Professional Ethics
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Questions and Answers

Which of the following is NOT a fundamental principle in the Code of Ethics for Chartered Accountants?

  • Integrity
  • Objectivity
  • Professional Skepticism (correct)
  • Confidentiality

    • According to the Chartered Accountants Act, 1949, which of the following circumstances debars a person from membership of the Institute?

  • Being over 21 years of age
  • Being convicted of an offense involving moral turpitude (correct)
  • Holding a Certificate of Practice
  • Passing CA Final

    • Which section of the Chartered Accountants Act, 1949, relates to the maintenance of a Register for members of the Institute?

  • Section 8
  • Section 19 (correct)
  • Section 27
  • Section 10

    • In the conceptual framework, what is the "reasonable and informed third party" test primarily used for?

    <p>To evaluate the appropriateness of an accountant’s conclusions</p> Signup and view all the answers

    A Chartered Accountant in practice must hold which of the following documents?

    <p>Certificate of Practice</p> Signup and view all the answers

    A member of the Institute is permitted to use the designation of "Certified Public Accountant (CPA)" in India.

    <p>False</p> Signup and view all the answers

    Confidentiality remains an obligation for a professional accountant even after the professional relationship ends.

    <p>True</p> Signup and view all the answers

    Familiarity threats arise when a professional accountant has a close business relationship with a client.

    <p>True</p> Signup and view all the answers

    NOCLAR applies to professional accountants only in audit engagement

    <p>False</p> Signup and view all the answers

    The Code of Ethics mandates that Chartered Accountants must promote themselves through advertising.

    <p>False</p> Signup and view all the answers

    What are the five fundamental principles outlined in the ICAI Code of Ethics?

    <p>The five fundamental principles are: Integrity: Being straightforward and honest in professional and business relationships. Objectivity: Not allowing bias or conflict of interest to compromise professional judgment. Professional Competence and Due Care: Maintaining the necessary knowledge and skills to provide competent services. Confidentiality: Respecting the confidentiality of information acquired during professional and business relationships. Professional Behavior: Complying with laws and avoiding actions that discredit the profession.</p> Signup and view all the answers

    What actions should an accountant take if they identify a conflict between two fundamental ethical principles?

    <p>The accountant should: Evaluate the conflict and its potential impact. Consult with others (within the firm, with governance, or the Institute) for guidance. Apply professional judgment to resolve the conflict in line with ethical principles. Document the conflict, discussions, and the decisions made, ensuring transparency and accountability. If the conflict cannot be resolved, the accountant may need to disassociate from the engagement.</p> Signup and view all the answers

    What are the potential consequences for a Chartered Accountant who discloses client information without consent?

    <p>Unauthorized disclosure of client information without proper consent or legal requirement constitutes a breach of the confidentiality principle. Consequences may include: Disciplinary action by the ICAI, such as suspension or removal from membership. Legal action by the client for breach of contract or confidentiality agreements. Damage to the accountant’s professional reputation and career.</p> Signup and view all the answers

    Describe the concept of "Intimidation Threat" and give an example.

    <p>An intimidation threat occurs when a professional accountant is deterred from acting objectively due to actual or perceived pressures, often from influential individuals. This pressure may cause the accountant to compromise their ethical standards to please a client or superior. Example: An accountant is threatened with dismissal if they do not agree with the client's aggressive tax treatment, which could violate tax laws. The threat creates pressure to comply, even though the action may be unethical.</p> Signup and view all the answers

    What is the primary objective of NOCLAR?

    <p>NOCLAR (Non-Compliance with Laws and Regulations) is designed to address situations where a professional accountant encounters, or is made aware of, non-compliance by a client or employer. Its primary objective is to: Protect the public interest by ensuring that accountants act appropriately when they become aware of illegal or unethical actions. Ensure that non-compliance is reported to management, governance, or, in some cases, regulatory authorities, while maintaining professional confidentiality.</p> Signup and view all the answers

    Under what conditions can a member’s name be removed from the Register of Members?

    <p>Death of the member. Voluntary request for removal by the member. Non-payment of prescribed fees to the Institute. Being found guilty of professional misconduct or any other reason where the member ceases to meet the qualifications for membership. Being declared insolvent or convicted of an offense involving moral turpitude.</p> Signup and view all the answers

    Explain the principle of "Professional Competence and Due Care."

