Audit Chapter 20 PDF

CHAPTER - 20 5.
1
" PROFESSIONAL ETHICS "
INTRODUCTION
The term “Ethics” means moral principles which govern a person’s behaviour or the conducting
of an activity. It is the branch of knowledge that deals with moral principles, whereas
“Professional Ethics” consist of personal, organizational and corporate standards of
behaviour expected for professionals.
Like other professionals, Chartered Accountants also have some set of code of ethics. This Code of
Ethics establishes ethical requirements for Professional Accountants.
Any deviation from the ethical responsibilities brings the disciplinary mechanism into action against
the Chartered Accountants.
Code of Ethics– Its Necessity: Ethics are as old as human civilization. It is nothing but the laws or
rules of acceptable behaviour. The whole foundation of any profession, particularly CA profession,
is its credibility. The sole purpose of Code of Ethics is to ensure and uphold this credibility. The
main ingredient of our profession is independence. An auditor needs to be independent while
carrying out his audit.
Our Institute’s Motto – ‘Ya Esha Supteshu Jagrati’ is adopted from Kathopanishad and it
denotes‘ eternal vigilance’ – awakening when the world is asleep.
Many of our members perceive Code of Ethics as a burden. They are totally mistaken. On the
contrary Code of Ethics seeks to protect the interests of the profession as a whole. It is a shield that
enables us to command respect.
CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
PART A -General Application of the Code –SECTION 100-150
PART B - Professional Accountants in Public Practice –SECTION 200-290
PART C- Professional Accountants in business–SECTION 300-350
PARTA:GENERALAPPLICATIONOFTHECODE
Introduction and Fundamental Principles - Section 100
1. A Professional Accountant’s responsibility is not exclusively to satisfy the needs of an

individual client or employer but also acting in the public interest. A prof essional
accountantshouldobserveandcomplywiththeethicalrequirementsofthisCode.
2. This Code is in three parts. Part A establishes the fundamental principles of professional
ethics for Professional Accountants and provides a conceptual framework for applying
those principles.
• The conceptual framework provides guidance on fundamental ethical principles.
• Professional accountants are required to apply this conceptual framework to identify

threats to compliance with the fundamental principles, to evaluate their significance
and, if such threats are other than clearly insignificant to apply safeguards to
eliminate them or reduce them to an acceptable level such that compliance with the
fundamental principles is notcompromised.
Vidya Sagar Career Institute Ltd

K-50, Bhawna Tower, Income Tax Colony. Jaipur.(Raj)
Page 1 of 45
3. Parts B and C illustrates how the conceptual framework is to be5.2applied in specific
situations. It provides examples of safeguards that may be appropriate to address threats to
compliance with the fundamental principles and also provides examples of situations where
safeguards are not available to address the threats and consequently the activity or
relationship creating the threats should be avoided.
• Part B applies to professional accountants in public practice.
• Part C applies to professional accountants in business.
Professional accountants in public practice may also find the guidance in Part C relevant to their
particular circumstances
Fundamental Principles
Professional accountants have to observe a number of prerequisites or fundamental principles. The
fundamental principles as discussed in Code of Ethics of ICAI, to be complied are given below:
(a) Integrity – Section110
1. The principle of integrity imposes an obligation on all professional accountants to be
straight forward and honest in both Professional and Business relationships.
2. Professional Accountant should not be associated with reports, returns, communications or
other information where they believe that the information:
(a) Contains a materially false or misleading statement;
(b) Contains statements or information furnished recklessly; or
(c) Omits or obscures information required to be included where such
omission or obscurity would be misleading.
However, a professional accountant will not be considered to be in breach of matters mentioned
above in paragraph 2 if the professional accountant provides a modified report in respect of such
above mentioned matter.
(b) Objectivity- Section120
1. The principle of objectivity imposes an obligation on all Professional Accountants not to
compromise their professional or business judgment because of bias, conflict of
interest or the undue influence of others.
2. Relationships that bias or unduly influence the professional judgment of the
professional accountant should be avoided.
(c) Professional Competence and Due Care – Section130
1. The principle of professional competence and due care imposes the following
obligations on profession a accountants:
(a) To maintain professional knowledge and skill at the level required to ensure that
clients or employers receive competent professional service; and
(b) To act diligently in accordance with applicable technical and professional standards.
2. Competent professional service requires the exercise of sound judgment in applying
professional knowledge and skill in the performance of such service. Professional
competence may be divided into two separate phases:
(a) Attainment of professional competence; and
(b) Maintenance of professional competence.

Page 2 of 45
3. The maintenance of professional competence requires a continuing5.3 awareness and an
understanding of relevant technical professional and business developments. Which to
perform competently within the professional environments.
4. Diligence encompasses the responsibility to act in accordance with the requirements of an
assignment, carefully, thoroughly and on a timely basis.
5. Professional accountant should take steps to ensure that those working under the
professional accountant’s authority in a professional capacity have appropriate training
and supervision.
Where appropriate should make clients, employers or other users of the professional services
aware of limitations inherent in the services to avoid the misinterpretation of an Expression of
Opinion.
(d) Confidentiality- Section 140
1. The principle of confidentiality imposes an obligation on professional accountants to
refrain from:
Disclosing outside the firm or employing organization confidential information without
proper and specific authority or unless there is a legal or professional right or duty to
disclose; and
(a) Using confidential information acquired as a result of professional and business
relationshipstotheirpersonaladvantageortheadvantageofthirdparties.
2. Maintain confidentiality even in a social environment. The Professional Accountant should
be alert to the possibility of inadvertent disclosure, particularly in circumstances
involving long association with a business associate or a close or immediate family
member.
3. Maintain confidentiality of information disclosed by a prospective client or employer.
4. Consider the need to maintain confidentiality of information within the firm or employing
organization.
5. Take all reasonable steps to ensure that staff under the professional accountant’s control
and persons from whom advice and assistance is obtained.
6. Comply with the principle of confidentiality continue seven after the end of relationships
between a professional accountant and a client or employer.
7. The following are circumstances where professional accountants are or may be required to
disclose confidential information or when such disclosure may be appropriate:
(a) Disclosure is permitted by law and is authorized by the client or the employer;
(b) Disclosure is required by law,
Example :-
1. Production of documents or other provision of evidence in the course of legal
proceedings.
2. Disclosure to the appropriate public authorities of infringements of the law that
come to light.
(c) There is a professional duty or right to disclose, when not prohibited by law:
(i) To comply with the quality review;
(ii) To respond to an inquiry or investigation;
(iii) To protect the professional interests of a professional accountant in
legal proceedings; or
(iv) To comply with technical standards and ethics requirements.
Page 3 of 45
8. In deciding whether to disclose confidential information, professional
5.4 accountants should
consider the following points:
a) Whether the interests of all parties, including third parties whose interests may be
affected, could be harmed if the client or employer consents to the disclosure of
information by the professional accountant;
b) Whether all the relevant information is known and substantiated, to the extent it is
practicable; and
c) The type of communication that is expected and to whom it is addressed; in

particular that the parties to whom the communication is addressed are
appropriate recipients.
(e) Professional Behaviour- Section150
1. Imposes an obligation on professional accountants to comply with relevant laws

and regulations and a void any action that may bring discred it to the profession.
2. In marketing and promoting themselves and their work, professional accountants

should not bring the profession into disrepute. Professional accountants should be
honest and truthful and should not:
(a) Make exaggerated claims for the services they are able to offer, the
qualifications they possess, or experience they have gained; or
(b) Make disparaging references or unsubstantiated comparisons to the work of

others.

Page 4 of 45
5.5
Part B:
Professional Accountants In Public Practice
Introduction – Section 200
This Part of the Code illustrates how the conceptual framework contained in Part A is to be
applied by professional accountants in public practice.
A professional Accountant in public practice should not engage in any business, occupation or
activity that impairs integrity, objectivity or the good reputation of the profession and as a
result would be incompatible with the rendering of professional services.
Threats and Safe guards
A. Threats: Compliance with the fundamental principles may potentially be threatened by range
of circumstances. Many threats fall into the following categories:
The nature and significance of the threats may differ depending on whether they arise in
relation to the provision of services to a financial statement audit client, a non financial
statement audit assurance client or a non-assurance client.
1. Circumstances that may create self-interest threats :-
A financial interest in a client or jointly holding a financial interest with a client.
Undue dependence on total fees from a client.
Having a close business relationship with a client. Concern about the possibility of los in A
loan to or from an assurance client or any of its directors or officers
2. Examples of circumstances that may create self-review threats
1. The discovery of a significant error during a re-evaluation of the work of the

professional accountant in public practice.
2. Reporting on the operation of financial systems after being involved in their design or
implementation.
3. Having prepared the original data used to generate records that are the subject
matter of the engagement.
4. A member of the assurance team being, or having recently been, a director or officer
of that client.
5. A member of the assurance team being, or having recently been, employed by the
client in a position to exert direct and significant influence over the subject matter of
the engagement.
6. Performing a service for a client that directly affects the subject matter of the
assurance engagement.
3. Examples of circumstances that may create advocacy threats:
1. Promoting shares in a listed entity when that entity is a financial statement audit
client.
2. Acting as an advocate on behalf of an assurance client in litigation or disputes with
third parties

Page 5 of 45
4. Examples of circumstances that may create familiarity threats 5.6
1. A member of the engagement team having a close or immediate family relationship
with a director or officer of the client.
2. A member of the engagement team having a close or immediate family relationship

with an employee of the client who is in a position to exert direct and significant
influence over the subject matter of the engagement.
3. A former partner of the firm being a director or officer of the client or an employee
in a position to exert direct and significant influence over the subject matter of the
engagement.
4. Accepting gifts or preferential treatment from a client, unless the value is clearly
insignificant.
5. Long association of senior personnel with the assurance client.
5. Examples of circumstances that may create intimidation threats
1. Being threatened with dismissal or replacement in relation to a client engagement
2. Being threatened with litigation
3. Being pressured to reduce inappropriately the extent of work performed in order to

reduce fees.
B. Safeguards that may eliminate or reduce threats to an acceptable level fall into two broad
categories:
(a) Safeguards created by the profession, legislation or regulation; and
(b) Safeguards in the work environment
• Work environment safeguards comprise firm-wide safeguards and engagement

specific safeguards. A professional accountant in public practice should exercise
judgment to determine how to best deal with an identified threat.
• Firm-wide safeguards in the work environment may include:
1. Leadership of the firm that stresses the importance of compliance with the
fundamental principles.
2. Leadership of the firm that establishes the expectation that members of an assurance
team will act in the public interest.
3. Policies and procedures to implement and monitor quality control of engagements.
4. Documented policies regarding the identification of threats to compliance with the

fundamental principles, the evaluation of the significance of these threats and the
identification and the application of safeguards to eliminate or reduce the threats, other
than those that are clearly insignificant, to an acceptable level
5. For firms that perform assurance engagements, documented independence policies

regarding the identification of threats to independence, the evaluation of the
significance of these threats and the evaluation and application of safeguards to
eliminate or reduce the threats, other than those that are clearly in significant, to an
acceptable level.

Page 6 of 45
6. Documented internal policies and procedures requiring compliance
5.7 with the
fundamental principles.
7. Policies and procedures that will enable the identification of interests or relationships
between the firm or members of engagement teams and clients.
8. Policies and procedures to monitor and, if necessary, manage the reliance on revenue
received from a single client.
9. Using different partners and engagement teams with separate reporting lines for the
provision of non-assurance services to an assurance client.
10. Policies and procedures to prohibit individuals who are not members of an engagement
team from inappropriately influencing the outcome of the engagement.
11. Timely communication of a firm’s policies and procedures, including any changes to
them, to all partners and professional staff, and appropriate training and education on
such policies and procedures.
12. Designating a member of senior management to be responsible for overseeing the

adequate functioning of the firm’s quality control system.
13. Advising partners and professional staff of those assurance clients and related entities
from which they must be independent.
14. A disciplinary mechanism to promote compliance with policies and procedures.
15. Published policies and procedures to encourage and empower staff to communicate to
senior levels within the firm any issue relating to compliance with the fundamental
principles that concerns them.
Engagement-specific safeguards in the work environment may include:
1. Involving an additional professional accountant to review the work done or otherwise

advise as necessary
2. Consulting an independent third party, such as a committee of independent directors, a

professional regulatory body or another professional accountant.
3. Discussingethicalissueswiththosechargedwithgovernanceoftheclient.
4. Disclosing to those charged with governance of the client the nature of services
provided and extent of fees charged.
5. Involving another firm to perform or re-perform part of the engagement.
6. Rotating senior assurance team personnel.

Page 7 of 45
5.8
PART C: PROFESSIONAL ACCOUNTANTS INBUSINESS
Introduction – Section 300
This Part of the Code illustrates the application of conceptual framework contained in Part A to
Professional Accountants in Business.
MEMBERSHIP OF THE INSTITUTE
On acceptance of application by the Council, the applicant's name shall be entered in the Register
and a certificate of membership in the appropriate Form shall be issued to the applicant.
Particulars of the Register: Section 19 of the Act provides the particulars to be included in the
Register about every member of the Institute, namely-
1. His full name, date of birth, domicile, residential and professional address;
2. date of entry of name in the Register;
3. His qualifications
4. Whether he holds a COP; and any other prescribed particulars.
Disabilities for the Purpose of Membership
Section 8 of the Chartered Accountants Act, 1949 enumerates the circumstances under which a
person is debarred from having his name entered in or borne on the Register of Members, as
follows:
(i) If he has not attained the age of 21 years at the time of h is application for the entry of
his name in the Register; or
(ii) If he is of unsound mind and stands so adjudged by a competent court; or
(iii) If he is an un discharged insolvent; or
(iv) If he, being a discharged insolvent, has not obtained from the court a certificate stating
that his insolvency was caused by misfortune without any misconduct on his part ; or
(v) If he has been convicted by a competent Court whether within or without India, of an
offence involving moral turpitude and punishable with transportation or imprisonment
or of an offence, not of a technical nature, committed by him in his professional capacity
unless in respect of the offence committed he has either been granted a pardon or, on an
application made by him in this behalf, the Central Government has, by an order in
writing, removed the disability; or
(vi) If he has been removed from membership of the Institute on being found on inquiry to
have been guilty of professional or other misconduct;
It may be noted that a person who has been removed from membership for a specified period,
shall not been titled to have his name entered in the Register until the expiry of such period.
In addition, failure on the part of a person to disclose the fact that he suffers from any one of
the disabilities aforementioned would constitute professional misconduct. The name of the
person, who is found to have been subject at any time to any of the disabilities aforementioned,
can be removed from the Register of Members by the Council.

