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Rule 11Chapter 21

Disciplinary proceeding

(1)

Based on the reference received from the Central Government or findings of its monitoring or enforcement or oversight activities, or on the basis of material otherwise available on record, if the Authority believes that sufficient cause exists to take actions permissible under sub-section (4) of section 132, it shall refer the matter to the concerned division, which shall cause a show-cause notice to be issued to the auditor.

(2)

The show-cause notice shall be in writing. and shall, inter alia, state-

(a)

the provisions of the Act or rules under which it has been issued;

(b)

the details of the alleged facts:

(c)

the details of the evidence in support of the alleged facts;

(d)

the provisions of the Act, rules or the accounting standards or auditing standards thereunder allegedly violated, or the manner in which the public interest is allegedly affected;

(e)

the actions that the Authority proposes to take or the directions it proposes to issue if the allegations are established;

(f)

the time limit and the manner in which the auditor is required to respond to the show-cause notice;

(g)

the consequences of failure to respond to the show-cause notice; and

(h)

the procedure to be followed for disposal of the show-cause notice.

(3)

The show-cause notice shall enclose copies of documents relied upon and extracts of relevant portions from the report of investigation or other records.

(4)

The show-cause notice shall be served on the auditor in the following manner, namely –

(a)

by sending it to the auditor at the address provided by him or provided by the Institute of Chartered Accountants of India (if required by the Authority) by registered post with acknowledgement due; or

(b)

by an appropriate electronic means to the email address of the auditor provided by him or it or provided by the the Institute of Chartered Accountants of India if required by the Authority)

Proviso

Provided that where the auditor is a firm –

(a)

a notice to a firm shall be deemed to be a notice to all the partners or employees of that firm as on the date of service of notice:

(b)

the notice shall call upon the firm to disclose the name or names of the partner or partners concerned who shall be responsible for answering the allegations;

(c)

the partner whose name is disclosed by the firm shall be responsible for answering the notice against the firm, and if no partner, whether erstwhile or present, of the firm owns responsibility for the allegations made against the firm, then the firm as a whole shall be responsible for answering the allegations, and all the partners and employees of that firm as on the date of occurrence of alleged misconduct, shall be responsible for answering the allegations.

(5)

The Division shall dispose of the show-cause notice within a period of ninety days of the assignment through a summary procedure as may be specified by the Authority, by a reasoned order in adherence to the principles of natural justice including where necessary or appropriate an opportunity of being heard in person, and after considering the submissions, if any, made by the auditor. the relevant facts and circumstances, and the material on record.

Proviso

Provided that where the disposal does not take place within the said period, the Division shall record the reasons for not disposing off the show-cause notice within the said period, and the chairperson, may, after taking into account the reasons so recorded,extend the aforesaid period by such additional period not exceeding ninety days as he may consider necessary:

Proviso

Provided further that the chairperson may, if he thinks fit, grant the said extension of period more than once.

(6)

The order disposing of a show-cause notice may provide for-

(a)

no action;

(b)

caution:

(c)

action tor imposing penalty against auditor under sub-clause (A) of clause (c) of sub-section (4) of section 132 or for debarring the auditor from engaging as such under sub-clause (B) of clause (c) of sub-section (4) of section 132 or both.

(7)

The order passed under sub-rule (6) shall not become effective until thirty days have elapsed from the date of issue of the order unless the Division states otherwise in the order along with the reason for the same.

(8)

The order passed under sub-rule (6) shall be served on the auditor in the manner specified in sub-rule (3) and a copy of the same shall be sent

(i)

in all cases to – (a) the Central Government; and (b) the Institute of Chartered Accountants of India;

(ii)

in the case of a company referred to in sub-section (5) of section 139 to the Comptroller and Auditor General of India;

(iii)

in the case of a listed company to the Securities and Exchange Board of India;

(iv)

in the case of a bank or a non-banking finance company to the Reserve Bank of India: I

(v)

in the case of an insurance company to the Insurance Regulatory and Development Authority of India;

(vi)

in case the auditor is resident outside India to concerned regulator of such country;

and the same shall be published on the website of the Authority.

Notes, amendments & references (1)

Inserted vide the National Financial Reporting Authority (Amendment) Rules, 2019 dated 05.09.2019. To view the Notification, Click Here .