    <p>The principle of professional competence and due care requires accountants to: Maintain up-to-date knowledge and skills to ensure they provide competent professional services. Act diligently and in accordance with applicable technical and professional standards. Accountants should continually develop their expertise to meet the evolving needs of clients or employers and to ensure the quality of their work remains high.</p> Signup and view all the answers

    NOCLAR applies only to criminal activities.

    <p>False</p> Signup and view all the answers

    Threats to objectivity can be managed entirely through professional skepticism.

    <p>False</p> Signup and view all the answers

    A member suspended for non-payment of fees can have their name restored in the Register by paying the dues.

    <p>True</p> Signup and view all the answers

    A Chartered Accountant can act as a broker or underwriter under the Management Consultancy and other services guidelines.

    <p>False</p> Signup and view all the answers

    A partner at an audit firm is not allowed to accept personal gifts from audit clients.

    <p>True</p> Signup and view all the answers

    What is the primary safeguard against a self-review threat in an audit engagement?

    <p>Using a different partner for review</p> Signup and view all the answers

    Which of the following does NOT constitute a threat to professional ethics?

    <p>Competence threat</p> Signup and view all the answers

    Which category of threats involves the risk of personal financial interest influencing a professional’s objectivity?

    <p>Self-interest</p> Signup and view all the answers

    According to the Chartered Accountants Act, how many years of continuous practice are required to be eligible for Fellow membership?

    <p>5</p> Signup and view all the answers

    If an accountant uncovers NOCLAR during an engagement, what is the first recommended action?

    <p>Obtain an understanding of the matter</p> Signup and view all the answers

    A professional accountant can disclose confidential information at any time without authority.

    <p>False</p> Signup and view all the answers

    Which of the following are circumstances where disclosure of confidential information might be appropriate? (Select all that apply)

    <p>Disclosure permitted by law and authorized by the client</p> Signup and view all the answers

    What must professional accountants consider before disclosing confidential information?

    <p>The interests of any party, the relevance and substantiation of information, and the appropriateness of the recipients.</p> Signup and view all the answers

    Match the following threats to their categories:

    <p>Self-interest threat = Financial interest in a client Self-review threat = Issuing a report after implementing systems Advocacy threat = Promoting client interests in disputes Familiarity threat = Close family relations with a client Intimidation threat = Pressure to agree with a client's judgment</p> Signup and view all the answers

    What does it mean for a threat to be at an 'acceptable level'?

    <p>It means that a reasonable and informed third party would likely conclude that the accountant complies with the fundamental principles.</p> Signup and view all the answers

    What should a professional accountant do when they are associated with misleading information?

    <p>Disassociate from that information.</p> Signup and view all the answers

    P, a Chartered Accountant in practice provides management consultancy and other services to his clients. During 2023, 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. Is P guilty of professional misconduct?

    <p>Section 2(2)(iv) of the Chartered Accountants Act, 1949, allows Chartered Accountants to provide “Management Consultancy and other Services.” However, they are specifically prohibited from broking, underwriting, and portfolio management. Therefore, P would be guilty of misconduct for managing client portfolios.</p> Signup and view all the answers

    Mr. G, a Chartered Accountant in practice as a sole proprietor has an office in Mumbai near Church Gate. Due to increase in professional work, he opens another office in a 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. Is Mr. G guilty of professional misconduct?

    <p>Per Section 27 of the Chartered Accountants Act, 1949, each office of a CA in practice must be under a separate member's charge unless located within 50 km of the primary office. Since the second office here is beyond this limit, the CA is liable for professional misconduct.</p> Signup and view all the answers

    Provide a short explanation of what constitutes "Other Misconduct" under the ICAI guidelines.

    <p>Other misconduct has been defined in part IV of the First Schedule and part III of the Second Schedule.</p> <p>Part IV of the First Schedule: A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, if he - Clause (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. Clause (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.</p> <p>part III of the Second Schedule.: A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, if he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term exceeding six months. Imprisonment awarded for a term exceeding six months in any civil/criminal matter treated as a major offence under ‘other misconduct’ is included in this Schedule.</p> Signup and view all the answers

    Mr. K, a Chartered Accountant, has been giving 50% of the audit fees received to a non-Chartered Accountant for years. Is this permissible under ICAI’s professional ethics?