Page 8 of 45
Types of Members of the Institute 5.9
Section 5 of the Chartered Accountants Act, 1949 provides the division of members of the
Institute.
Associate Member:
Any person, whose name has been entered in the Register, shall be deemed to have become
an Associate of the Institute and shall also be entitled to use the letters A.C.A. after his name
to indicate that he is an Associate Member of the Institute.
Fellow Member: The name of following types of members shall be entered into the Register
as a Fellow of the Institute, on payment of such fees along with the application made and
granted in the prescribed manner-
(i) An associate member who has been in continuous practice in India for at least 5 years,
(ii) A member who has been an associate for a continuous period of not less than 5 years
and who posses such qualifications as may be prescribed by the Council with a view to
ensuring that he has experience equivalent to the experience normally acquired as a
result of continuous practice for a period of 5 years as a Chartered Accountant.
The above mentioned members shall be entitled to use the letters F.C.A. after his name to
indicate that he is a Fellow Member of the Institute.
Removal of Name from the Register
As per section 20 of the Act, the Council may remove, from the Register, the name of any
member of the Institute in the following cases-
(i) who is dead; or
(ii) from whom are quest has been received to that effect; or
(iii) who has not paid any prescribed fee required to be paid by him; or
(iv) who is found to have been subject at the time when his name was entered in the
Register, or who at any time thereafter has become subject, to any of the
disabilities mentioned in Section 8, or who for any other reason has ceased to be
entitled to have his name borne on the Register.
The Council shall remove the name of any member from the Register in respect of whom an order
has been passed under this Act removing him from membership of the Institute.
If the name of any member has been removed from the Register for non-payment of prescribed
fee as required to be paid by him, then, on receipt of an application, his name may be entered
again in the Register on payment of the arrears of annual fee and entrance fee along with such
additional fee, as may be determined by the Council.
Restoration of Membership
Regulation 19 of the Chartered Accountants Regulations, 1988, as well states that the n ame of the
member may be restored by the Council in the Register on an application, in the appropriate
Form, received in this behalf whose name has been removed from the Register for non -payment
of prescribed fee as required to be paid by him, if he is otherwise eligible to such membership, on
his paying the arrears of annual membership fee, entrance fee and additional fee determined by
the Council under the Act.
However, the effective date in case of restoration of cancelled membership, in differe nt situations,

Page 9 of 45
shall be in the following manner::- 5.10
1. Application for restoration and requisite fees are made within the same year of removal –
Restoration shall be with effect from the date on which it was removed from the Register.
2. Removal of name under the orders of the Board of Discipline or the Disciplinary Committee
or the Appellate Authority or the High Court-
Restoration shall be in accordance with such orders.
3. In other cases-
Restoration shall be with effect from the date on which the application and fee are received.
Penalty for Falsely Claiming to be a Member etc.
Section 24 of the Chartered Accountants Act, 1949 provides that any person who -
(i) not being a member of the Institute;
(a) represents that he is a member of the Institute; or
(b) uses the designation Chartered Accountant;
(ii) being a member of the Institute, but not having a certificate of practice, represents
that he is in practice or practices as a Chartered Accountant, shall be punishable on
first conviction with fine which may extend to ` 1000, and on any subsequent
conviction with imprisonment which may extend to 6 months or with fine which may
extend to ` 5,000, or with both.
The provision may be understood with a case, where, the Court of Additional Chief Ju dicial
Magistrate had by its Judgement found the accused guilty under Section 24(i)(a) &(b) of the
Chartered Accountants Act, 1949 and Section 465 of the Indian Penal Code. The Court imposed a
fine on the accused and in the event of his failure to pay the fine, sentenced to rigorous
imprisonment for three months. (Case of Prem Batra decided on 18.7.1989)
CHARTERED ACCOUNTANTSIN PRACTICE
A practicing Chartered Accountant is a person who is a member of the Institute and is holding
Certificate of Practice; and includes such members of the Institute who are deemed to be in
Practice in accordance with the provisions of the Chartered Accountants Act,1949.
Significance of the Certificate of Practice
A member who is not in practice is precluded from accepting engagement to render services of
any of the types normally prescribed for a Chartered Accountant, even though for doing so, he
does not require special qualifications. The Council of the institute is of view that-
(i) Once the person concerned becomes a member of the Institute, he is bound by the
provisions of the Chartered Accountants Act and its Regulations. If and when he appears
before the Income-tax Tribunal as an Income-tax representative after having become a
member of the Institute, he could so appear only in his capacity as a Chartered Accountant
and a member of the Institute. If he continues to be a member of the Institute and has been
punished by suspension from practice as a member, he would not be entitled, in substance,
to practice in some other capacity.
(ii) A member of the Institute can have no other capacity in which he can take up such practice,
separable from his capacity to practice as a member of the Institute.”
Therefore, in nutshell, a Chartered Accountant whose name has been removed from the
membership for professional and/or other misconduct, during such period of removal, will
not appear before the various tax authorities or other bodies before whom he could have
appeared in his capacity as a member of this Institute.

Page 10 of 45
Questions 5.11
A Chartered Accountant in practice has been suspended from practice for a period
of 6 months and he had surrendered his Certificate of Practice for the said period. During
the said period of suspension, though the member did not undertake any audit
assignments, he undertook representation assignments for income tax whereby he would
appear before the tax authorities in his capacity as a Chartered Accountant.
Solution
Undertaking Tax Representation Work:
A chartered accountant not holding certificate of practice cannot take up any other work because it
would amount to violation of the relevant provisions of the Chartered Accountants Act, 1949.
In case a member is suspended and is not holding Certificate of Practice, he cannot in any other
capacity take up any practice separable from his capacity to practices as a member of the
Institute. This is because once a person becomes a member of the Institute; he is bound by the
provisions of the Chartered Accountants Act, 1949 and its Regulations.
If he appears before the income tax authorities, he is only doing so in his capacity as a chartered
accountant and a member of the Institute. Having bound himself by the said Act and its
Regulations made there under, he cannot then set the Regulations at naught by contending that
even though he continues to be a member and has been punished by suspension, he would be
entitled to practice in some other capacity.
Conclusion: Thus, in the instant case, a chartered accountant would not be allowed to represent
before the income tax authorities for the period he remains suspended. Accordingly, in the
present case he is guilty of professional misconduct.
Cancellation and Restoration of Certificate of Practice
Regulation 10 provides that a Certificate of Practice (COP) shall be liable for cancellation, if:
(i) the name of the holder of the certificate is removed from the Register; or
(ii) the Council is satisfied, after giving an opportunity of being heard to the person
concerned, that such certificate was issued on the basis of incorrect, misleading or false
information, or by mistake or inadvertence; or
(iii) a member has ceased to practise; or
(iv) a member has not paid annual fee for certificate of practice till 30thday of September of
the relevant year.
Where a COP is cancelled, the holder shall surrender the same to the Secretary.
Further, Regulation 11 on restoration of COP states that, on an application made in the approved
Form and on payment of such fee, the Council may restore the COP with effect from the date on
which it was cancelled, to a member whose certificate has been cancelled due to non -payment of
the annual fee for the COP and whose application, complete in all respects, together with the fee,
is received by the Secretary before the expiry of the relevant year.
Members - deemed to be in Practice

In Section2(2)of the Act, the term deemed“ to be in practice” has been defined as follows:
“A member of the Institute shall be deemed “to be in practice” when individually or in
partnership with Chartered Accountants in practice, or in partnership with members of such
other recognised professions as may be prescribed, he, inconsideration of remuneration
received or to be received-

Page 11 of 45
5.12
(i) engages himself in the practice of accountancy; or
(ii) offers to perform or performs service involving the auditing or verification of financial
transactions, books, accounts or records, or the preparation, verification or certification of
financial accounting and related statements or holds himself out to the public as an
accountant; or
(i) renders professional services or assistance in or about matters of principle or detail
relating to accounting procedure or the recording, presentation or certification of
financial facts or data; or
(ii) ) renders such other services as, in the opinion of the Council, are or may be rendered by
a Chartered Accountant in practice;
Explanation - An associate or a fellow of the Institute who is a salaried employee of a

Chartered Accountant in practice or a firm of such Chartered Accountants or firm
consisting of one or more chartered accountants and members of any other professional
body having prescribed qualifications shall, notwithstanding such employment, be
deemed to be in practice for the limited purpose of the training of Articled Assistants”.
Pursuant to Section 2(2)(iv) above, the Council has passed a resolution permitting a
Chartered Accountant in practice to render entire range of “Management Consultancy and
other Services”.
The expression “Management Consultancy and other Services” shall not include the
function of statutory or periodical audit, tax (both direct taxes and indirect taxes)
representation or advice concerning tax matters or acting as liquidator, trustee,
executor, administrator, arbitrator or receiver, but shall include the following-
(i) Financial management planning and financial policydetermination.*
(ii) Capital structure planning and advice regarding raisingfinance.*
(iii) Working capitalmanagement.*
(iv) Preparing project reports and feasibility studies. *
Note:- * Consideration of “tax implications” while rendering the services at (i), (ii), (iii) and
(iv) above will be considered as part of “Management Consultancy and other services”.
(iii) Preparing cash budget, cash flow statements, profitability statements, statements of sources
and application of funds etc.
(iv) Budgeting including capital budgets and revenue budgets.
(v) Inventory management, material handling and storage.
(vi) Market research and demand studies.
(vii) Price-fixation and other management decision making.
(viii) Management accounting systems, cost control and value analysis.
(ix) Control methods and management information and reporting.
(x) Personnel recruitment and selection.
(xi) Setting up executive incentive plans, wage incentive plans etc.
(xii) Management and operational audits.
(xiii) Valuation of shares and business and advice regarding amalgamation, merger and
acquisition.
(xiv) Business Policy, corporate planning, organization development, growth and diversification
(xv) Organisation structure and behaviour, development of human resources including design and

Page 12 of 45
conduct of training programmes, work study, job-description, job evaluation
5.13 and evaluation
of workloads.
(xvi) Systems analysis and design, and computer related services including selection of
hardware and development of software in all areas of services which can otherwise be
rendered by a Chartered Accountant in practice and also to carry out any other professional
services relating to EDP.
(xix) Acting as advisor or consultant to an issue, including such matters as:
(a) Drafting of prospectus and memorandum containing salient futures of prospectus.
Drafting and filing of listing agreement and completing formalities with Stock
Exchanges, Registrar of Companies and SEBI.
(b) Preparation of publicity budget, advice regarding arrangements for selection of (i) ad-
media, (ii) centres for holding conferences of brokers, investors, etc., (iii) bankers to
issue, (iv) collection centres, (v) brokers to issue, (vi) underwriters and the
underwriting arrangement, distribution of publicity and issue material including
application form, prospectus and brochure and deciding on the quantum of issue
material. (In doing so, the relevant provisions of the Code of Ethics must be kept in
mind).
(c) Advice regarding selection of various agencies connected with issue, namely
Registrars to Issue, printers and advertising agencies.
(d) Advice on the post issue activities, e.g., follow up steps which include listing of
instruments and dispatch of certificates and refunds, with the various agencies
connected with the work.
Explanation - For removal of doubts, it is hereby clarified that the activities of broking,
underwriting and portfolio management are not permitted.
(xx) Investment counselling in respect of securities [as defined in the Securities Contracts
(Regulation) Act, 1956 and other financial instruments.] (In doing so, the relevant
provisions of the Code of Ethics must be kept in mind).
(xxi) Acting as registrar to an issue and for transfer of shares/other securities. (In doing so,
the relevant provisions of the Code of Ethics must be kept in mind).
(xxii) Quality Audit.
(xxiii) Environment Audit.
(xxiv) Energy Audit.
(xxv) Acting as Recovery Consultant in the Banking Sector.
(xxvi) Insurance Financial Advisory Services under the Insurance Regulatory & Development
Authority Act, 1999, including Insurance Brokerage.
A member shall be deemed to be in practice if he, in his professional capacity and neither in his
personal capacity nor in his capacity as an employee, acts as a liquidator, trustee, executor,
administrator, arbitrator, receiver, adviser or representative for costing, financial or taxation
matters or takes up an appointment made by the Central Government or a State Government or a
court of law or any other legal authority or acts as a Secretary unless his employment is on a
salary-cum-full-time basis.
A person is deemed to be in practice not only when he is actually engaged in the practice of
accountancy but also when he offers to render accounting services whether or not he in fact does
so.
It may also be noted that a member of the Institute is deemed to be in practice during the period he
renders ‘service with armed forces’.
Page 13 of 45
The above provisions need to be correlated with the provisions of section 144
5.14 of the Companies
Act, 2013 which prohibits an auditor of the company from rendering certain services directly or
indirectly to the company or its holding company or its subsidiary company.
Questions
Mr. A, a practicing Chartered Accountant agreed to select and recruit personnel, conduct
training programmes for and on behalf of a client.
Solution
Providing Management Consultancy and Other Services: Under Section 2(2)(iv) of the
Chartered Accountants Act, 1949, a member of the Institute shall be deemed “to be in practice”
when individually or in partnership with Chartered Accountants in practice, he, in consideration
of remuneration received or to be received renders such other services as, in the opinion of the
Council, are or may be rendered by a Chartered Accountant in practice. Pursuant to Section
2(2)(iv) above, the Council has passed a resolution permitting a Chartered Accountant in
practicetorenderentirerangeof“ManagementConsultancyandotherServices”.
The definition of the expression “Management Consultancy and other Services” includes
Personnel recruitment and selection. Personnel Recruitment and selection includes,
development of human resources including designing and conduct of training programmes,
work study, job description, job evaluation and evaluations of workloads.
Conclusion: Therefore, Mr. A is not guilty of professional misconduct.
Questions
Mr. Sam, a Chartered Accountant in practice, provides guidance on post -issue activities to
his clients e.g. follow up steps which include listing of instruments dispatch of certificates
and refunds etc. with the various agencies connected with the work. During the year 201 5-
16, looking to the growing needs of his clients to invest in the stock markets, he also
started advising them on Portfolio Management Services whereby he managed portfolios
of some of his clients.
Solution
Advising on Portfolio Management Services:
The Council of the Institute of Chartered Accountants of India (ICAI) pursuant to Section 2(2)(iv)
of the Chartered Accountants Act, 1949 has passed a resolution permitting a Chartered
Accountant in practice to render entire range of “Management Consultancy and other
Services”. A clause of the aforesaid resolution allows Chartered Accountants in practice to act as
advisor or consultant to an issue of securities including such matters as drafting of prospectus,
filing of documents with SEBI, preparation of publicity budgets, advice regarding selection of
brokers, underwriters etc., advice regarding post issue activities, like, follow up steps for listing
of instruments, dispatch of certificates, refunds etc. It is, however, specifically stated that
Chartered Accountants in practice are not permitted to undertake the activities of broking,
underwriting and portfolio management services.
In the given case, Mr. Sam has started advising his clients on portfolio management along with
other management consultancy services related to an issue.
Therefore, Mr. Sam would be guilty of misconduct under the Chartered Accountants Act, 1949 as a
chartered accountant in practice is not permitted to manage portfolios of his clients.
Questions
P, a Chartered Accountant in practice provides management consultancy and other
services to his clients. During 2016, looking to the growing needs of his clients to invest
in the stock markets, he also advised them on Portfolio Management Services whereby
he managed portfolios of some of his clients.

