The Maharashtra Real Estate Regulatory Authority (MahaRERA) has raised concerns over a category of servicemen who need to ensure that businesses remain on the right side of the rule book but have themselves been violating the law. The Chartered Accountants of India (ICAI), the body governing CAs, has been approached by MahaRERA highlighting the irregularity.
CA performing dual roles
As per the law, a CA looking after the day-to-day affairs of a housing project as its project auditor should not handle the statutory audit of the same project. However, from the information submitted by the developers with MahaRERA, it has come across that both these roles are being performed by the same CA.
MahaRERA has identified this by accessing the Unique Document Identification Number (UDIN), which is given to CAs for doing business.
MahaRERA sends notices to CA, writes to ICAI
A MahaRERA official said on condition of anonymity that the regulatory body has taken a serious note of this irregularity. Besides sending show-cause notices to accountants, a letter has also been sent to their apex body ICAI to take notice of these CAs doing business in an illegal manner. In the missive to ICAI, MahaRERA has suggested that training should be undertaken for these CAs to educate them in accordance with the Immovable Property Act.
As per the Real Estate Act, every developer, for carrying out a project, should keep 70% of the money received from homebuyers by maintaining an escrow account. Even a project’s progress has to be certified by various professionals, including its CA, to permit withdrawing the funds at each of the stages of construction. While withdrawing the funds, Form 3 certified by the project’s CA has to be submitted.
Need of different CAs to avoid conflict of interest
Apart from this, the developer is obliged to update the Statutory Audit report with MahaRERA twice a year. During this audit, it has to be certified that the expenditure incurred by the developer is in accordance with the completion of the project. Moreover, if there are any irregularities, it is also necessary to record them.
Hence, the requirement is to have different individuals and companies for the tasks to avoid conflict of interest.