    <p>According to Clause (2) of Part I of the First Schedule, a CA must not share fees or profits with non-members. Mr. K’s practice of sharing 50% of his audit fees with Mr. L (a non-member) under the pretext of “office allowance” constitutes misconduct, regardless of the label used</p> Signup and view all the answers

    Mr. X, a newly practicing Chartered Accountant, offered an articled clerk 1% of his firm's profits in addition to a stipend. Is this allowed under ICAI guidelines?

    <p>Clause (2) of Part I of the First Schedule prohibits sharing profits with non-members, including articled clerks. Therefore, Mr. X’s practice of sharing 1% of profits with an articled clerk is misconduct, despite his intent to provide financial support.</p> Signup and view all the answers

    M/s XYZ developed a website with a bright color scheme and featured the names of its partners and clients. Is this website design compliant with ICAI’s guidelines?

    <p>The ICAI allows CAs to post website details under Clause (6) of Part I, provided they adhere to guidelines, including not listing client names or fees (unless required by a regulator). Since M/s XYZ failed to meet these guidelines, it amounts to misconduct by advertising.</p> Signup and view all the answers

    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 or not.

    <p>Clause (6) of Part I prohibits soliciting clients or promoting services publicly. Here, a CA's bio-data, which was read on TV, promoted the firm, which is deemed misconduct for indirectly soliciting work.</p> Signup and view all the answers

    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.

    Signup and view all the answers

    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.

    <p>Mr. X’s repeated letters to request audit work from the Assistant Registrar amount to misconduct under Clause (6).</p> Signup and view all the answers

    A practising Chartered Accountant uses a visiting card in which he designates himself, besides as Chartered Accountant, Cost Accountant. Is this a misconduct?

    <p>Under Clause (7) of Part I of first schedule, a CA cannot use any designation other than &quot;Chartered Accountant.&quot; While members may use letters of certain accountancy bodies, “Cost Accountant” is not permissible, and using it constitutes misconduct.</p> Signup and view all the answers

    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.

    <p>Clause (6) and Clause (7) Part 1 of First Schedule restrict CAs from using titles like “Management Expert” and promoting firm services. In this case, the CA’s use of such a title and mentioning services is deemed misconduct, along with distributing promotional materials to the audience.</p> Signup and view all the answers

    Mr. A is a practicing Chartered Accountant working as proprietor of M/s A & Co. He went abroad for 3 months. He delegated the authority to Mr. Y a Chartered Accountant his employee for taking care of routine matters of his office. During his absence Mr. Y has conducted the under mentioned jobs in the name of M/s A & Co. (i) He issued the audit queries to client which were raised during the course of audit. (ii) He issued production certificate to a client under the GST Act. (iii) He attended the Income Tax proceedings for a client as authorized representative before Income Tax Authorities. Please comment on eligibility of Mr. Y for conducting such jobs in name of M/s A & Co. and liability of Mr. A under the Chartered Accountants Act, 1949.

    <p>A CA in practice (CA A) allowed an employee CA (Mr. Y) to handle certain office matters while CA A was abroad. Under Clause (12) of Part I of the First Schedule of the Chartered Accountants Act, 1949, it is permissible for an employee CA to handle routine matters, such as issuing audit queries, as long as they do not involve providing a professional opinion. However:</p> <p>Routine tasks: Mr. Y issuing audit queries was deemed acceptable since it qualifies as routine work. Non-routine tasks: Issuing a production certificate under the GST Act is beyond Mr. Y’s authority, leading to CA A being guilty of misconduct. Tax matters: Mr. Y attending tax proceedings was acceptable, as it’s allowed within routine tax practices.</p> Signup and view all the answers

    XYZ Co. Ltd. has applied to a bank for loan facilities. The bank on studying the financial statements of the company notices that you are the auditor and requests you to call at the bank for a discussion. In the course of discussions, the bank asks for your opinion regarding the company and also asks for detailed information regarding a few items in the financial statements. The information is available in your working paper file. What should be your response and why?