Page 14 of 45
Solution : 5.15
Advising on Portfolio Management Services:
The Council of the Institute of Chartered Accountants of India (ICAI) pursuant to Section 2(2)(iv)
of the Chartered Accountants Act, 1949 has passed a resolution permitting “Management
Consultancy and other Services” by a Chartered Accountant in practice. A clause of the aforesaid
resolution allows Chartered Accountants in practice to act as advisor or consultant to an issue of
securities including such matters as drafting of prospectus, filing of documents with SEBI,
preparation of publicity budgets, advice regarding selection of brokers, etc. It is, however,
specifically stated that Chartered Accountants in practice are not permitted to undertake the
activities of broking, underwriting and portfolio management services. Thus, a chartered
accountant in practice is not permitted to manage portfolios of his clients.
In view of this, P would be guilty of misconduct under the Chartered Accountants Act,1949.
Companies not to Engage in Accountancy Section 25 of the Chartered Accountants Act, 1949
provides that:
(1) No company, whether incorporated in India or elsewhere, shall practice as chartered

accountants.
Here, the term “company” shall include any limited liability partnership which has company
as its partner for the purpose of this section.
(2) If any company contravenes this provision then, without prejudice to any other proceedings
which may be taken against the company, every director, manager, secretary and any other
officer thereof who is knowingly a party to such contravention shall be punishable with fine
whichmayextendonfirstconvictionto`1,000andonanysubsequentconvictionto`5,000.
LLPs, though allowed to be appointed as an auditor in accordance with the Companies Act, 2013,
however, it can’t be engaged into practice, if it has company as its partner, as per the Chartered
Accountants Act,1949.
Therefore, in short, the LLP not having any company as its partner, can be engaged into practicing
and thus take audit assignments.
Member in Practice Prohibited from using a Designation Other Than Chartered Accountant
(i) The member of the Institute are now permitted to use the word 'CA' as prefix before their
name irrespective of the fact that they are in practice or not.
(ii) Under Section 7 of the Chartered Accountants Act, 1949 a member in practice cannot use
any designation other than that of a Chartered Accountant, nor can he use any other description,
whether in addition thereto or in substitution there for, but a member who is not in practice and
does not use the designation of a Chartered Accountant may use any other description.
Nevertheless a member in practice may use any other letters or description indicating
membership of Accountancy Bodies which have been approved by the Council so long as such use
does not imply adoption of a designation and/or does not amount to advertisement or publicity.
For example, though a member cannot designate himself as a Cost Accountant, he can use the
letters A.I.C. W.A .after his name, when he is a member of that Institute.
“It is improper for a Chartered Accountant to state on his professional documents that he is an
Income-tax Consultant, Cost Accountant, Company Secretary, Cost Consultant or a Management
Consultant”.

Page 15 of 45
Chartered Accountant in practice is not entitled to use the designation “Corporate
5.16 Lawyer”.
Further, the members are not permitted to use the initials ‘CPA’ (standing for Certified Public
Accountant) on their visiting cards”.
“Members of the Institute in practice who are otherwise eligible may also practice as Company
Secretaries and/or Cost Accountants. Such members shall, however, not use designation/s of the
aforesaid Institute/s simultaneously with the designation “Chartered Accountant”.
Question
Discuss whether the following actions by a Chartered Accountant would amount to

misconduct or not:
A practising Chartered Accountant uses a visiting card in which he designates himself,
besides as Chartered Accountant, as
(a) Tax Consultant
(b) Cost Accountant.
Solution:
(a) Tax Consultant:
Section 7 of the Chartered Accountants Act, 1949 read with Clause (7) of Part I of the First
Schedule to the said Act prohibits advertising of professional attainments or services of a
member. It also restrains a member from using any designation or expression other than that of a
chartered accountant in documents through which the professional attainments of the member
would come to the notice of the public. Under the clause, use of any designation or expression
other than chartered accountant for a chartered accountant in practice, on
professionaldocuments,visitingcards,etc.amountstoamisconductunlessitbeadegree of a university
or a title indicating membership of any other professional body recognised by the Central
Government or the Council. Thus, it is improper to use designation "Tax Consultant" since n either
it is a degree of a University established by law in India or recognised by the Central Government
nor it is a recognised professional membership by the Central Government or the Council .
(b) Cost Accountant:
As stated in the preceding paragraph, this would also constitute misconduct under section 7 of
the Act read with Clause (7) of Part I of the First Schedule to the Chartered Accountants Act, 1949.
A chartered accountant in practice cannot use any other designation than that of a chartered
accountant. Nevertheless, a member in practice may use any other letters or descriptions
indicating membership of accountancy bodies which have been approved by the Council. Thus, it
is improper for a chartered accountant to state in his documents that he is a “Cost Accountant”.
However as per the Chartered Accountants Act, 1949, the Council has resolved that the
members are permitted to use letters indicating membership of the Institute of Cost and Works
Accountants but not the designation "Cost Accountant".
Maintenance of Branch Offices -Section 27
If a Chartered Accountant in practice or a Firm of Chartered Accountants has more than one office
in India, each one of such offices should be in the separate charge of a member of the Institute.
Failure on the part of a member or a firm would constitute professional misconduct.
Chartered Accountant in-charge of the branch of another firm should be associated with him or
with the firm either as a partner or as a paid assistant. If he is a paid assistant, he must be in
whole time employment with him.

Page 16 of 45
However, exemption has been given to members practicing in hill areas
5.17subject to certain
conditions. The conditions are:
(1) Such members/firm be allowed to open temporary offices in a city in the plains for a limited
period not exceeding 3 months in a year.
(2) The regular office need not be closed during this period and all correspondence can continue
to be made at the regular office.
(3) The name board of the firm in the temporary office should not be displayed at times other
than the period such office is permitted to function as above.
(4) The temporary office should not be mentioned in the letterheads, visiting cards or any other
documents as a place of business of the member/firm.
(5) Before commencement of every winter it shall be obligatory on the member/firm to inform
the Institute that he/it is opening the temporary office from a particular date and after the
office is closed at the expiry of the period of permission, an intimation to that effect should
also be sent to the office of the Institute by registered post.
However, a member can be in-charge of two offices if they are located in one and the same
Accommodation. In this context some of the Council’s decisions are as follows:
(1) With regard to the use of the name-board, there will be no bar to the putting up of a name-
board in the place of residence of a member with the designation of Chartered Accountant,
provideditisaname-plateoraname-boardofanindividualmemberandnotofthefirm.
(2) The exemption may be granted to a member or a firm of Chartered Accountants in practice to
have a second office without such second office being under the separate charge of a
member of the Institute, provided-
(a) the second office is located in the same premises, in which the first office is located or,
(b) the second office is located in the same city, in which the first office is located or,
(c) the second office is located within a distance of 50 km. from the municipal limits of a
city, in which the first office is located.
Question
Mr. G, a Chartered Accountant in practice as a sole proprietor has an office in Mumbai

nearChurchGate.Duetoincreaseinprofessionalwork,heopensanotherofficeina suburb of
Mumbai which is approximately 80 kilometers away from the municipal limits of the city.
For running the new office, he employs three retired Income-tax Officers. In terms
Solution:
of section 27 of the Chartered Accountants Act, 1949, if a chartered accountant in practice has
more than one office in India, each one of these offices should be in the separate charge of a
member of the Institute. There is however an exemption for the above if the second office is
located in the same premises, in which the first office is located; or the second office i s located in
the same city, in which the first office is located; or the second office is located within a
distance of 50 kms from the municipal limits of a city, in which the first office is located. Since the
second office is situated beyond 50 kms of municipal limits of Mumbai city, he would be liable
for committing a professional misconduct.
Question

Page 17 of 45
Mr. K Chartered Accountant in practice as a sole proprietor at Chennai5.18
has an office in the
suburbs of Chennai. Due to increase in the income tax assessment work, he opens another
office near the income tax office, which is within the city an data distance of 30kms. from
his office in the suburb. For running the new office, he has employed are tired Income Tax
Commissioner who is not a Chartered Accountant.
Solution:
Maintenance of Branch Office in the Same City:
As per section 27 of the Chartered Accountants Act, 1949 if a chartered accountant in practice has
more than one office in India, each one of these offices should be in the separate char ge of a
member of the Institute. However, a member can be in charge of two offices if the second office is
located in the same premises or in the same city, in which the first office is located; or the second
office is located within a distance of 50 Kilo metres from the municipal limits of a city, in which
the first office is located.
In the given case, Mr.K, Chartered Accountant in practice as a soleproprietor at Chennai has an
office in suburbs of Chennai, and due to increase in the work he opened another branch within the
city near the income tax office. He also employed a retired income tax commissioner to run the new
office and the second office is situated within a distance of 30 kilometers from his office in the
suburb.
In view of above provisions, there will be no misconduct if Mr.K will be in-charge of both the
offices. However, he is bound to declare which of the two offices is the main office.
Question
Mr. X & Mr. Y, partners of a Chartered Accountant Firm, one in-charge of Head Office and
another in-charge of Branch at a distance of 80kms from the municipal limits, putsupaname-
board of the firm in both premise sand also in the irrespective residences.
Putting Name Board of the Firm at Residence: The council of the Institute has decided that with
regard to the use of the name-board, there will be no bar to the putting up of a name-board in the
place of residence of a member with the designation of chartered accountant, provided, it is a
name-plate or board of an individual member and notof the firm.
In the given case, partners of XY &Co., put up a name board of the firm in both offices and also in
their respective residences.
Conclusion: Thus, the chartered accountants are guilty of misconduct. Distance given in the question
is not relevant for deciding.
KYC Norms for CA in Practice

The Council of ICAI approved the following KYC Norms which are mandatory in nature
and shall apply in all assignments pertaining to attest functions.
The KYC Norms approved by the Council of ICAI are given below:
1. Where Client is an Individual/Proprietor
A. General Information
 Name of the Individual
 PAN N o. or Aadhar Card No. of the Individual
 Business Description
 Copy of last Audited Financial Statement
B. Engagement Information
 Type of Engagement

Page 18 of 45
2. Where Client is a Corporate Entity 5.19
 Name and Address of the Entity
 Name of the Parent Company in case of Subsidiary
C. Regulatory Information
 Company PAN No.
 Company Identification No.
 Directors’ Names & Addresses
 Directors’ Identification No.
3. Where Client is a Non-Corporate Entity
 Name and Address of the Entity
 Copy of PAN No.
 Partner’s Names &Addresses (with their PAN/Aadhar Card/DIN No.)
Question
Write a short note on Importance of KYC requirements for a Chartered Accountant's
practice.
Solution
Importance of KYC Requirements for a Chartered Accountant’s Practice: The financial
services industry globally is required to obtain information of their clients and comply with
Know Your Client Norms (KYC norms). Keeping in mind the highest standards of Chartered
Accountancy profession in India, the Council of ICAI recommended such norms to be observed
by the members of the profession who are in practice. These Know Your Client (KYC) Norms are
also important in order to ensure a healthy growth of the profession and an equitable flow of
professional work among the members.
The self-regulatory measures are recommendatory. However, considering the spirit underlying
these measures, it is expected that every Chartered Accountant carrying out attest function is
encouraged to follow them and implementation of these measures would go a long way in ensuring
equitable flow of work among the members and would also further enhance the prestige of the
profession in the society.
CHARTERED ACCOUNTANTS IN SERVICE

Chartered Accountant in Service means a professional accountant employed or engaged in an
executive or non-executive capacity in such areas as commerce, industry, service, the public sector,
education, the not for profit sector, regulatory bodies or professional bodies, or a professional
accountant contracted by such entities.

