Investigation and arrest of CAs

The Institute of Chartered Accountants of India (ICAI) has prepared a Standard Operating Procedure (SOP) for police and law enforcement agencies when investigating auditors. This SOP describes essential steps to ensure fair treatment and compliance with legal protocols. The investigators must first verify the auditor’s membership status on the official website of ICAI. Document requests require written communication with a reasonable response time. Only customer-specific documents should be obtained in investigations and media disclosure of the investigation must be limited until completion. The SOP emphasizes that auditors should not be subjected to harassment or insults and that all legal authorizations must be obtained during searches and seizures. If there is a lack of cooperation, the investigating authority can summon the accountant for questioning and thus ensure compliance with the Code of Criminal Procedure. Importantly, auditors should not be arrested unless there is prima facie evidence of misconduct and prior approval of a police commissioner is mandatory before filing an FIR. The right to legal representation during interrogation is guaranteed and all hearings should be video recorded. The aim of the SOP is to protect the rights and dignity of auditors while facilitating necessary investigations.

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
[Set up by an Act of Parliament]

STANDARD PROCEDURES TO BE USED BY THE POLICE AND OTHER LAW ENFORCEMENT AUTHORITIES FOR THE INVESTIGATION, SEARCH, SEIZURE, INTERROGATION, ARREST AND DETENTION OF AUDITORS

A. Preliminary request

Before taking action against an auditor, the investigator must ascertain whether the person being taken against is a member of the Institute of Chartered Accountants of India. For this purpose, membership verification can be done via the “Trace a Member” link available at

B. Investigations, searches and seizures

1. All communications to obtain documents, information, etc. with the auditors should be made in writing.

2. The investigating authority should allow an auditor reasonable time to respond to his/her query(s).

3. Only those documents relating to a specific client (for which an investigation is being carried out) should be requested or seized by the auditor, but not the documents relating to another client.

4. The investigating officer should ensure that no press or media personnel are allowed to enter the premises being searched and that the auditor’s name is not released to the press until the investigation is completed.

5. During the investigation, search and seizure, the auditor shall not be subjected to harassment, physical attack, abuse, misconduct or ill-treatment and the procedure established by law shall be followed at all times

6. At the time of conducting such investigation, search and seizure, all authorizations required by law should be obtained and procedural safeguards observed.

7. In carrying out such investigations, searches and seizures, the provisions of law and the instructions of the Supreme Court and the High Courts shall always be complied with.

C. Interrogation, detention and arrest

1. Only in the event of an auditor’s unwillingness to cooperate in answering questions or presenting the documents available to him should he be called to the office of the investigative authority for questioning. Sections 41 and 41A of the Code of Criminal Procedure, 1973 should be strictly adhered to as well as the judgment of the Hon’ble Supreme Court in Arnesh Kumar v. State of Bihar (2014) 8 SCC 273 and Satender Kumar Antil v. CBI2022 SCC Online SC 825.

2. It should be noted that the time frame for retention of audit documentation under Standard of Audit (SA) 230 is only for a period of seven years from the date of the audit report for the relevant year. There is no requirement for auditors to retain such documents for longer than seven years. Site personnel should be made aware of this provision when obtaining documents from an auditor.

3. If the auditor complies with the requirements of the investigation and cooperates with the investigating agency(s), no arrest should be made.

4. If there is no prima facie evidence of embezzlement or fraud and the auditor was not a beneficiary thereof, he should not be arrested.

5. The investigating authority must carefully examine whether this is the case Men’s Rea or consultation on the part of the auditor before the arrest is made.

6. No FIR shall be registered against an auditor unless prior permission is obtained from an officer not below the rank of Police Commissioner.

7. During the questioning and interrogation, the presence of a lawyer of the choice of an auditor should be permitted and the entire interrogation should be video recorded.

8. Investigating officers must maintain decorum, decency, etiquette, and moral and ethical conduct that must be displayed to a regulated professional.

9. The auditor shall never be subjected to intimidation, threats, abusive behavior or physical attack and shall at all times comply with the proper provisions of the law.