The Jammu & Kashmir High Court has ruled that Chartered Accountants must carefully examine supporting financial records before issuing utilisation certificates, even though they are not required to independently verify the genuineness of every client document.
The High Court of Jammu & Kashmir and Ladakh, in its judgment dated 15 October 2026, emphasised that Chartered Accountants have a professional responsibility to carefully scrutinise supporting documents before issuing utilisation certificates.
Justice Sanjay Dhar delivered the ruling in Naresh Kapahi v. Central Bureau of Investigation, CRM(M) No. 712/2021, concerning alleged misuse of government grants amounting to ₹11.59 lakh by an NGO engaged in handicraft training programmes.
According to the CBI investigation, the Chartered Accountant had issued utilisation certificates confirming that government funds were properly utilised and payments made to artisans and instructors through account-payee cheques. However, the underlying records allegedly showed withdrawals through bearer cheques, with payments not reaching the intended beneficiaries.
The High Court clarified that while a CA is not expected to independently establish the genuineness of every document supplied by a client, the certificate must accurately reflect the documents examined. Any material inconsistency between financial records and the certification may warrant scrutiny of the professional's conduct.
Observing that the bank statements could have revealed the discrepancies, the Court found sufficient prima facie material to sustain the criminal charges and dismissed the CA's petition challenging them.
Importantly, the ruling does not establish the CA's criminal guilt. The Court acknowledged that the conduct could ultimately be found to constitute negligence after trial.
The decision highlights the importance of proper documentary examination, bank transaction verification and professional diligence while certifying the utilisation of grants and public funds.
Source: CA Sansaar