    <p>Clause (1) of Part I of the Second Schedule of the Chartered Accountants Act, 1949, restricts a CA from disclosing client information without consent. In this case, a bank requested specific details from an auditor's working papers. However, the auditor is not obligated to share these details unless required by law, as working papers are the auditor's property.</p> Signup and view all the answers

    Mr. A, a newly qualified Chartered Accountant, started his practice and sought clients through telephone calls from his family and friends, almost all of them employed in one or the other retail trade business. One of his friends Mr. X gave him an idea to start online services and give stock certifications to traders with Cash Credit Limits in Banks. Mr. A started a website with colorful catchy designs and shared the website address on his all social media posts and stories and tagged 30 traders of his local community with the caption “Easy Online Stock Certification Services”. Besides, Mr. A entered in an agreement with a Digital Marketer to give him 5% commission on each service procured through him. Discuss if the actions of Mr. A are valid in the light of the Professional Ethics and various pronouncements and guidelines issued by ICAI.

    <p>Clause (6) of Part I of the First Schedule of the Chartered Accountants Act, 1949, prohibits soliciting clients through advertisement or personal communication. Here, Mr. A, a CA, improperly used social media to share his website link, tag local traders, and mention client names, all of which contravene ICAI’s guidelines on solicitation, making him guilty of professional misconduct.</p> Signup and view all the answers

    Mr. D, a practicing CA, is appointed as a Director Simplicitor in XYZ Pvt. Ltd. After one year of appointment, Mr. D resigned as the Director and accepted the Statutory Auditor position of the company. Is Mr. D right in accepting the auditor position?

    <p>Clause (4) of Part I of the Second Schedule of the Chartered Accountants Act, 1949, prohibits a CA from auditing a business in which they have a substantial interest. CA D, previously a director in a company, cannot accept the statutory auditor role until two years after resignation. Accepting this role sooner results in a professional misconduct violation.</p> Signup and view all the answers

    Mr. F, a Chartered Accountant, gave advisory services to PQR Pvt. Ltd. Further, he gave them GST consultancy, compilation engagement for historical financial information and helped in ERP set up. Later, the company turned out to be a part of a group of companies involved in money laundering. Mr. F was asked to provide details of the companies. Mr. F refused on the grounds that he gave only consultancy services to the company and wasn’t supposed to keep any information about the company. Is Mr. F right as per the guidelines issued by the ICAI?

    <p>The ICAI mandates KYC compliance for CAs providing client services. Here, CA F provided consultancy to a company later linked to money laundering but argued KYC wasn’t necessary due to limited services provided. However, as KYC norms are mandatory for all services, CA F should have gathered essential details about the client, including company and regulatory information.</p> Signup and view all the answers

    Mr. S, the auditor of ABC Pvt. Ltd. has delegated following works to his articles and staff: i. Issue of audit queries during the course of audit. ii. Issue of memorandum of cash verification and other physical verification. iii. Letter forwarding draft observations/financial statements. iv. Issuing acknowledgements for records produced. v. Signing financial statements of the company. Is this correct as per the Professional Ethics and ICAI’s guidelines and pronouncements?

    <p>Clause (12) of Part I of the First Schedule of the Chartered Accountants Act, 1949, forbids a CA from allowing non-partners to sign key financial statements. CA S delegated some tasks, such as issuing audit queries, to staff and articles, which was appropriate. However, delegating the signing of financial statements to them is a violation, making him guilty of misconduct.</p> Signup and view all the answers

    Mr. S is a practising chartered accountant based out of Chennai. During the weekends, he involved himself in equity research and used to advise his friends, relatives and other known people who are not his clients. Apart from this, he was also involved as a paper-setter for Accountancy subject in the school in which he studied. He also owned agricultural land and was doing agriculture during his free time. During the year 20X1, heavy losses were incurred in agricultural activity due to natural calamities and misfortune, and he lost almost all of his wealth and became undischarged insolvent. After a few court hearings, finally, in the year 20X3, he was declared discharged insolvent and obtained a certificate from the court stating that his insolvency was caused by misfortune without any misconduct on his part. You are required to comment on the above situation with reference to the Chartered Accountants Act, 1949 and Schedules thereto, (especially from the point of section 8: Entry of name in Register of Members).

