CA Vikram signs the audit report of a company relying entirely on a working paper prepared by an article assistant on a material inventory balance, without any review. The inventory is later found to be grossly overstated. He is most likely to be held guilty under:

Correct answer: C) Clause (7) of Part I of the Second Schedule, for not exercising due diligence or being grossly negligent in the conduct of professional duties

Explanation

Clause (7) of Part I of the Second Schedule covers a member who does not exercise due diligence or is grossly negligent in conducting professional duties. Signing a report on a material area without reviewing the assistant's work reflects lack of due diligence. Here CA Vikram signed the report himself, so Clause (12) on allowing others to sign does not apply.