Page 19 of 45
DISCIPLINARY PROCEDURE 5.20
Provisions of the Chartered Accountant, Act, 1949 regarding:
(i) Disciplinary Directorate,
(ii) Board of Discipline,
(iii) Disciplinary Committee,
(iv) Appellate Authority and procedure in enquiries for disciplinary matters relating to
misconduct of the members of the Institute are as hereunder:
Flow Chart of Discipline Procedure Mechanism
Receipt of (i) Complaint along with prescribed fee, or (ii) Information,

against member of ICAI alleged misconduct
Disciplinary Directorate
Prima Facie Opinion
Guilty Not
Submit all
Falling in First Falling in Second information &
Schedule Schedule complaints to
Place the matter Place the matter

before Board of before
Accept Reject
Accept Reject
Accept Reject
Advice the
Conduct Director
Close the
Conduct Close the enquiry matter
Enquiry matter
Found guilty May proceed with

Found Guilty the matter if it's
allied to
Yes No
Yes No
Refer the matter to
the Disciplinary
Committee, if it's
allied to the

Page 20 of 45
5.21
It can, It can,
(i) reprimand the member (i) reprimand the member
(ii) remove name of the member (ii) remove name of the member
upto period of 3 months permanently or for any
(iii) impose fine upto `1,00,000 duration, it think fit
(iii) impose fine upto `5,00,000
Any member or Director (Discipline) aggrieved by order of Board

or Disciplinary Committee can prefer an appeal with in
Appellate
It can,
(i) Confirm, modify or set aside theorder,
(ii) Impose, set aside, Reduce or enhance penalty.
(iii) Remit the case to the Board of Discipline or Disciplinary.
TYPES OF MISCONDUCT – PROFESSIONAL OR OTHER section 22
“Professional or other misconduct” shall be deemed to include any act or omission provided in
any of the Schedules, but nothing in this section shall be construed to limit or abridge in any way
the power conferred or duty cast on the Director (Discipline) under sub-section (1) of section 21
to inquire into the conduct of any member of the Institute under any other circumstances.
A member is liable to disciplinary action under Section 21 of the Chartered Accountants Act, if he
is found guilty of any Professional or Other Misconduct.
Professional Misconduct
Professional misconduct has been defined in part I, II and III of the First Schedule; and part I
and II ofthe Second Schedule. If the member is found guilty of any of the acts oromissions
stated in any of the respective parts of the Schedule, he/she shall be deemed to be guilty of
professional misconduct.
Other Misconduct
Other misconduct has been defined in part IV of the First Schedule and part III of the Second
Schedule. These provisions empower the Council to inquire into any misconduct of a member
even it does not arise out of his professional work. This is considered necessary because a
chartered accountant is expected to maintain the highest standards of integrity even in his
personal affairs and any deviation from these standards, even in his non-professional work,
would expose him to disciplinary action. For example, a member who is found to have forged the
Page 21 of 45
will of a relative, would be liable to disciplinary action even though the 5.22
forgery may not have
been done in the course of his professional duty.
Other misconduct would also relate to conviction by a competent court for an offence involving
moral turpitude punishable with transportation or imprisonment to an offence not of a technical
nature committed by the member in his professional capacity. [See section 8 (v)of the Act].
Some illustrative examples, where a member may be found guilty of “Other Misconduct”, under
the aforesaid provisions rendering, himself unfit to be member are:
(i) Where a chartered accountant retains the books of account and documents of the client
and fails to return these to the client on request without a reasonable cause.
(ii) Where a chartered accountant makes a material misrepresentation.
(iii) Where a chartered accountant uses the services of his articled or audit assistant for
purposes other than professional practice.
(iv) Conviction by a competent court of law for any offence under Section 8(v) of the
Chartered Accountants Act 1949.
(v) Misappropriation by office-bearer of a Regional Council of the Institute, of a large
amount and utilization thereof for his personal use.
(vi) Non-replying within a reasonable time and without a good cause to the letter of the
public authorities.
(vii) Where certain assessment records of income tax department belonging to the client of
Chartered Accountant were found in the almirah of the bed-room of the Chartered
Accountant.
(viii) Where a chartered accountant had adopted coercive methods on a bank for having a loan
sanctioned to him.
Question
Mr. A, a practicing Chartered Accountant, failed to return the books of account and
other documents of a client despite many reminders from the client. The client had
settled his entire fees dues also.
Answer
Bringing Disrepute to the Profession: A member is liable to disciplinary action under Section
21 of the Chartered Accountants Act, 1949, if he is found guilty of any professional or “Other
Misconduct”. As per part IV of the First Schedule to the Chartered Accountants Act, a member of
the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, if
he-
(1) is held guilty by any civil or criminal court for an offence which is punishable with
imprisonment for a term not exceeding six months;
(2) in the opinion of the Council, brings disrepute to the profession or the Institute as a
result of his action whether or not related to his professional work.
A member may be found guilty of “Other Misconduct”, as per Clause (2), under the aforesaid
provisions rendering, himself unfit to be member if he retains the books of account and
documents of the client and fails to return these to the client on request without a reasonable
cause.
In the given case, Mr. A failed to return the books of accounts and other documents of his
client without any reasonable cause, therefore, he would be guilty of other misconduct under
the afore said provisions.

Page 22 of 45
5.23
Question
Mr. R, a Chartered Accountant in practice has been elected as the treasurer of a Regional
Council of the Institute. The Regional Council had organized an international tour through
a tour operator during the year for its members. During the audit of the Regional Council, it
was found that Mr. R had received a personal benefit o f` 50,000 from the tour operator.
Answer
Embezzlement of Funds:
Section 21 of the Chartered Accountants Act, 1949 provides that a member is liable for disciplinary
action if he is guilty of any professional or “Other Misconduct.” Though the term “Other Misconduct”
has not been defined in the said Act, this provision enables the Council to enquire into any
misconduct of a member even if it does not arise out of his professional work. This is considered
necessary because a chartered accountant is expected to maintain the highest standards of
integrity even in his personal affairs and any deviation from these standards even in his non -
professional work, would expose him to disciplinary action. The Council has also laid down that
among other things “misappropriation by an office-bearer of a Regional Council of the Institute of a
large amount and utilization thereof for his personal use” would amount to “other misconduct”.
Thus, in the instant case, Mr. R would be liable for disciplinary action.
SCHEDULES TO THE ACT
The First Schedule is divided into four parts,
1. Part I of the First Schedule deals with the misconduct of a member in practice.
2. Part II deals with misconduct of members in services.
3. Part III deals with the misconduct of members generally and
4. Part IV deals with other misconduct in relation to members of the institute generally.
The Second Schedule is divided into three parts.
1. Part I deals with misconduct in relation to a member in practice.
2. Part II deals with misconduct of members generally and
3. Part III deals with other misconduct in relation to members of the Institute generally.
THE FIRSTSCHEDULE
Where the Director (Discipline)is of the opinion that member is guilty of any professional or
other misconduct mentioned in the First Schedule; he shall place the matter before the Board
of Discipline.
PART I - Professional Misconduct in relation to Chartered Accountants in Practice
A Chartered Accountant in practice is deemed to be guilty of professional misconduct if he:
Clause (1) allows any person to practice in his name as a chartered accountant unless such
person is also a chartered accountant in practice and is in partnership with or employed by
him.

Page 23 of 45
5.24
QUESTION:-
Who can be allowed to practice in a CA’s name?
ANS.:-
1. Non- Chartered Accountant – NOT ALLOWED
2. Chartered Accountant in practice – A. PARTNER –ALLOWED
B. EMPLOYEE-ALLOWED
C.OTHER-NOT ALLOWED
Clause (2) pays or allows or agrees to pay or allow, directly or indirectly, any share,
commission or brokerage in the fees or profits of his professional business, to any
person other than a member of the Institute or a partner or a retired partner or the
legal representative of a deceased partner, or a member of any other professional
body or with such other person shaving such qualification as may be prescribed, for
the purpose of rendering such professional services from time to time in or out side
India.
Explanation - In this item, “partner” includes a person residing outside India with
whom a chartered accountant in practice has entered into partnership which is not in
contravention of item (4) of this Part.
The Council has prescribed [Regulation 53A(1) of the Chartered Accountants
Regulations, 1988] the professional bodies, which are asunder:-
(a) The Institute of Company Secretaries of India established under the Company
Secretaries Act, 1980.
(b) The Institute of Cost &Works Accountants of India established under the Cost &Works
Accountants Act, 1959.
(c) Bar Council of India established under the Advocates Act, 1961.
(d) The Indian Institute of Architects established under the Architects Act, 1972.
(e) The Institute of Actuaries of India established under the Actuaries Act, 2006.
Further, the Council has also prescribed [Regulation 53A(3) of the Chartered Accountants
Regulations, 1988] the persons qualified in India, which are as under:
(i) Company Secretary within the meaning of the Company Secretaries Act, 1980;
(ii) CostAccountantwithinthemeaningoftheCostandWorksAccountantsAct,1959;
(iii) Actuary within the meaning of the Actuaries Act, 2006;
(iv) Bachelor in Engineering from a University established by law or an Institution
recognized by law;
(v) Bachelor in Technology from a University established by law or an institution
recognised by law;
(vi) Bachelor in Architecture from a University established by law or an institution
recognized by law;
(vii) BachelorinLawfromaUniversityestablishedbylaworaninstitutionrecognisedbyla
w;
(viii) Master in Business Administration from Universities established by law or
technical institutions recognized by All India Council for Technical Education.

Page 24 of 45
5.25
Note:-
1. Certain Circulars/Orders issued by the Registrars of various State Co-operative
Societies wherein it has been mentioned that certain amount of audit fee is
payable to the concerned State Government and the auditor has to deposit a
percentage of his audit fee in the state Treasury by a prescribed challan within
a prescribed time of the receipt of Audit fee. Council decided that as such there
is no bar in the Code of Ethics to accept such assignment wherein a percentage
of professional fee is deducted by the Government to meet the administrative
and other expenditure.
2. It is not the nomenclature to a transaction that is material but it is the substance
of the transaction, which has to be looked into.
Question
Ms. Preeti is a practicing Chartered Accountant. Mr. Preet is a practicing Advocate
representing matters in the court of law. Ms. Preetiand Mr. Preet decided to help each
other in the matters involving their professional expertise. Accordingly,
Ms.Preeti recommends Mr. Preet in all tax litigation matters in the court of law and Mr.Preet
consults Ms.Preeti in all matters related to finance and other related matters, which comes
to him in arguing various cases in the court of law. Consequently, they started sharing some
part in the profits of their professional work.
Answer
Sharing and Accepting of Part of Profits with an Advocate: According to Clause (2) of
Part I of the First Schedule to the Chartered Accountants Act, 1949, a Chartered
Accountant in practice is deemed to be guilty of professional misconduct if he pays or
allows or agrees to pay or allow, directly or indirectly, any share, commission or brokerage
in the fees or profits of his professional business, to any person other than a member of
the Institute, for the purpose of rendering such professional services from time to time in
or outside India.
Furthermore, Clause (3) of Part I of the First Schedule to the said Act states that a
Chartered Accountant in practice is deemed to be guilty of professional misconduct if he
accepts any part of the profits of the professional work of a person who is not a member of
the Institute.
However, a practicing member of the Institute can share fees or profits arising out of his
professional business with such members of other professional bodies or with such other
persons having such qualifications as prescribed by the Council under Regulation 53 -A of
the Chartered Accountants Regulations, 1988. Under the said regulation, the member of
“Bar Council of India” is included.
Therefore, Mr. Preet, an advocate, a member of Bar Council, is allowed to share part of
profits of his professional work with Ms.Preeti. Hence, Ms. Preeti, a practicing Chartered
Accountant, will not be held guilty under any of the abovementioned clauses for paying
and accepting part of profits from Mr. Preet.

Page 25 of 45
Question 5.26
Mr.X who passed his CA examination of ICAI on 18thJuly, 2016 and started his practice
from August 15, 2016. On 16thAugust 2016, one female candidate approached him for
articleship. In addition to monthly stipend, Mr.X also offered her 1 % profits of his CA
firm. She agreed to take both 1 % profits of the CA firm and stipend as per the rate
prescribed by the ICAI. The Institute of Chartered Accountants of India sent aletter to
Mr.X objecting the payment of 1 % profits. Mr.X replies to the ICAI stating that he is paying
1 % profits of his firm over and above the stipend to help the articled clerk as the financial
position of the articled clerk is very weak. Is Mr.X Liable to professional misconduct?
Answer
Sharing Fees with an Articled Clerk: As per Clause (2) of Part I of First Schedule to the Chartered
Accountants Act 1949, a Chartered Accountant in practice shall be deemed to be guilty of
professional misconduct if he pays or allows or agrees to pay or allow, directly or indirectly,
any share, commission or brokerage in the fees or profits of his professional business, to any
person other than a member of the Institute or a partner or a retired partner or the legal
representative of a deceased partner, or a member of any other professional body or with such
other persons having such qualification as may be prescribed, for the purpose of rendering such
professional services from time to time in or outside India.
In view of the above, the objections of the Institute of Chartered Accountants of India, as given in
the case, are correct and reply of Mr. X, stating that he is paying 1 % profits of his firm over and
above the stipend to help the articled clerk as the position of the articled clerk is weak is not
tenable.
Hence, Mr. X is guilty of professional misconduct in terms of Clause (2) of Part I of First Schedule
to the Chartered Accountants Act 1949.
Question
Mr.K, a practicing Chartered Accountant gave 50% of the audit fees received by him to a
non-Chartered Accountant, Mr.L, under the nomenclature of office allowance and such an
arrangement continued for a number ofyears.
Answer
Sharing of Audit Fees with Non-Member: As per Clause (2) of Part I of First Schedule to the
Chartered Accountants Act, 1949 a member shall be held guilty if a Chartered Accountant in
practice pays or allows or agrees to pay or allow, directly or indirectly, any share, commission or
brokerage in the fees or profits of his professional business, to any person other than a m ember of
the Institute or a partner or a retired partner or the legal representative of a deceased partner, or
a member of any other professional body or with such other persons having such qualification as
may be prescribed, for the purpose of rendering such professional services from time to time in
or outside India.
In the instant case, Mr. K, a practising Chartered Accountant gave 50% of the audit fees received
by him to a non-Chartered Accountant, Mr. L, under the nomenclature of office allowance and
such an arrangement continued for a number of years. In this case, it is not the nomenclature to a
transaction that is material but it is the substance of the transaction, which has to be lookedinto.