    <p>Clause 11 of Part I of the First Schedule allows CAs to engage in certain activities, such as equity research and agriculture, without Council approval, provided they don’t publish retail research reports. Mr. S’s involvement in equity research for private advice, paper-setting, and agriculture are permitted activities. Additionally, since Mr. S’s insolvency was declared without misconduct, he retains his membership rights under Section 8 of the CA Act, 1949.</p> Signup and view all the answers

    Study Notes

    Professional Ethics & Liabilities of Auditors

    • The chapter delves into professional ethics guidelines, requirements, and conduct standards expected from a Chartered Accountant.
    • Chartered Accountants in practice and in service are expected to adhere to the fundamental principles of professional ethics.
    • The Code of Ethics aims to ensure and uphold the credibility of the accountancy profession.
    • Independence is a key ingredient of the profession, and the code aims to ensure that the independence of members of the Institute is not affected.
    • The Institute’s Motto – ‘Ya Esha Supteshu Jagrati’ emphasizes eternal vigilance and awakening when the world is asleep.
    • The accountancy profession acknowledges its responsibility to act in the public interest.
    • The Code of Ethics aims to protect the interests of the profession as a whole.

    Code of Ethics Overview

    • The revised Code of Ethics is divided into four parts and a glossary.
    • Part 1 outlines the fundamental principles and the conceptual framework, applicable to all professional accountants.
    • Part 2 provides additional material for professional accountants in service.
    • Part 3 covers professional accountants in public practice.
    • Part 4A addresses independence requirements for audit and review engagements.
    • Part 4B focuses on independence requirements for assurance engagements other than audit and review engagements.

    Fundamental Principles of Professional Ethics

    • The five fundamental principles of professional ethics are: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.

    Integrity

    • A professional accountant must be straightforward and honest in their professional and business relationships.
    • They must not knowingly be associated with false, misleading, or negligent information.

    Objectivity

    • A professional accountant must not allow bias, conflict of interest, or undue influence from others to compromise their professional judgment.

    Professional Competence and Due Care

    • A professional accountant must maintain professional knowledge and skill at the required level.
    • They must act diligently in accordance with applicable technical and professional standards.

    Confidentiality

    • A professional accountant must respect the confidentiality of information acquired due to professional and employment relationships.

    Professional Behaviour

    • A professional accountant must comply with the principle of professional behavior, which requires them to uphold the good reputation of the profession and avoid any action that may discredit the profession.### Confidentiality

    • Accountants are required to protect confidential information obtained through professional and employment relationships.

    • Confidential information includes information disclosed by a prospective or existing client.

    • Accountants should be mindful of inadvertent disclosure of confidential information, especially to close business associates or family members.

    • Accountants cannot use confidential information for personal gain or for the benefit of a third party.

    Disclosure of Confidential Information

    • Disclosure of confidential information is permitted in specific circumstances:
      • When required by law, such as for legal proceedings or reporting infringements of the law.
      • With the client's or employing organization's permission.
      • Due to a professional duty or right, including for:
        • Compliance with peer or quality review requirements.
        • Responding to inquiries or investigations by professional or regulatory bodies.
        • Protecting the accountant's professional interests.
        • Complying with technical and professional standards.

    Factors to Consider When Disclosing Information

    • Accountants should assess the following before disclosing confidential information:
      • Potential harm to any party involved.
      • Adequacy of available information and its substantiation.
      • Type of communication and intended recipient.
      • Appropriateness of recipients.

    Confidentiality After Employment Ends

    • The duty of confidentiality continues after the accountant's relationship with a client or employer ends.
    • Accountants can use prior experience during job changes or with new clients but must not disclose confidential information obtained from previous engagements.

    ###  Professional Behaviour

    • Accountants must comply with relevant laws and regulations and avoid conduct that could discredit the profession.
    • Professional conduct includes refraining from engaging in activities that compromise integrity, objectivity, or the reputation of the profession.
    • Advertising must not be misleading or discredit the profession, adhering to Institute guidelines.

    Ethical Principles

    • Accountants are bound by ethical principles, which set the standard of professional behavior.
    • The conceptual framework provides a structured approach to comply with these principles.
    • When ethical principles conflict, accountants must exercise professional judgment to resolve the conflict.
    • Documentation of the issue, discussions, decisions, and rationale is encouraged.

