ICAI Reprimands Chartered Accountant for Withdrawing ₹43.75 Lakh from Client’s Bank Account During Audit
Disciplinary Committee finds auditor guilty of “Other Misconduct” under CA Act
Case highlights ethical boundaries and fiduciary responsibility of auditors
By Legal Reporter
New Delhi: February 19, 2026:
The Institute of Chartered Accountants of India (ICAI) has formally reprimanded a chartered accountant for withdrawing ₹43.75 lakh from a client’s bank account during his tenure as statutory auditor. The disciplinary committee held the auditor guilty of “Other Misconduct” under the Chartered Accountants Act, 1949, stressing that such actions violate professional ethics and compromise the integrity of the audit process.
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Background of the Case
- The case involved CA Nagesh Kumar, who was appointed as statutory auditor of M/s Mayurath Films Private Limited.
- The company had availed credit facilities from Canara Bank between 2003–2007.
- Allegations surfaced that funds were siphoned off through cash withdrawals and certification of invoices for loan disbursement.
- A complaint was filed by the Central Bureau of Investigation (CBI), leading to ICAI’s disciplinary proceedings.
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ICAI’s Findings
- The disciplinary committee concluded that the auditor’s conduct amounted to “Other Misconduct”, even though the withdrawals were allegedly made at the director’s request.
- ICAI emphasized that auditors must maintain independence and cannot involve themselves in financial transactions of clients.
- The committee reprimanded the CA, reinforcing that professional misconduct includes not only negligence but also actions that compromise fiduciary responsibility.
Why This Matters
- Professional Ethics – Auditors are expected to act independently and avoid conflicts of interest.
- Investor Confidence – Misconduct erodes trust in financial reporting and corporate governance.
- Legal Accountability – The case demonstrates ICAI’s role in upholding ethical standards and disciplining members.
Relevant Laws and Provisions
- Chartered Accountants Act, 1949 – Defines professional misconduct and empowers ICAI to take disciplinary action.
- Companies Act, 2013 – Mandates auditor independence and prohibits auditors from engaging in transactions that compromise impartiality.
- Banking Regulations – Cash withdrawals linked to loan disbursement certification raise concerns of fraud and misrepresentation.
Broader Implications
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- For Auditors: The case serves as a reminder that even actions taken at a client’s request can amount to misconduct if they breach professional boundaries.
- For Companies: Directors and management must respect the independence of auditors and avoid involving them in financial transactions.
- For Regulators: ICAI’s disciplinary action strengthens oversight and reinforces accountability in the profession.
Expert Views
Corporate governance experts say the ruling highlights the importance of audit independence. Legal professionals note that auditors must act as watchdogs, not participants, in financial dealings. The reprimand is seen as a necessary step to preserve the credibility of the profession.
Conclusion
The ICAI’s reprimand of a chartered accountant for withdrawing funds from a client’s bank account underscores the importance of ethical conduct in auditing. By holding the CA guilty of “Other Misconduct,” the institute has sent a strong message that professional boundaries must be respected to maintain trust in financial reporting and corporate governance.
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