Page 26 of 45
The Chartered Accountant had shared his profits and, therefore, Mr. K will
5.27 be held guilty of
professional misconduct under the Clause (2) of Part I of First Schedule to the Chartered
Accountants Act, 1949.
Treatment of Goodwill –
Share of Profit / Sale of Goodwill
1. In case of partnership firm:-
There are two or more partners and one of them dies - Legal Representative (say, widow) of the
deceased partner can continue to receive a share of the firm, only if partnership agreement
contains such provision.
In case of a partnership firm when all the partners die at the same time, the provision of
proprietorship firm would also be applicable
2. In case of proprietorship firm:-
No sharing of fees between Legal Representative of single member firm and purchaser of
Goodwill of the firm on the death of the Sole Proprietor of the firm.
Payments may be made in instalments, provided the agreement of the sale of goodwill ontains
such provision.
Goodwill of a proprietary firm of chartered accountant can be sold/transferred to another
eligible member of the Institute, after the death of the proprietor concerned.
The Council permitted the sale/transfer of goodwill for such cases in the following manner:-
a. Death of proprietor concerned occurred on or after 30.8.1998
Provided such sale is completed in all aspects within a year of the death of such proprietor
concerned. The name of the concerned firm would be kept in abeyance (i.e. not removed on
receipt of information about the death of the proprietor as is being done at present) only upto
a period of 1 year from the death of proprietor concerned as aforesaid
b. Death of proprietor concerned occurred on or after 30.8.1998 and there existed a
dispute as to the legal heir of the deceased proprietor:-
Provided the information as to the existence of the dispute is received by the Institute within a
year of the death of the proprietor concerned. The name of concerned firm shall be kept in
abeyance till 1 year from the date of settlement of dispute.
c. Death of proprietor concerned had occurred on or before 29th August, 1998 :-
Provided such sale/transfer is completed/effected and the Institute's permission to practice in
the deceased's proprietary firm name is sought for by 28th August, 1999 and the firm name
concerned is still available with the Institute.
Question
Mr. Qureshi, Chartered Accountant, in practice died in a road accident. His widow proposes to sell
the practice of her husband to Mr. Pardeshi, Chartered Accountant, for ` 5 lakhs. The price also
include srighttousethefirmname-QureshiandAssociates.CanwidowofQureshisell the practice and can
Mr. Pardeshi continue to practice in that name as a proprietor?
Answer
Sale of Goodwill: With reference to Clause (2) of Part I to the First Schedule to Chartered
Accountants’ Act, 1949, the Council of the Institute of Chartered Accountants of India had an
occasion to consider whether the goodwill of a proprietary concern of chartered accountant can
be sold to another member who is otherwise eligible, after the death of the proprietor.
It lay down that the sale is permitted subject to certain conditions discussed in above diagram. It
further resolved that the legal heir of the deceased member has to obtain the permission of the
Council with in a year of the death of the proprietor concerned.
Conclusion: Thus, in a given case and on the facts, the widow of Mr. Qureshi, who has sold the
practice for ` 5 lakhs is nothing but sale of goodwill. Thus the act of Mrs. Qureshi is permissible.

Page 27 of 45
5.28
Question
A Chartered Accountant who was in practices since last 20 years died in a road accident. His
widow sold the practice to another Chartered Accountant in practice for ` 30 lakhs. The price also
included the right to use the firm name.
Answer
Sale of Goodwill: With reference to Clause (2) of Part I to the First Scheduleto Chartered
Accountants Act, 1949 the Council of the Institute of Chartered Accountants of India had an
occasion to consider whether the goodwill of a proprietary concern of chartered accountant can be
sold to another member who is otherwise eligible, after the death of theproprietor.
The Council resolved that the sale/transfer of goodwill in the case of a proprietary firm of
chartered accountant to another eligible member of the Institute shall be permitted. It furtherlaid
down that in cases where the death of proprietor occurs after 30.08.1998, the goodwill of the
deceased member’s practice can be sold to another member and permission of the Institute has to
be obtained within a year of the death of the proprietor concerned. It is even laid down that in such
cases the name of the proprietary firm concerned would not be removed up to a period of one year
from the death of the proprietor.
Thus, in the instant case, when the widow of the chartered accountant sold the practice to
another member, it is nothing but goodwill sold to another member. The sale of the practice and
the right to use the name is also allowed in terms of theabove decision of the Council. Therefore,
the above act of the widow of the Chartered Accountant is permissible.
Clause (3) accepts or agrees to accept any part of the profits of the professional work of a
person who is not a member of the Institute.
Provided that nothing herein contained shall be construed as prohibiting a member ‘from
entering into profit sharing or other similar arrangements, including receiving any share
commission or brokerage in the fees, with a member of such professional body or other
person having qualifications, as is referred to in item (2) of this part.
Clause (4) enters into partnership, in or outside India, with any person other than Chartered
Accountant in practice or such other person who is a member of any other professional
body having such qualifications as may be prescribed, including a resident who but for his
residence abroad would be entitled to be registered as a member under clause (v) of sub-
section (1) of section 4 or whose qualifications are recognized by the Central Government
or the Council for the purpose of permitting such partnerships.
The Council has prescribed Regulation 53A(3) (as discussed under clause (2) of this part) and
Regulation 53B of the Chartered Accountants Regulations, 1988 for the persons qualified and the
professional bodies.
The Regulation 53B prescribes the membership of following professional bodies for entering into
partnership:
(a) Company Secretary, member, The Institute of Company Secretaries of India, established
under the Company Secretaries Act, 1980;
(b) Cost Accountant, member, The Institute of Cost and Works Accountants of India
established under the Cost and Works Accountants Act,1959;
(c) Advocate,member,BarCouncilofIndiaestablishedundertheAdvocatesAct,1961;
(d) Engineer, member, The Institution of Engineers, or Engineering from a University
established by law or an institution recognized bylaw.

Page 28 of 45
(e) Architect, member, The Indian Institute of Architects established under the Architects
5.29
Act, 1972;
(f) Actuary, member, The Institute of Actuaries of India, established under the Actuaries
Act, 2006.
Some of the decisions of the Council under this clause are given below:
1. Where a Chartered Accountant had engaged himself as a partner in two business firms and
Managing Director in two Companies and was also holding Certificate of Practice without
obtaining permission of the Institute. Held that he was guilty of professional misconduct
inter alia under Clauses (4) and (11). (Harish kumar)
2. The Respondent was a Taxation Advisor of a group of Companies. During search and
seizure under Section 132 of The Income Tax Act, 1961 of the group and also of the
Chartered Accountant, the Complainant found that the Respondent was colluding with this
group in evasion of tax. The Respondent had signed two sets of financial statements of the
same auditee, for the same financial year. The two financial statements showed different
figures of contract receipts, net profits and balance sheet. He was grossly negligent in the
conduct of his professional duties. The Respondent admitted that he was managing
partner/partner in two partnership firms where there were other partners who were not
Chartered Accountants. Held, the respondent is guilty under Clause (4) of Part I of First
Schedule and under Clauses (5), (6) &(7) of Part I of Second Schedule. [Assistant Director of
Income Tax (investment), Calicut v. P Subramanian.
Question:-
Mr.P, a Chartered Accountant in practice entered into a partnership with Mr.L, an advocate
for sharing of fees for work sent by one to the other. However, due to some disputes, the
partnership was dissolved after 1 month without any fees having been received.
Answer:-
Partnership with an Advocate: As per Clause (4) of Part I of the First Schedule to the Chartered
Accountants Act, 1949, a chartered accountant will be guilty of professional misconduct if he enters
into partnership with any person other than a chartered accountant in practice or a person
resident without India who but for his residence a broad would been titled to be registered as a
member under Clause(v)of Sub–section (1) of Section 4 or whose qualification are recognized by
the Central Government or the Council for the purpose of permitting such partnership.
However, Regulation 53B of the Chartered Accountants Regulations, 1988 permits a Chartered
Accountant in practice to enter into partnership with other prescribed Professionals which includes
an Advocate, a member of Bar Council of India.
In the instant case, Mr. P, a chartered accountant, has entered into partnership with Mr. L, an
advocate.
Thus, he would not be guilty of professional misconduct as per Clause (4) of Part I of First
Schedule read with Regulation 53B.
Question:-
A Chartered Accountant having CoP entered into partnership with persons, who are not the
members of the institute, for the purpose of carrying on business. The share of the chartered
account in the profit and losses was 25%. He was to take part in the business and was
entitled to represent the firm before Govt. authorities etc. He was operating the bank account
of the firm, was receiving moneys from the customers and was also looking after the affairs of
the Partnership.

Page 29 of 45
5.30
Answer:-
Practicing CA Entering into Partnership and Carrying on Business:
As per Clause (4) of Part I of First Schedule to the Chartered Accountants Act, 1949, a Chartered
Accountant in practice is deemed to be guilty of professional misconduct if he enters into
partnership, in or outside India, with any person other than Chartered Accountant in practice or
such other person who is a member of any other professional body having such qualifications as
may be prescribed, including a resident who but for his residence abroad would be entitled to be
registered as a member under clause (v) of sub-section (1) of section 4 or whose qualifications are
recognized by the Central Government or the Council for the purpose of permitting such
partnerships.
It may be noted that the Council has prescribed the list of person qualified and the professional
bodies for the purpose of entering into partnership under the Chartered Accountants Regulations,
1988.
Further, according to Clause (11) of Part I of First Schedule to the said Act, a Chartered Accountant
in practice shall be deemed to be guilty of professional misconduct if he engages in any business or
occupation other than the profession of char tered accountant unless permitted by the Council so to
engage.
It may also be noted that a member in practice is required to apply for specific and prior approval of
the Council for entering into any business.
In the given case, a chartered accountant in practice has entered into partnership with persons
who were not the members of the Institute, for the purpose of carrying on business.
The question is silent about with whom the partnership has been entered into and whether the
prior permission for entering into such business has been obtained.
Conclusion: It is assumed that the persons with whom the partnership has been entered into has
not been allowed under the Regulations and the prior approval of the Council has not been obtained
for entering into such business. Hence, the Chartered Accountant shall be held guilty of professional
misconduct under Clause (4) and Clause(11).
Question:-
A Chartered Accountant practising in India enters into partnership with
(a) A Certified Public Accountant in New York.
(b) A Chartered Accountant from the Institute of Chartered Accountants in England and
Wales in London, and in each case, the members concerned take the profits earned in
their own country.
Answer:-
(a) Partnership with a CPA in New York:
Clause (4) of Part I to the First Schedule to the Chartered Accountants Act, 1949
specifies that a chartered accountant in practice shall be deemed to be guilty of
professional misconduct if he enters into partnership, in or outside India, with any
person other than a chartered accountant in practice or such other person who is a
member of any other professional body having such qualifications as may be
prescribed, including a resident who but for his residence abroad would be entitled to
be registered as a member or whose qualifications are recognised by the Central
Government or the Council for the purpose of permitting such partnerships;
Thus, chartered accountant would be guilty of professional misconduct since
certified public accountants (CPA) are not eligible to become members of the
Institute.
Page 30 of 45
(b) Partnership with a chartered accountant from ICAEW: As 5.31 stated above, it is
important that partnership with a member of the foreign professional body is
permissible provided inter alia such bodies are eligible for the membership of the
Institute. Earlier, the Council had passed a resolution permitting chartered
accountants from ICAEW to become members of the Institute as also fulfilment of
certain conditions in respect of persons not permanently residing in India.
However, the Council of the Institute at its meeting held in December, 1995
decided to withdraw the resolution w.e.f. December 8, 1995. In view of this,
persons qualified from any of the four Institutes in the United Kingdom including
England and Wales are not entitled to have their names entered in the Register of
Members maintained by the Institute effective from December 8, 1995. Based on
this development, partnership between members of the Institute and members of
above foreign professional bodies will not be permissible from the above date. Even
a chartered accountant from ICAEW who was eligible to become member of the
Institute, the profit sharing arrangement stated in the question goes against the
provisions of Clause (4). Hence, it would constitute professional misconduct.
Clause (5) secures either through the services of a person who is not an employee of such
Chartered Accountant or who is not his partner or by means which are not open to a
Chartered Accountant, any professional business.
Provided that nothing herein contained shall be construed as prohibiting any agreement
permitted in terms of item (2), (3) and (4) of this part.
“A man must stand erect, and not to be kept erect by others”, is a dictum by Marcus Aurelius.
The decision of the Council under this clause is given below:-
A Chartered Accountant wrote various letters to officers of different Army Canteens giving details
about him and his experience, his partner &office and the norms for charging audit fees. He was
held guilty for violation of Clauses (5) &(6). (Jethan and Sharda vs. Deepak Mehta)
Clause (6) Solicits clients or professional work either directly or indirectly by circular,
advertisement, personal communication or interview or by any other means.
Provided that nothing herein contained shall be construed as preventing or prohibiting -
(i) Any Chartered Accountant from applying or requesting for or inviting or securing
professional work from another chartered accountant in practice; or
(ii) A member from responding to tenders or enquiries issued by various users of
professional services or organizations from time to time and securing professional work
as a consequence.
However, as per the guideline issued by the Council of the Institute of Chartered Accountants of
India, a member of the Institute in practice shall not respond to any tender issued by an
organization or user of professional services in areas of services which are exclusively reserved for
chartered accountants, such as audit and at testation services. However, such restriction shall not
be applicable where minimum fee of the assignment is prescribed in the tender document itself or
where the areas are open to other professionals along with the Chartered Accountants.
Further, Keeping in view the broad purview of Clause (6) of Part I of the First Schedule to
the Chartered Accountants Act, 1949, an advertisement of Coaching /teaching activities by a
member in practice may amount to indirect solicitation, as well as solicitation by any other
means, and may therefore be violative of the provisions of Clause(6)of Part I of the First
Schedule to the Chartered Accountants Act,1949.
Such members are advised to abstain from advertising their association with Coaching / teaching
activities through hoardings, posters, banners and by any other means, failing which they may be

