ICAI Disciplinary Committee Reprimands CA Over Faulty Audit of Volvo Car Transaction

ICAI Disciplinary Committee Reprimands CA Over Faulty Audit of Volvo Car Transaction

A complaint was filed by Shri Hukum Singh against CA Sanjay Gupta, statutory auditor of M/s Trinity Hotels and Resorts Pvt. Ltd. for FY 2018-19. The company’s audited balance sheet reflected Rs. 29,67,423/- as a short-term loan recoverable from the complainant, described as a car advance for a Volvo vehicle purchased through a loan from ICICI Bank in the company’s name. The complainant denied receiving any such loan, denied paying EMIs, and asserted that he had no role in the company and that the car remained registered in its name and used by its directors.

The auditor contended that the vehicle was purchased for the complainant’s personal use and that EMIs were adjusted through ledger entries. However, no written agreement, ownership transfer document, board resolution, or third-party confirmation supported this treatment.

Main Issue: Whether the auditor failed to exercise due diligence and obtain sufficient audit evidence before certifying Rs. 29.67 lakh as recoverable from the complainant.

Disciplinary Committee Held: The Disciplinary Committee of the Institute of Chartered Accountants of India observed that the vehicle was registered in the company’s name and the loan from ICICI Bank was recorded as its liability. Despite this, the auditor certified the entire cost, EMIs, and interest as recoverable from the complainant without any formal agreement or independent corroboration.

The Committee held that reliance solely on internal ledger entries, cash transactions and informal explanations did not constitute sufficient and appropriate audit evidence under auditing standards, especially given the materiality of the amount involved. The Respondent was found Guilty of professional misconduct under Clauses (5), (6), (7) and (8) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, and by order dated 11 February 2026, was reprimanded and fined Rs. 1,00,000, payable within 60 days.

To Read Full Judgment, Download PDF Given Below

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