Shrikrishna (S) — Arjun, you are looking relaxed and seem to be enjoying the chilled climate. Arjun (A) — Yes. At long last, we could upload all tax returns by midnight of 30th November. We paid advance taxes of all clients by 15th of December.
S — N ow, what is going on?
A — U sual running about for scrutiny assessments!
S — But tell me. You got so much of additional time for tax audit. Could you do it properly?
A — Please don’t ask me that! I know how we managed it. It is always a nightmare.
S — A re your audit papers organised properly? A — Who is going to see it now?
S — T hat’s the trouble with all of you. You have learnt many times that work should not only be done, but it should be seen that is done.
A — O f course, we have so many papers generated. But where to keep them? We don’t have space to keep all that record. We have to either scrap it or give back to the client!
S — T his is the folly. You somehow sign the audits. That too, backdated! And say that you don’t have working papers. I told you so many instances of complaints for misconduct.
A — But how to overcome this problem?
S — See, I cannot tell you the whole list of documents that you need to maintain. That you know better. Do you have at least the appointment letters of all audits?
A — N o. Only for companies we have started taking. It is compulsory to upload to ROC – with 23B. All these years we never did it.
S — I know, you people do it only when you have no option. That too, at the 11th hour.
A — A ll queries are also there. Now we send the queries on e-mail. So automatically, there is a record.
S — But when did you send the queries on mail?
A — Continuously during the last two to three months.
S — A nd when did you sign the audits?
A — Company audits in the beginning of September. And tax audits in November.
S — I had told you that a partner of even a large and reputed CA firm was held guilty since there were queries sent after the date of the audit.
A — O h! I need to see that. I don’t know what my assistants have done.
S — M oreover, there may be many queries raised. But have you put remarks as to how each one was resolved?
A — See. We just instruct our juniors to do the vouching etc. Some of the queries are solved. Some remain just hanging.
S — A nd you sign the balance sheet even when queries are unresolved. There are many cases where queries were not discussed at all. Obviously, it is a gross negligence. What about MRL?
A — T hat we rarely take. Everything is oral and in good faith.
S — I have told you how ‘good faith’ is the most dangerous thing in your profession. If you sign in good faith, why should there be an audit by qualified person like you?
A — I agree. But in practice, it is difficult.
S — No. Not very difficult. You lack will-power. And once you develop that habit among the clients, they take you for granted. Thereafter, it is difficult to insist on these things.
A — What you say is right.
S — A ctually, it is very wrong that you relax immediately after the deadline. The real work should be done at this stage. Organise the records, audit files, connect all loose ends. Your staff will be available. Do the right things when everything is fresh in the mind. Who will remember after four or five years? Where will you trace the records?
A — Y ou are frightening me. I have understood. But somehow, it does not happen. I tell you, a couple of audits I have given many adverse remarks. In fact, there are annexure containing adverse observations.
S — That is alright. But what is your final audit opinion?
A — T hat is a standard one – ‘subject to this ……. It is true and fair!’
S — T hat itself is highly objectionable. On the one hand, you give serious qualifications; and at the same time, you say it is true and fair. How do you reconcile these two things? There is a clear direction in SA 700. You either give a disclaimer or say it does not give true and fair view.
A — Y es. That’s a point. See, every time we discuss these ethics, we invariably refer to some live case, some actual story. Today it was general.
S — Y es. But your negligence like this will give rise to many stories! And remember, now the misconduct means not only ‘gross negligence’ but also ‘lack of due diligence’. And again, now you cannot take shelter from ‘watch-dog’, ‘blood-hound’ theory.
A — Good that you told me all this. I was wondering how I should keep all articles occupied after the tax-returns. I will make them arrange all papers properly.
S — Y es. It will also help you in peer review. This is a wake-up call for you, dear!
Note: The above dialogue between Shri Krishna and Arjun is based on clause (8) of Part I of Second Schedule which is reproduced below.
Clause (8) of Part I of Second Schedule states that a CA in practice shall be deemed to be guilty of professional misconduct, if he – ‘Fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion.
