1. ' SHABBIR AHMED, J.---The appellant, a Member of respondent No,1 audited accounts of respondent No,4 for the year 2001 which was scrutinized by respondent No,2. On examination of the accounts prepared by the appellant, certain irregularities in observance of International Accounting Standard (IAS) and complying with recruitments of Fourth Schedule of the Companies Ordinance were found in the following terms:-- ' The Company did not disclose the basis on which the financial statements are prepared and reasons why the enterprise is considered to be a going concern as per para.234 of IAS 1 (Presentation of Financial Statements).
2. ' The Company has not recognized the borrowing cost on bank borrowings as an expense as required by para.7 of IAS 23 (Borrowing Costs).
3. ' Disclosure of interest rate risk has not been made in the accounts contrary to requirements of paras.56, 66 and 77 of IAS 32 (Financial Instruments; Disclosure and Presentation).
4. ' The Company did not disclose accounting policies in the accounts as per para.20 of IAS 1 (Presentation of Financial Statements).
5. ' Statement of changes in equity and Cash Flow Statement have not been prepared and annexed to the accounts contrary to the requirements as per para. 7 of IAS 1 (Presentation of Financial Statements).
6. ' Number of Employees has not been disclosed contrary to requirements of para. 102(d) of IAS 1 (Presentation of Financial Statements).
7. ' Earnings per Share has not been disclosed in the accounts as per IAS 33 (Earnings Per Shares).
8. ' The Company has not disclosed the domicile and legal form of the enterprise, its country of incorporation and description of nature of the enterprise operation as per provisions of subparas.
(a) and (b) of para.102 of IAS 1 (Presentation of Financial Statements).
9. ' The Company failed to comply with the provisions of clause (ii) of para.2 of Part I of Fourth Schedule to the Ordinance regarding disclosure of non-following of fundamental accounting assumption, namely going concern and accrual in preparation of the financial statements.
10. ' Plant capacity has not been disclosed in the accounts as per clause (vii) of para.2 of Part I of Fourth Schedule to the Ordinance.
11. ' The Company has not disclosed the current portion of long-term loans as per clause (b) of para.12 of Part II of Fourth Schedule to the Ordinance.
12. ' Account receivable has been included in the Advances, deposits and prepayments instead of disclosing it separately on the face of balance sheet as per sub-clause (iv) of clause (A) of para.6 of Part II of Fourth Schedule.
13. ' Disclosure of bank borrowings not in accordance with Fourth Schedule as per clause (b) of para.12 of Part II of Fourth Schedule to the Ordinance.
14. ' As a consequence of the above irregularities and non-compliances, the appellant was served with show-cause notice. The appellant submitted his reply containing admissions in the following terms:- "We failed to comply with certain International Accounting Standards and certain requirements of the Fourth Schedule to the Ordinance. We have also failed to comply with the new audit format as per Form 35-A. Our reason for the above-stated lapses was time. Our client was rushed to comply with SECP deadlines for submission of audited accounts with result that all these lapses took place.
15. Even our normal audit report, which had always carried a "going concern" qualification was overlooked in the rush to finish the job. The excuse given by us does not in any way diminish our responsibilities as an auditor and we feel, we have been careless in fully discharging our responsibilities. For the above stated reasons we request that SECP take a lenient view and we on our part assure the SECP that no such lapse will take place in the future."
16. ' As a consequence of hearing, the .Appellant was found to have contravened the provisions of section 255 of the Companies Ordinance and rule 17-A of the Companies (General Provisions and Forms) Rules, 1985, and fine of Rs.4,000 was imposed on him and further a sum of Rs.2,000 under subsection (1) of section 260 of the Ordinance and some amount under rule 35 of the Companies (General Provisions and Forms) Rules, 1985, read with section 476 of the Ordinance were imposed.
17. The appellant was also issued warning.
18. ' By order dated 24-1-2002, a copy of the same was forwarded to different authorities, including respondent No,1, respondent No,1 on receipt of the copy of the order passed on the same to the Secretary, who referred the matter in terms of section 20-A of the Chartered Accountants Ordinance, 1961 to the Investigation Committee of respondent No,
1. The appellant vide letter dated 6-2-2002 were informed about referring of the matter to the Investigation Committee and was asked to send his comments. In response to the letter of the Secretary of the respondent, the appellant submitted reply containing the same facts submitted by him to respondent No,2 and admitted the lapse committed by him on his part which were summarized as follows:-- ' We failed to comply with certain IAS and certain requirements of Fourth Schedule.
19. ' We failed to comply with the new audit format.
20. ' Going concern qualification which was carried in the previous audit reports was overlooked in the rush to finish the job.
21. ' The excuse given does not in any way diminish our responsibility as an auditor.
22. ' The appellant through its principal Mr. Salman Masood, appeared before the Investigation Committee of respondent No,
1. Before it, he stated that the Chief Executive of respondent No,4 was his friend and the audited report was prepared by respondent No,4 and he (Salman Masood) signed it without noticing the fallacies in the account and respondent No,4 got it printed. In fact, he admitted that he signed the accounts without auditing it. At the conclusion of the hearing, the Investigation Committee recorded its findings in the following terms:--
(i) He certified a report of an examination of financial statements in the name of his firm without examination of these statements and the related records, under clause (2) of Part-I of Schedule-II of the C.A. Ordinance, 1961.
(ii) He was grossly negligent in the conduct of his professional duties under clause (7) of Part-I of Schedule-II of the C.A. Ordinance, 1961.
(iii) He was guilty of an act discreditable to a member of the Institute under clause (5) of Part-IV of Schedule-I of the C.A. Ordinance, 1961.
23. ' On the basis of the report of the Investigation Committee, show-cause notice dated 10-7-2002 was served on the appellant which was replied by him and after the hearing, respondent No,1 imposed punishment by suspending his membership for a period of 5 years under section 20D of the Chartered Accountants Ordinance, 1961. Hence this appeal.
24. ' We have heard Mr. Shahenshah Hussain, learned counsel for the appellant, Mr. I.H. Zaidi, learned counsel for respondent No,1, and Mr. Agha Faqir Muhammad, learned counsel for respondent No,2 at Katcha Peshi stage for final disposal of the appeal.
25. ' Mr. Shahenshah Hussain, learned counsel for the appellant has raised the following grounds in support of the appeal:--
(1) Suspension of the membership by respondent No,1 is against the principle of double jeopardy as enshrined in Article 13 of the Constitution of Islamic Republic of Pakistan.
(2) The impugned order has been passed in violation of provisions of Ordinance in initiations of proceedings and the Investigation was influenced by the outsider i.e. Respondent No,2. The action taken under the impugned judgment is harsh.
26. ' After hearing the learned counsel for the parties we are of the view that the appellant at the very outset, has admitted the mistake on both fora, before the Investigation Committee and the respondent No,2. We have also noticed that subsection (2) of section 260 of the Companies Ordinance provides harsher punishment but respondent No,2 has imposed lesser punishment under subsection (1) of section 260 of the Companies Ordinance. Respondent No,1, however, has imposed the maximum punishment within its competence. We are of the view that the same calls for interference.
27. ' In the circumstances of the case, while maintaining the finding, we reduce the period of suspension of the appellant from 5 years to one year effective from the date of order of respondent No, 1.
28. ' With the above modification in period of suspension, the appeal is dismissed in limine, with no order as to costs with listed applications.