Auditor who ‘knew nothing’ banned for 5 years by NCLT

Auditor who ‘knew nothing’ banned for 5 years by NCLT

The Mumbai bench of the National Company Law Tribunal (NCLT) on February 6 barred Mukesh Choksi from being appointed as an auditor of any company for a period of five years, holding him guilty of signing off on a company’s books without inspection and colluding with its promoters in a fraudulent manner.

This is the first time the NCLT has passed an order barring an auditor in such a fashion.

The NCLT passed the order in connection with a case by the Western Regional Director of the Ministry of Corporate Affairs against the auditor Mukesh Choksi, and the company he audited, Zen Shaving.

Zen Shaving is accused of issuing an IPO in 1996, proposing to list its shares on the Pune Stock Exchange but failing to do so, and siphoning off funds raised through the issue.

The company has since changed hands, frequently changed offices and the current management remains untraceable, according to the MCA.

When the company’s auditor, Mukesh Choksi, was questioned, he claimed to have no knowledge about the company’s affairs and said he had signed off on its books without seeing them.

To a string of basic questions asked about the company, such as the last time Zen Shaving held an AGM, Choksi replied: “I don’t know”.

In its order, the NCLT also directed that the copy of the order be sent to National Financial Reporting Authority (NFRA) and ICAI “to take proper action as they may deem fit”.

“In the present times when the national economy is highly dependent upon the profitability and credibility of commercial institutions, the role of statutory auditors is becoming a very important tool of keeping a check and preventing re-occurrence of scams like Satyam,” the NCLT said in its order.

“The role of a statutory auditor is vital, and auditor owes a fiduciary duty towards the nation. It is necessary to take stern action against the person who has tried to diminish the credibility of the auditor’s profession… We hope the ICAI will take necessary action against auditor for his professional misconduct”.

Source:- moneycontrol