Page 31 of 45
liable for disciplinary action, as per the provisions of Chartered Accountants
5.32 Act, 1949 and
Rules/Regulations framed there under. However, such members may put, outside their
Coaching/teaching premises, sign board mentioning the name of Coaching/teaching Institute,
contact details and subjects taught therein only. As regards the size and type of sign board, the
Council Guidelines as applicable to Firms of Chartered Accountants would apply.
Ban on Solicitation is relaxed in the following situation of client or professional work:
(i) If work or professional work occurs within the fraternity; or
(ii) If professional work is secured from responding to tenders, or enquiries issued by various
users of professional services or organization.
Some forms of soliciting work which the Council has prohibited are discussed below:
(a) Advertisement and note in the press –They are also not permitted to use the less open
method of circulating letters to a small field of possible clients. Personal canvassing or
canvassing for clients of previous employer through the help of the employees arealso not
permitted. The exceptions to the above rule are:
(i) A member may request another Chartered Accountant in practice for professional work.
(ii) a member may advertise changes in partnerships or dissolution of a firm, or of any
change in address of practice and telephone numbers. Such announcements should be
limited to a bare statement of facts and consideration given to the appropriateness of
theareaofdistributionofthenewspaperormagazineandnumberofinsertions.
(iii) a member is also permitted to issue a classified advertisement in the journal/ newsletter
of the Institute intended to give information for sharing professional work on assignment
basis or for seeking partnership or salaried employment of an accountancy nature,
provided it only contains the accountant’s name, address or telephone number, fax
number, e-mail address.
(b) Application for empanelment for allotment of audit and other professional work –
Where the existence of such a panel is within the knowledge of a member, he is free to
write to the concerned organization with a request to place his name on the panel.
However, it would not be proper for the Chartered Accountant to make roving
enquiries by applying to any such organization for having his name included in any
such panel. It is permissible to quote fees on enquiries being received from such bodies,
which maintain such panel.
(c) Publication of Name or Firm Name by Chartered Accountants in the Telephone or other
Directories published by Telephone Authorities or Private Bodies – The Council has held
that it would not be proper for a chartered accountant to have entries made in a Telephone
Directory either by making a special request or by means of an additional payment. The
Council has also considered the question of permitting entries in respect of chartered
accountants and their firms under specified groups in telephone/trade directories brought
out by government and nongovernment agencies. It has decided to permit such entries
subject to certain restrictions.
(d) Responding to Tenders, Advertisements and Circulars – It is not prohibited
(e) Publication of Books or Articles – A member is not permitted to indicate in a book or
an article, published by him, the association with any firm of Chartered Accountants.
(f) Issue of greeting cards or invitations – The Council does not approve. However, the
Council is of the view that the designation “Chartered Accountant” as well as the name of the
firm may be used in greeting cards, invitations for marriages and religious ceremonies and
any invitation for opening or inauguration of office of the members, change in office

Page 32 of 45
premises and change in telephone numbers, provided that such greeting 5.33cards or invitations
etc. are sent only to clients, relatives and close friends of the members concerned.
(g) Soliciting professional work by making roving inquiries – It is not permissible since it
wouldtant amount to advertisement.
(h) Seeking work from professional colleagues – The bissue of an advertisement or a circular
would be in violation of this Clause.
(i) Scope of Representation which an auditor is entitled to make under Section 225(3)
Companies Act, 1956 (now section 140(4)(iii) of the Companies Act, 2013) –The
wording of his representation should be such that apart from the opportunity not being
abused to secure needless publicity, it does not tantamount directly or indirectly to
canvassing or soliciting for his continuance as an auditor.
(j) Acceptance of original professional work by a member emanating from the client
Introduced to him by another member –If any professional work of such client comes to
him directly, it should be his duty to ask the client that he should come through the other
member dealing generally with his original work.
(k) Giving public Interviews –the members should ensure that it should not result in publicity.
Due care should be taken to ensure that such interviews or details about the members or
their firms are not given in a manner highlighting their professional attainments.
(l) Members and/or firms who publish advertisements under Box numbers –
Members/Firms are prohibited.
(m) Website–
The Council at its 212th meeting held in January, 2001 approved the detailed guidelines for posting
the particulars on Website and its 345th Meeting held in August, 2015 again revised the said
guidelines.
The amended guidelines issued by the Council are as under:
1. The Chartered Accountants and/or Chartered Accountants’ Firms would be free to
create their own Website. The actual format of the Website is not being prescribed nor
any standard format of the Website is being given to provide independence to the
Members. There is no restriction on the colours which may be used in the Website.
2. Individual Members would also be permitted to have their Web pages in their trade
name or individual name.
3. The Chartered Accountants and/or Chartered Accountants’ Firms would ensure that
their Websites are run on a “pull” model and not a “push” model of the technology.
4. The Chartered Accountants and/or Chartered Accountants’ Firms should ensure that
none of the information contained in the Website be circulated on their own or through
E-mail or by any other mode or technique except on a specific “pull” request.
5. The Chartered Accountants would also not issue any circular or any other
advertisement or any other material of any kind whatsoever by virtue of which they
solicit people to visit their Website. The Chartered Accountants would, however, be
permitted to mention their Website address on their professional stationery.
6. The following information may be allowed to be displayed on the Firms/Members’
Websites:
(i) Member/Trade/Firmname.
(ii) Year of establishment.

Page 33 of 45
(iii) Member/Firm’s Address (both Head Office and Branches) Tel. No(s) Fax No(s) E-
5.34
mail ID(s)
(iv) Nature of services rendered (to be displayable only on specific “pull” request)
(v) Partners
Partners Year of Other Tel Area of
Name Qualification Qualification Off. – Direct Experience (to be
displayable only
Res. on Specific “pull”
Mobile request)
E-mail
address
(vi) Details of Employees–
Professional Others Name Designatio Area of Experience

n
(to be displayable
only on Specific “pull”
request)
(vii) Job vacancies for the Chartered Accountant/firm of Chartered Accountants

(including article ship).
(viii) No. of articled clerks. (to be displayable only on specific “pull” request).
(ix) Nature of assignment shandled (to be displayable only on specific “pull” request).
Names of clients and fee charged cannot be given.
Note: Disclosure of names of clients and/or fees charged, on the website is permissible
only where it is required by a regulator, whether or not constituted under a statute, in
India or outside India, provided that such disclosure is only to the extent of requirement
of the regulator. Where such disclosure of names of clients and/or fees charged is made
on the website, the member/ firm shall ensure that it is mentioned on the website [in
italics], below such disclosure itself, that “This disclosure is in terms of the
requirement of [name of the regulator] having jurisdiction in [name of the
country/area where such regulator has jurisdiction] vide
[Rule/Directiveetc.underwhichthedisclosureisrequiredbytheRegulator].
7. Since Chartered Accountants in practice/firms of Chartered Accountants are not
permitted to use logo with effect from1st July, 1998, they cannot use logo on Website
also.
8. Display of Passport size photograph is permitted.
9. The members may include articles, professional information, professional updation and
other matters of larger importance or of professional interest.
10. The bulletin boards can be provided.
11. The chat rooms can be provided which permit chatting amongst members of the
ICAI and between Firms and its clients. The confidentiality protocol would have to be
observed.
12. The members/firms can provide on line advice to their clients who specifically
request for the advice whether free of charge or on payment.
13. The listing on suitable search engine should be permitted. However, the field of
search should be restricted only to the field of “Chartered Accountants” or “CA” or

Page 34 of 45
“Indian CA”, “Indian CPA”, “Indian Chartered Accountant” or any 5.35permutation or
combination related thereto. The Websites would not be vetted by the Institute of
Chartered Accountants of India (ICAI). ICAI at its sole discretion may vet any of the
Websites created by its members or individual Chartered Accountant or firms of
Chartered Accountants and would have powers to direct deletion of certain portions
and/or issue specific directions.
14. The details in the Website should be so designed that it does not amount to soliciting
client or professional work.
15. The Website should ensure adequate secrecy of the matters of the clients handled
throughWebsite,
16. A number of Chartered Accountants Societies or other bodies are creating data -
bases of Chartered Accountants or Chartered Accountants’ Firms and are offering
listing to Chartered Accountants. Such listing would be permitted with or without
payment.
17. The Institute of Chartered Accountants of India will regularly inform the aforesaid
guidelines to the members and the Chartered Accountants’ Firms to ensure the strict
complianceoftheguidelines.Theguidelinesmayberevisedfromtimetotime.
18. No Advertisement in the nature of banner or any other nature will be permitted on
the Website.
19. The Website should be befitting the profession of Chartered Accountants and should
not containanyinformationormaterialwhichisunbecomingofaCharteredAccountant.
20. The Website may provide a link to the Website of ICAI, its Regional Councils and
Branches and also the Website of Govt./Govt. Departments/Regulatory
authorities/other Professional Bodies, such as, American Institute of Certified Public
Accountants (AICPA), the Institute of Chartered Accountants of England & Wales
(ICAEW) and The Canadian Institute of Chartered Accountants(CICA).
21. The address of the Website can be different from the name of the firm. But it should
not amount to soliciting clients. The Website address should be as near as possible to
the individual name/trade name, firm name of the Chartered Accountant in practice
or firm of Chartered Accountants in practice.
22. The Website should mention the date upto which it is updated and the
informationshould not be at material variance from the information as per the ICAI’s
records.
23. The website address of the member beobtained on annual basis in the annual form
required to be filed by the member while paying fee and the same be taken as entry
on record &the website address of the member be provided to members as part of
the membership record. If the member chose not to give his website address, it did
not prevent the Institute to take suitable action against him in case his
noncompliance with theguidelines.
24. A number of non-Chartered Accountants’ firms have set up their own Websites
providing advisory services on taxation and other areas. Some of such Websites
may request Chartered Accountants or Chartered Accountants’ firms to provide
consultation and advice through their Websites. This would be permitted subject to
the condition thaton the Website, contact address of the Chartered Accountant
concerned is not provided nor such Website will contain any material which
advertises professional achievements or status of such Chartered Accountant except
making a statement that they are Chartered Accountants. The name
ofCharteredAccountants’firmwithsuffix“CharteredAccountants”would notv be
permitted.
Some of the decisions of the Council/High Courts on this clause are given below:

Page 35 of 45
1. Where a chartered accountant firm issued a letter of authority in favour
5.36 of two other
chartered accountants to accept and carry out audits of Co -operative Societies on its
behalf and they (the two chartered accountants) issued circulars of which the firm was
not aware - Held, that the firm was not guilty of professional misconduct. [V.B. Kirtane
(1958)] But the person, in whose
favourtheletterofauthoritywasgivenintheabovecase,washeldguilty.[MRWalke(1958)]
2. A chartered accountant sent a printed circular to a person unknown to him offering his
services in profit planning and profit improvement programmes. Held, the chartered
accountant was guilty. [B.S.N. Bhushan (1965)]
3. A chartered accountant wrote several letters to Assistant Registrars/ Registrars of Co -
operative Societies, Government of West Bengal requesting for allotment of audit work
and to enroll his name-on panel of auditors. Held he was guilty of professional misconduct
under the clause. [Chief Auditor of Co- operative Societies, West Bengal vs. B.B. Mukherjee
(1967)]
4. A chartered accountant, in spite of the previous reprimand, sent letters to registrar Co -
operative societies, Calcutta, stating that no allotment of audit was made to him and
requested to take action immediately and oblige. Held he was guilty of professional
misconduct under the clause. [D.N. Das Gupta, Chief auditor of Co-operative Societies, West
Bengal vs. B.B. Mukherjee (1969)]
5. A Chartered Accountant approached the principal of a secondary school through a third
person known to the principal for his appointment as auditor of that school. Further, the
chartered accountant misrepresented to the pervious Auditor that he had been offered
appointment as auditor of the school and enquired whether he had any objection to his
accepting the same though it was a fact that the appointment of chartered accountant was
not made, the chartered accountant was guilty of professional misconduct under the
clause. It was further held that writing letter by the Chartered Accountant to the previous
auditor offering his services to audit the accounts of school was not wrong as it was an
offer to professional colleague and not to a prospective client. [M. L. Agarwa l(1973)]
6. A member was found guilty of professional misconduct under Clauses (6) and (7) Part I of
the First Schedule for having issued circular letter regarding change of address of his firm
to persons who were not in professional relationship with him and for having written to
the shareholders thanking them for appointing him as
auditor.[K.K.Mehtavs.M..K.Kaul(1975)]
7. An advertisement was published in a newspaper containing the member’s photograph
wherein he was congratulated on the occasion of the opening ceremony of his office. He
was found guilty by the Council.[G.P. Agrawal(1982)]
8. A member who got an advertisement published in a newspaper offering his “services in
matters of Accounts, Income Tax, Labour laws, Law matters and Management Services was
found guilty in terms of this clause as also under Clause (7). [Anil K. Garg (1987)]
9. A member had an advertisement published in a newspaper regarding inauguration of his
professional office. It was held that having regardto:
(i) the nature of theadvertisement
(ii) the function organised on thatoccasion
(iii) the persons invited
(iv) the mediumused
(v) the names of various concerns which had conveyed their goodwishes
(vi) the advertisement having been released by the Respondent himself and he had

