say this was written down at the time. A short note made then, of why you did not report something, is far stronger than an explanation given years later.
3. Prepare the reconciliation even when it agrees
A reconciliation that shows "no difference" is still evidence. Here, its absence from the record was why the bank charge was framed; the reconciliations submitted later helped answer it.
4. Complaints can come years later, from anyone
The audits ran from FY 2014-15; the complaint came in 2020 from people in a long-running dispute with the society's office-bearers, and the order in 2026. You cannot choose who complains or when — only what your file shows when they do.
A short file check before you close any audit
- Cash: where material, a count sheet (with the roll-back to the balance sheet date); otherwise at least a certificate, with who signed it.
- Bank: a reconciliation for every account, even where the balances agree.
- Unusual items: the supporting document and a note of your conclusion.
- Non-compliance noticed but not reported: a note of why, and what you relied on.
- The scope of the engagement on file (engagement letter or appointment letter). Here the member relied on a letter limiting his role, and the Committee found his procedures "commensurate with the scope of the engagement".
The point of this order: documents he could produce turned a prima facie finding into closure — with help from circumstances you cannot count on. Keep the documents on file from the start, and you will not need the help.
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Start freeFrequently asked questions
Can an auditor held prima facie guilty be acquitted by ICAI?
Yes. In this order the Director (Discipline) held the auditor prima facie guilty under Clause (7) on three charges, and the Disciplinary Committee, after hearing the parties and examining the documents, held him not guilty on all three and closed the case under Rule 19(2).
What evidence helped the auditor in this case?
Cash certificates signed by the president for each year, bank reconciliation statements for every year, and receipts and passbook entries showing that cash membership fees had been deposited in the bank, together with his explanation of why no adverse comment was needed. The Committee also relied on the limited scope of his role, the complainants' lack of evidence, the rectification accepted by the Registrar and a considerate view of a small society.
Is a bank reconciliation needed if the balances agree?
It is good practice to prepare and keep one. In this case, the absence of a bank reconciliation statement on record was why the charge was framed; reconciliations submitted later helped answer it.
Does an auditor have to verify the registered address of a society?
In this order the Committee held that the auditor's role cannot be stretched to verifying the physical address of the society without a specific requirement of law or a dispute affecting its location.
Who complained in this case?
Two individuals connected with the society, who were in a long-running dispute with its office-bearers. The Committee decided the case on the evidence, holding that the charges were not substantiated by cogent evidence.
Sources
- ICAI Disciplinary Committee — findings and order (23.01.2026), case PR/306/2020-DD/315/2020-DC/1820/2023 (PDF)
- ICAI Disciplinary Committee — all orders for the Council year 2025-26
- Chartered Accountants Act, 1949 — Second Schedule, Part I, Clause (7)
- ICAI — SA 230 Audit Documentation
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Version history: 15 Oct 2026 — first published. 15 Oct 2026 — written from the ICAI Disciplinary Committee findings and order (23 Jan 2026) in case PR/306/2020-DD/315/2020-DC/1820/2023. Third in the series "Real orders, real lessons".