    Threats to Ethical Compliance

    • Threats to ethical compliance are categorized as:
      • Self-interest threats: Potential for financial or other interests to influence judgments.
      • Self-review threats: Risk of failing to appropriately evaluate previous judgments or activities.
      • Advocacy threats: Compromised objectivity due to promoting a client's or employer's position.
      • Familiarity threats: Reduced objectivity due to long-standing or close relationships.
      • Intimidation threats: Fear of pressure or retaliation that hinders objective decision-making.

    Evaluation and Addressing Threats

    • Accountants must evaluate identified threats and determine whether they are at an acceptable level.
    • The "reasonable and informed third-party test" helps evaluate whether the accountant's conclusions meet ethical standards.
    • Threats are addressed by:
      • Eliminating the circumstances creating the threat.
      • Applying safeguards to reduce the threat to an acceptable level.
      • Declining or ending the specific professional activity.

    Safeguards

    • Safeguards are actions that mitigate ethical threats.
    • Examples of safeguards include:
      • Allocating additional time and qualified personnel for tasks.
      • Independent review of completed work or advice.
      • Using separate partners and engagement teams for assurance and non-assurance services.
      • Involving another firm for specific parts of the engagement.
      • Separating teams handling confidential matters.

    Non-Compliance with Laws and Regulations (NOCLAR)

    • Professional accountants may encounter NOCLAR during client engagements or while working for an employer.
    • NOCLAR applies to acts of omission or commission, intentional or unintentional, that violate laws or regulations.
    • NOCLAR includes violations by clients, employing organizations, those charged with governance, management, or employees.
    • However, personal misconduct unrelated to business activities and non-compliance by parties not listed in the definition are not part of NOCLAR.
    • Examples of NOCLAR include money laundering, fraud, corruption, terrorist financing, bribery, proceeds of crime, banking and securities markets violations, financial products and trading services transgressions, data protection breaches, environmental protection violations, public health and safety issues, tax and pension liabilities, and payment irregularities.
    • The objective of NOCLAR is to emphasize the roles of management and those charged with governance in addressing non-compliance, increase awareness of professional accountants' legal and regulatory responsibilities, and encourage them to proactively address NOCLAR.
    • A professional accountant is expected to apply knowledge and expertise while exercising professional judgment but is not expected to have a level of knowledge of laws and regulations beyond what's required for their engagement.
    • Whether an act constitutes non-compliance ultimately depends on a court or other appropriate adjudicative body.
    • Matters that are clearly inconsequential or personal misconduct unrelated to the client's business activities are excluded from the scope of NOCLAR.
    • Disclosure of NOCLAR to appropriate authorities is not required if it contradicts applicable laws or regulations.

    Applicability of NOCLAR in India

    • Section 260 of the Indian Companies Act applies to Senior Professional Accountants in Service (employees of listed entities), who have significant influence over the deploying and controlling of the employing organization's resources.
    • Section 360 of the Act applies to professional accountants performing audits for listed entities in India with a net worth of 250 crores or more.
    • Audit engagements under Section 360 involve a reasonable assurance engagement where an opinion is provided on the true and fair view of financial statements under a relevant financial reporting framework.

    NOCLAR vs. SA 250

    • SA 250 is applicable only to audit engagements, while NOCLAR applies to both professional accountants in service and in public practice.
    • SA 250 focuses on the auditor's responsibilities for laws with a direct effect on material amounts and disclosures in financial statements, as well as laws that don't directly impact financial statements but are fundamental to the business's operations.
    • NOCLAR expands on SA 250 by including non-compliance that causes substantial harm resulting in significant financial or non-financial consequences.
    • SA 250 doesn't explicitly define stakeholders; however, NOCLAR considers the effects of non-compliance on investors, creditors, employees, and the general public.
    • NOCLAR provides specific guidance for auditors on how to respond to imminent breaches of laws or regulations that could significantly harm stakeholders. It allows for immediate disclosure to appropriate authorities to prevent or mitigate the consequences.
    • The "Appropriate Authority" for reporting NOCLAR depends on the nature of the non-compliance. For example, SEBI is the appropriate authority for fraudulent financial reporting.