Page 36 of 45
solicited professional work by advertisement, he was found guilty
5.37 in terms of this
clause .[ShashindraS. Ostwal (1988)]
10. A member wrote a letter to a Company in standard format highlighting his expertise in
sales tax matters and had requested for a draft of ` 200/- if his knowledge of the Sales tax
matters has been found worthwhile. The member was found guilty in terms of this Clause.
[K.A. Gupta (1989)]
11. Where a Chartered Accountant had visited personally the clients for securing the
appointment as auditors of the Institutions. Held that he was guilty under Clause (6) of
Part I of First Schedule. [J.S. BhatiVs. M.L Aggarwal.(1991)]
12. Where a Chartered Accountant had addressed an undated but signed letter to -a Bank
requesting for empanelment of his firm as auditor along with the particulars of his firm
showing the past experience and other details of the firm; and a Member of Parliament
had also sent a letter to the Bank recommending the name of the said Chartered
Accountant’s firm for immediate empanelling for Internal Audit/Inspection
Audit/Management Audit, Expenditure Audit. Held that the
memberwasguiltyunderClause(6)ofPartIoftheFirstSchedule.[NareshC.Aggarwal(1992)]
13. Where a Chartered Accountant had sent a letter on the letterhead of his firm to a non -
member introducing himself as a chartered accountant giving details of service s rendered
by him and the schedule of his fees for rending various kinds of services. Held that he was
guilty under the clause. [Vijay Kumar Goel (1994)]
14. Where a Chartered Accountant had written a letter to a Co -operative Society wherein he
had mentioned that he had been authorised by the Registrar of Societies to conduct the
statutory audit of the Societies and requested it to contact him. Held that it tantamount to
solicitation of the audit and he had violated the provisions of the clause. [M. V. Lonkar
(1996)]
Question
XYZ, a firm of Chartered Accountants created a website “www.xyzindia.com”. The website
besides containing details of the firm and bio-data of the partners also contains the
passport size photographs of all the partners of the firm.M/
Answer
Posting of Particulars on Website: The Council of the Institute had approved posting of
particulars on website by Chartered Accountants in practice under Clause (6) of Part I of First
Schedule to the Chartered Accountants Act, 1949 subject to the prescribed guidelines. The
relevant guidelines in the context of the website hosted by M/s XYZ are:
 No restriction on the colours used in the website;
 The websites are run on a “pull” technology and not a “push” technology
 Names of clients and fees charged not to be given.
However, disclosure of names of clients and/or fees charged, on the website is permissible
only where it is required by a regulator, whether or not constituted under a statute, in India or
outside India, provided that such disclosure is only to the extent of requirement of the
regulator. Where such disclosure of names of clients and/or fees chargedis made on the
website, the member/ firm shall ensure that it is mentioned on the website [in italics], below
such disclosure itself, that “This disclosure is in terms of the requirement of [name of the
regulator] having jurisdiction in [name of the country/area where such regulator has
jurisdiction] vide [Rule/ Directive etc. under which the disclosure is required by the
Regulator].

Page 37 of 45
In view of the above, M/s XYZ would have no restriction on the colours used
5.38 in the website but
failed to satisfy the other two guidelines. Thus, the firm would be liable for professional
misconduct since it would amount to soliciting work by advertisement.
Question
A partner of a firm of chartered accountants during a T.V. interview handed over a bio -data of
his firm to the chairperson. Such bio-data detailed the standing of the international firm with
which the firm was associated. It also detailed the achievements of the concerned partner and
his recognition as an expert in the field of taxation in the country. The chairperson read out the
said bio-data during the interview. Discuss whether this action by the Chartered Accountant
would amount to misconduct ornot.
Answer
Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949 prohibits
solicitation of client or professional work either directly or indirectly by circular, advertisement,
personal communication or interview or by any other means since it shall constitute professional
misconduct. The bio-data was handed over to the chairperson during the T.V. interview by the
Chartered Accountant which included details about the firm and the achievements of the partner as
an expert in the field of taxation. The chairperson simply read out the same in detail about
association with the international firm as also the achievements of the partner and his recognition
as an expert in the field of taxation. Such anact would definitely lead to the promotion of the
firms’ name and publicity thereof as well as of the partner and as such the handing over of bio-
data cannot be approved. The partner would be held guilty of professional miscount under Clause
(6) of Part I of the First Schedule to the Chartered Accountants Act,1949.
Question
Is there any misconduct on the part of a Chartered Accountant in the following circumstances?
The offer document of a listed company in which Mr. D, a practising Chartered Accountant is a
director mentions the name of Mr.D as a director along with his various professional attainments
and spheres of specialisation.
Answer
The Council of the ICAI has in a communication to members stated that if a public company, in
which a chartered accountant in practice is a director, issues a prospectus or gives any
announcement that gives descriptions about the Chartered Accountant’s expertise, specialisation
and knowledge in any particular field, it shall constitute a misconduct under Clauses (6) and (7) of
Part I of the First Schedule to the Chartered Accountants Act, 1949. The Council has further stated
that in such cases the member concerned has to take necessary steps to ensure that s
uchprospectus or public announcements or public communications do not advertise his
professional attainments and also that such prospectus or public announcements or public
communications do not directly or indirectly amount to solicitation of clients for professional
work by the members. Thus in the instant case, Mr.D would be held to be guilty of professional
misconduct and liable for disciplinary action.
Question
A chartered accountant in practice created his own website in attractive format and colours and
circulated the information contained in the website through E-mail.
Answer
Creation of Own Website by a Chartered Accountant/Firm of Chartered Accountants: The
guidelines approved by the Council of the Institute of Chartered Accountants of India permits
creation of own website by a chartered accountant in his or his firm name and no standard
format or restriction on colours is there. The chartered accountant or firm, as per the
guidelines, should ensure that none of the information contained in the website be circulated
on their own or through E -mail or by any other mode except on a specific “Pull”request.
Page 38 of 45
Since in the given case, the chartered accountant circulated the information 5.39 contained in the
website through E-mail, he is guilty of misconduct under Clause (6) of Part I of the First Schedule
to the Chartered Accountants Act, i.e., a chartered accountant in practice is deemed to be guilty of
professional misconduct if he solicits client or professional work either directly or indirectly, by
circular, advertisement, personal communication or interview or by any other means.
Question
XYZ & Associates, a firm with 5 partners developed a website www.xyzassociates.com.
The website also contained a link to “All India Chartered Accountants Association”, a voluntary
association where X, a partner of the firm is currently the Vice-president.
Answer
Developing Website:
As per the guidelines laid down under Clause (6) of Part I of the First Schedule to the Chartered
Accountants Act, 1949 in respect of websitesby chartered accountants in practice, it is permitted
that website may provide a link to the website of ICAI, its Regional Councils, Branches and
Government Departments and other professional Bodies like AICPA, ICAEW, CICA. In this case,
M/s XYZ Associates provided a link to “All India Chartered Accountants Association” which is not
permitted. Hence the firm would be liable for misconduct under Clause (6) of Part I of th e First
Schedule to the Chartered Accountants Act,1949.
Question
M/s LMN, a firm of Chartered Accountants responded to a tender from a State Government for
computerization of land revenue records. For this purpose, the firm also paid `50,000 as earnest
deposit as part of the terms of the tender.
Answer
Responding to Tenders:
Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949 lays down
guidelines for responding to tenders, etc. As per the guidelines if a matter relates to any services
other than audit, members can respond to any tender. Further, in respect of a non-exclusive area,
members are permitted to pay reasonable amount towards earnest money/security deposits.
In the instance case, since computerization of land revenue records does not fall within exclusive
areas for chartered accountants, M/s LMN can respond to tender as well as deposit 50,000 as earnest
deposit and shall not have committed any professional misconduct.
Question
An advertisement was published in a Newspaper containing the photograph of Mr. X, a member of
the institute wherein he was congratulated on the occasion of the opening ceremony of his office.
Answer
Publishing an Advertisement Containing Photograph: As per Clause (6) of Part I of the First
Schedule to the Chartered Accountants Act, 1949, a Chartered Accountant in practice shall be
deemed to be guilty of misconduct if he solicits clients or professional work either directly or
indirectly by a circular, advertisement, personal communication or interview or by any other
means.
In the given case, Mr. X published an advertisement in a Newspaper containing his photograph on
the occasion of the opening ceremony of his office. On this context, it may be noted that the
advertisement which had been put in by the member is quite prominent. If soliciting of work is
allowed, the independence and forthrightness of a Chartered Accountant in the discharge of
duties cannot bema intained.
The above therefore amounts to soliciting professional work by advertisement directly or
indirectly. Mr. X would be therefore held guilty under Clause (6) of Part I of the First Schedule to
the Chartered Accountants Act,1949.

Page 39 of 45
Question 5.40
Mr. X, a Chartered Accountant and the proprietor of X & Co., wrote several letters to the
Assistant Registrar of Co-operative Societies stating that though his firm was on the panel
of auditors, no audit work was allotted to the firm and further requested him to look into
the matter.
Answer
Soliciting Professional Work: As per Clause (6) of Part I of the First Schedule to the Chartered
Accountants Act, 1949, a Chartered Accountant in practice shall be deemed to be guilty of
misconduct if he solicits clients or professional work either directly or indirectly by a circular,
advertisement, personal communication or interview or by any other means.
In the given case, Mr. X, a Chartered Accountant and proprietor of M/s X and Co., wrote several
letters to the Assistant Registrar of Co-operative Societies, requesting for allotment of audit work.
In similar cases, it was held that the Chartered Accountant would be guilty of professional
misconduct under Clause (6) of Part I of the First Schedule to the Chartered Accountants Act,
1949. The writing of continuous letter to ascertain the reasons for not getting the work is quite
alright but in case such either amount to request for allowing the work then Mr. X will be liable
for professional misconduct.
Consequently, Mr. X would therefore be held guilty under Clause (6) of Part I of the First Schedule
to the Chartered Accountants Act, 1949
Question
PQR and Associates, Chartered Accountants have their website and on the letterhead of
the firm it is mentioned that "Visit our website: PQR com". In the website, the nature of
assignments handled, name of prominent clients and fees charged are also displayed
without any disclosure obligation from any regulator.
Answer
The Council of the Institute of Chartered Accountants has issued guidelines for posting the
particulars on Website by Chartered Accountants in practice and firms of Chartered Accountants in
practice under Clause (6) of Part I of First Schedule to the Chartered Accountants Act, 1949.
According to the guidelines the details in the website should be so designed that it does not
amount to soliciting client or professional work. It is permitted to mention the website address on
letterhead but soliciting people to visit website is not permitted. Nature of assignments handled
(to be displayable only on specific “pull” request) may be allowed to be displayed on the
Websites but Name so f clients and fee be charged cannot be given.
However, disclosure of names of clients and/or fees charged, on the website is permissible only
where it is required by a regulator, whether or not constituted under a statute, in India or
outside India, provided that such disclosure is only to the extent of requirement of the regulator.
Where such disclosure of names of clients and/or fees charged is made on the website, the
member/ firm shall ensure that it is mentioned on the website [in italics], below such disclosure
itself, that “This disclosure is in terms of the requirement of [name of the regulator] having
jurisdiction in [name of the country/area where such regulator has jurisdiction]
vide[Rule/Directiveetc.underwhichthedisclosureisrequiredbytheRegulator].
In the given case, PQR and Associates letterhead invites to people to visit their website. Similarly
the website mentions the nature of assignments, names of the prominent clients and fees charged.
The nature of assignments is permitted for display only on specific 'Pull" request. And the name of
clients, the fees charged is not permitted unless required by regulator.
Therefore, PQR & Associates will be held guilty of Professional Misconduct under Clause (6) of Part
I of First Schedule to the Chartered Accountants Act, 1949.

Page 40 of 45
5.41
Question
A letter is sent by a Chartered Accountant in practice to the Ministry of Finance inquiring
whether a panel of auditors is being maintained by the Ministry and if so to include his
name in the panel (CV enclosed).
Answer
Making Roving Inquiries: Clause (6) of Part I of the First Schedule to the Chartered Accountants
Act, 1949 states that a Chartered Accountant in practice shall be deemed to be guilty of
misconduct if he solicits clients or professional work either directly or indirectly by a circular,
advertisement, personal communication or interview or by any other means. Such a restraint
has been put so that the members maintain their independence of judgement and may be able to
command respect from their prospective clients.
In case of making an application for the empanelment for the allotment of audit and other
professional work, the Council has opined that, “where the existence of such a panel is within the
knowledge of the member, he is free to write to the concerned organization with a request to
place his name on the panel. However, it would not be proper for the member to make roving
inquiries by applying to any such organization for having his name included in any such panel.”
Accordingly, the member is guilty of misconduct in terms of the above provision as he has
solicited professional work from the Finance Ministry, by inquiring about the maintenance of the
panel.
Question
Mr. Honest, a Chartered Accountant in practice, wrote two letters to M/s XY Chartered
Accountants a firm of CAs; requesting them to allot him some professional work . As he
did not have a significant practice or clients he also wrote a letter to M/s ABC, a firm of
Chartered Accountants for securing professional work. Mr. Clever, an another CA,
informed ICAI regarding Mr Honest's approach to secure the professional work. Is Mr.
Honest wrong in soliciting professional work?
Answer
Securing Professional Work: Clause (6) of Part I of the First Schedule to the Chartered
Accountants Act, 1949 states that a Chartered Accountant in practice shall be deemed to be
guilty of misconduct if he solicits clients or professional work either directly or indirectly by a
circular, advertisement, personal communication or interview or byany other means. Provided
that nothing herein contained shall be construed as preventing or prohibiting any Chartered
Accountant from applying or requesting for or inviting orsecuring professional work from
another chartered accountant in practice.
Such a restraint has been put so that the members maintain their independence of judgment and
may be able to command respect from the irrprospective clients.
In the given case, Mr. Honest wrote letters only to other Chartered Accountants, M/s XY and M/s
ABC requesting them to allot some professional work to him, which is not prohibited under
Clause (6) as explained above. Thus, Mr. Honest is not wrong in soliciting professional work.
Question
Mr. Nigal, a Chartered Accountant in practice, delivered a speech in the national conference
organized by the Ministry of Textiles. While delivering the speech, he told to the audience
that he is a management expert and his firm provides services of taxation and audit at
reasonable rates. He also requested the audience to approach his firm of chartered
accountants for these services and at the request of audience he also distributed his
business cards and telephone number of his firm to those in the audience. Comment.

