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Auditaudit Staff asked 3 years ago
2 Answers
RaviRavi Staff answered 3 years ago

For Clause 7 & 8 of Second Schedule
Clause 7 covers all types of negligence, but clause 8 covers one particular type not collecting sufficient evidence…
if specific evidence related case apply 8 else 7
below are examples Clause 7 Cases
Repeated to failure to appear before tax authority .
If auditor fails to detect fraud. Which were apparent, big or where they were indication he will be guilty for not exercising due Professional care.
Not able to complete Audit as per giving time schedule and statutory requirement.
Signing B/S and P&L a/c before approval from BOD. Signing two B/S by applying different judgments for same company same period.
Giving opinion subjected to separate notes but such notes did not exit. Sending Audit report through value paid post.
Clause 8 Cases
In following case CA is consider as guilty of professional misconduct.  
1.Blind reliance on internal audit report in some arrears. (Clause 8 is appropriate can refer at the end that clause 7 can also be applied)
2. Z, a practicing Chartered Accountant issued a certificate of circulation of a periodical without going into the most elementary details of how the circulation of a periodical was being maintained i.e. by not looking into the financial records, bank statements or bank pass books, by not examining evidence of actual payment of printers bills and by not caring to ascertain how many copies were sold and paid for. (Clause 8 is appropriate can refer at the end that clause 7 can also be applied)  
3. Mr. A, a Chartered Accountant was the auditor of ‘A Limited’. During the financial year 2007- 08, the investment appeared in the Balance Sheet of the company of `10 lakhs and was the same amount as in the last year. Later on, it was found that the company‘s investments were only Rs 25,000, but the value of investments was inflated for the purpose of obtaining higher amount of Bank loan. (Clause 8 is appropriate can refer at the end that clause 7 can also be applied)

RaviRavi Staff answered 3 years ago

Clause 9 is non compliance of auditing standards
engagement letter not prepared under SA 210
communication not done with TCWG under SA 260 

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