Page 41 of 45
5.42
Answer
Using Designation Other Than a CA and Providing Details of Services Offered: Clause
(6) of Part I of the First Schedule to the Chartered Accountants Act, 1949 states that a Chartered
Accountant in practice shall be deemed to be guilty of misconduct if he solicits clients or
professional work either directly or indirectly by a circular, advertisement, personal
communication or interview or by any other means. Such a restraint has been put so that the
members maintain their independence of judgment and may be able to command respect from
their prospective clients.
Section 7 of the Chartered Accountants Act, 1949 read with Clause (7) of Part I of the First
Schedule to the said Act prohibits advertising of professional attainments or services of a
member. It also restrains a member from using any designation or expression other than that
of a chartered accountant in documents through which the professional attainments of the
member would come to the notice of the public. Under the clause, use of any designation or
expression other than chartered accountant for a chartered accountant in practice, on
professional documents, visiting cards, etc. amounts to a misconduct unless it be a degree of a
university or a title indicating membership of any other professional body recognised by the
Central Government or the Council.
Member may appear on television and films and agree to broadcast in the Radio or give lectures
at forums and may give their names and describe themselves as Chartered Accountants. Special
qualifications or specialized knowledge directly relevant to the subject matter of the programme
may also be given but no reference should be made, in the case of practicing member to the name
and address or services of his firm. What he may say or write must not be promotional of his or
his firm but must be an objective professional view of the topic under consideration.
Thus, it is improper to use designation "Management Expert" since neither it is a degree of a
University established by law in India or recognised by the Central Government nor it is a
recognised professional membership by the Central Government or the Council. Therefore, he is
deemed to be guilty of professional misconduct under both Clause (6) and Clause (7) as he has
used the designation “Management Expert” in his speech and also he has made reference to the
services provided by his firm of Chartered Accountants at reasonable rates. Distribution of
cards to audience is also a misconductin terms of Clause (6).
Question
CA. N, in practice, started project consultancy work as a part of his practice and to
advance the same, sent mail to all the CAs in the country informing them of his services
and for securing professional work.
Answer
As per Clause (6) of Part I of First Schedule to the Chartered Accountants Act, 1949, a
charteredaccountantinpracticeisdeemedtobeguiltyofprofessionalmisconduct,ifhe solicit clients or
professional work either directly or indirectly by circular, advertisement, personal communication
or interview or by any other means.
However, nothing herein contained shall be construed as preventing or prohibiting, any chartered
accountant from applying or requesting for or inviting or securing professional work from
another chartered accountants in practice.
In the instant case, CA. N has written email to all the CA for securing professional work from
them and has not approached any other person or professional or communicated with any
client, Thus as per exception to the Clause (6), CA. N is well within the regulation of the act and
has not committed any professional misconduct.

Page 42 of 45
5.43
Question
A special notice has been issued for a resolution at 3rd annual general meeting of Fiddle Ltd.
providing expressly that CA. Smart shall not be re-appointed as an auditor of the company.
Consequently, CA. Smart submitted a representation in writing to the company as provided
under section 140(4)(iii) of the Companies Act, 2013. In the representation, CA. Smart
incorporated his independent working as a professional throughout the term of office and
also indicated his willingness to continue as an auditor if reappointed by the shareholders of
the Company.
Answer
Soliciting Clients: As per Clause (6) of Part I of First Schedule to the Chartered Accountants Act,
1949, a Chartered Accountant in practice is deemed to be guilty of professional misconduct if he
solicits clients or professional work either directly or indirectly by circular, advertisement,
personal communication or interview or by any other means except applying or requesting for or
inviting or securing professional work from another chartered accountant in practice and
responding to tenders.
Further, section 140(4)(iii) of the Companies Act, 2013, provides a right, to the retiring auditor, to
make representation in writing to the company. The retiring auditor has the right for his
representation to be circulated among the members of the company and to be read out at the
meeting. However, the content of letter should be set out in a dignified manner how he has been
acting independently and conscientiously through the term of his office and may, in addition,
indicate, if he so chooses, his willingness to continue as auditor, if re-appointed by the shareholders.
Thus, the incorporation as an independent professional, made by CA. Smart, while submitting
representation under section 140(4)(iii) of the Companies Act, 2013 and indication of willingness
to continue as an auditor if reappointed by shareholders, does not leads to solicitation.
Therefore, CA. Smart will not be held guilty for professional misconduct under Clause (6) of Part I
of First Schedule to the Chartered Accountants Act, 1949.
Question
Comment on the following with reference to the Chartered Accountants Act, 1949, and
Schedules there to:
CA. Intelligent, a Chartered Accountant in practice, provides part-time tutorship under the
coaching organization of the Institute. On 30th June, 2016, he was awarded ‘Best Faculty of
the year’ as gratitude from the Institute. Later on, CA. Intelligent posted his framed
photograph on his web site where in he was receiving the said a ward from the Institute.
Answer
Posting Photograph on Website: A Chartered Accountant in practice shall be deemed to be guilty
of professional misconduct under Clause (6) of Part I of the First Schedule to the Chartered
Accountants Act, 1949, if he solicits clients or professional work either directly or indirectly by
circular, advertisement, personal communication or interview or by any other means.
In the given case, CA. Intelligent shared his framed photograph on website wherein he was
receiving ‘Best Faculty of the year’ award from the Institute.
In this context, it may be noted that according to the guidelines approved by the Council of the
Institute of Chartered Accountants of India, no photographs of any sort are permitted. Only display
of passport size photograph is permitted.
Therefore, CA. Intelligent is guilty of professional misconduct under Clause (6) of Part I of the
First Schedule to the Chartered Accountants Act, 1949.

Page 43 of 45
Question 5.44
Mr. Raj, a renowned practicing Chartered Accountant, decided to tie his knot with Ms. Anjani.
While giving order for marriage invitation cards, Mr. Raj instructed to add his designation
“Chartered Accountant” with his name. Later on, the cards were distributed to all his
relatives, close friends and clients.
Answer
Printing of Designation “Chartered Accountant” on Marriage Invitations: As per Clause (6) of
Part I of the First Schedule to the Chartered Accountants Act, 1949, a Chartered Accountant in
practice shall be deemed to beguilty of professional misconduct if he solicits clients or
professional work either directly or indirectly by circular, advertisement, personal communication
or interview or by any other means.
However, the Council of the ICAI is of the view that the designation “ Chartered Accountant” as well
as the name of the firm may be used in greeting cards, invitations for marriages and religious
ceremonies and any other specified matters, provided that such greeting cards or invitations etc.
are sent only to clients, relatives and close friends of the members concerned.
In the given case, Mr. Raj instructed to write designation “Chartered Accountant” on his marriage
invitation cards and distributed the same to all his relatives, close friends and clients.
On this context, it may be noted that the Council has allowed using designation “Chartered
Accountant” in invitations for marriages, provided these are sent only to clients, relatives and
close friends of the members concerned. Therefore, Mr.Raj would notbe held guilty of professional
misconduct under Clause (6) of Part I of the First Schedule to the Chartered Accountants Act,1949.
Question
Mr.Brilliant, a chartered accountant in practice, created his own website in attractive
format and highlighted the contents in blue colour. He also circulated the information
contained in the website through E-mail to acknowledge public at large about his expertise.
However, due to shortage of time, he could not intimate his website address to the Institute.
Answer
Circulating Information Contained in Own Website: As per Clause (6) of Part I of the First
Schedule to the Chartered Accountants Act, 1949, a Chartered Accountant in practice is deemed
to be guilty of professional misconduct if he solicits clients or professional work either directly or
indirectly by circular, advertisement, personal communication or interview or by any other
means.
However, the guidelines approved by the Council of the Institute of Chartered Accountants of
India permit creation of own website by a chartered accountant in his or his firm name and no
standard format or restriction on colours is there. The chartered accountant or firm, as per the
guidelines, should ensure that none of the information contained in the website be circulated on
their own or through E -mail or by any other mode except on a specific “Pull” request.
Further, members are not required to intimate the Website address to the Institute. Members
are only required to comply with the Website Guidelines issued by the Institute in this regard.
In the given case, Mr. Brilliant has circulated the information contained in the website through E-
mail to public at large. Therefore, he is guilty of professional misconduct under Clause (6) of Part I
of the First Schedule to the said Act. However, there is no such misconduct for not intimating
website address to the Institute.
Clause (7) Advertisesh is professional attainments or services, or uses any designation or
expressions other than the Chartered Accountant on professional documents, visiting cards, letter
heads or sign board sunless it be adegree of a University established by law in India or recognized
by the Central Government or a title indicating membership of the Institute of Chartered

Page 44 of 45
Accountants or of any other in stitution that has been recognized by the Central
5.45 Government or
may be recognized by the Council.
Provided that a member in practice may advertise through a write up, setting out the service
provided by him or his firm and particulars of his firm subject to such guidelines as may be issued
by the Council.
1. It is improper for a Chartered Accountant to state on his professional documents that he is
an Income-tax Consultant or a Cost Consultant or a Management Consultant.
2. The date of setting up the practice by a member or the date of establishment of the firm on
the letterheads and other professional documents, etc. should not be mentioned. However
in the Website, the year of establishment can be given on the specific “pull” request.
3. A member must not use the designation such as ‘Member of Parliament’, Municipal
Councilor anyother functionary in addition to that of Chartered Accountant.
4. They should not use the designation ‘chartered accountant’ and ‘advocate’
simultaneously.
5. The name, description and address of member (or firm) may appear in any directory or
list of members of a particular body in which the names are listed alphabetically.
6. For a specialised directory or a publication such as a “Who’s Who” (including those
compiled on purely local basis), a member should use his discretion in supplying
information, bearing in mind the nature and purpose of the publications.
7. In addition to his name, description and address and those of his firm, a member may
give where appropriate, directorship held and reasonable personal details and may state
his outside interests. He should not, however, give the names of any of his clients or
details of the service offered by his firm.
8. There should be no objection to the publication of photographs and brief particulars of
members in magazines provided no payment is made for such publication and there is no
advertisement of professional attainments.
9. It is not permissible for the chartered accountants in practice to print their photograph
on their visiting cards. However, a member in practice is allowed to print Quick Response
Code (QR Code) on the visiting Card, provided that the Code does not contain information
that is not otherwise permissible to be printed on a visiting Card.

Page 45 of 45

Audit Chapter 20 PDF

Uploaded by

Copyright:

Available Formats

Audit Chapter 20 PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Audit Chapter 20 PDF

Uploaded by

Copyright:

Available Formats

CHAPTER - 20 5.

CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS

PART A -General Application of the Code –SECTION 100-150

PART B - Professional Accountants in Public Practice –SECTION 200-290

PART C- Professional Accountants in business–SECTION 300-350

Introduction and Fundamental Principles - Section 100

1. A Professional Accountant’s responsibility is not exclusively to satisfy the needs of an

• The conceptual framework provides guidance on fundamental ethical principles.

• Professional accountants are required to apply this conceptual framework to identify

Vidya Sagar Career Institute Ltd

• Part B applies to professional accountants in public practice.

• Part C applies to professional accountants in business.

Vidya Sagar Career Institute Ltd

c) The type of communication that is expected and to whom it is addressed; in

(e) Professional Behaviour- Section150

1. Imposes an obligation on professional accountants to comply with relevant laws

2. In marketing and promoting themselves and their work, professional accountants

(b) Make disparaging references or unsubstantiated comparisons to the work of

Vidya Sagar Career Institute Ltd

Professional Accountants In Public Practice

Introduction – Section 200

Threats and Safe guards

1. Circumstances that may create self-interest threats :-

A financial interest in a client or jointly holding a financial interest with a client.

Undue dependence on total fees from a client.

2. Examples of circumstances that may create self-review threats

1. The discovery of a significant error during a re-evaluation of the work of the

Vidya Sagar Career Institute Ltd

2. A member of the engagement team having a close or immediate family relationship

5. Long association of senior personnel with the assurance client.

5. Examples of circumstances that may create intimidation threats

1. Being threatened with dismissal or replacement in relation to a client engagement

2. Being threatened with litigation

3. Being pressured to reduce inappropriately the extent of work performed in order to

(a) Safeguards created by the profession, legislation or regulation; and

(b) Safeguards in the work environment

• Work environment safeguards comprise firm-wide safeguards and engagement

• Firm-wide safeguards in the work environment may include:

3. Policies and procedures to implement and monitor quality control of engagements.

4. Documented policies regarding the identification of threats to compliance with the

5. For firms that perform assurance engagements, documented independence policies

Vidya Sagar Career Institute Ltd

12. Designating a member of senior management to be responsible for overseeing the

14. A disciplinary mechanism to promote compliance with policies and procedures.

Engagement-specific safeguards in the work environment may include:

1. Involving an additional professional accountant to review the work done or otherwise

2. Consulting an independent third party, such as a committee of independent directors, a

5. Involving another firm to perform or re-perform part of the engagement.

6. Rotating senior assurance team personnel.

Vidya Sagar Career Institute Ltd

PART C: PROFESSIONAL ACCOUNTANTS INBUSINESS

Introduction – Section 300

MEMBERSHIP OF THE INSTITUTE

2. date of entry of name in the Register;

4. Whether he holds a COP; and any other prescribed particulars.

Disabilities for the Purpose of Membership

(ii) If he is of unsound mind and stands so adjudged by a competent court; or

(iii) If he is an un discharged insolvent; or

Vidya Sagar Career Institute Ltd