    Confidentiality Provisions under Chartered Accountants Act, 1949

    • Chartered accountants in practice are prohibited from disclosing information acquired during client engagements to anyone except the client or as required by law, without the client's consent.
    • Chartered accountants working for companies, firms, or individuals are obliged to maintain confidentiality and are restricted from disclosing confidential information except when required by law or permitted by their employer.

    Documentation Requirements in NOCLAR

    • Professional accountants are required to document the following:
      • Management and those charged with governance's responses to the matter.
      • The professional accountant's course of action, judgments made, and decisions taken, considering the reasonable and informed third-party test.
      • Proof that the accountant's actions fulfill the responsibility of public interest.
    • This documentation is supplemental to the documentation requirements of applicable auditing standards.

    Membership of the Institute of Chartered Accountants of India (ICAI)

    • To become an Associate Member of the ICAI, applicants must have their names entered in the Register of members and must fulfill specific eligibility criteria.
    • Associate Members can use the letters A.C.A. after their names.
    • To become a Fellow Member of the ICAI, Associate Members must meet the following conditions:
      • Continuous practice in India for at least 5 years.
      • Continuous membership as an Associate for at least 5 years with qualifications recognized by the Council as equivalent to the experience acquired through continuous practice as a Chartered Accountant.
    • Fellow Members can use the letters F.C.A. after their names.

    Removal of Name from the Register

    • The ICAI Council can remove a member's name from the Register for the following reasons:
      • Death of the member.
      • A request to remove their name from the Register.
      • Failure to pay prescribed fees.
      • The member's name was subject to disqualifying circumstances at the time of entry or subsequently, or they no longer meet the criteria for membership.
    • In cases where the name is removed due to non-payment of fees, the member can reapply to have their name re-entered after paying arrears and prescribed fees.

    Restoration of Membership

    • Members whose names have been removed from the Register for non-payment of fees can apply for restoration.
    • The effective date of restoration depends on the circumstances:
      • Restoration within the same year of removal: Effective from the date of removal.
      • Removal under disciplinary orders: Restoration in accordance with those orders.
      • Other cases: Effective from the date the application and fees are received.

    Penalty for Falsely Claiming to be a Member

    • The text doesn't provide any specific information about the penalty for falsely claiming to be a member of the ICAI.

    Chartered Accountants Act, 1949

    • Anyone who is not a member of the Institute but represents themselves as a member or uses the designation "Chartered Accountant" is punishable by law.
    • A member of the Institute who does not have a Certificate of Practice but represents themselves as being in practice is punishable by law.

    Certificate of Practice

    • Holding a Certificate of Practice is mandatory for a member of the Institute to practice as a Chartered Accountant in India or elsewhere.
    • The Council of the Institute grants the Certificate of Practice.
    • The certificate can be cancelled if the member's name is removed from the Register, incorrect information was provided, the member has ceased to practice, or the member has not paid the annual fee.
    • A member not in practice cannot accept engagements typically performed by a Chartered Accountant.

    Members Deemed to be in Practice

    • Members of the Institute are deemed to be in practice when they perform various accounting services such as auditing, financial statement preparation, and providing accounting advice.
    • The Council of the Institute can define other services that qualify a member as being in practice.
    • Members who are salaried employees of a Chartered Accountant in practice or a firm are deemed to be in practice for the purpose of training articled assistants.
    • The Council permits Chartered Accountants in practice to provide "Management Consultancy and other Services" but excludes statutory audit, tax representation, and acting as liquidator, trustee, executor, administrator, arbitrator, or receiver.

    Management Consultancy and Other Services

    • Examples of "Management Consultancy and other Services" include:
      • Financial management planning
      • Capital structure planning
      • Working capital management
      • Preparing project reports and feasibility studies
      • Budgeting
      • Inventory management
      • Market research
      • Management accounting systems
      • Control methods
      • Personnel recruitment and selection
      • Setting up incentive plans
      • Management and operational audits
      • Valuation of shares and business
      • Business policy, corporate planning, organization development
      • Organization structure and behavior
      • Systems analysis and design
      • Acting as an advisor or consultant to an issue
      • Investment counselling
      • Acting as registrar to an issue
      • Quality Audit
      • Environment Audit
      • Energy Audit
      • Acting as Recovery Consultant in the Banking Sector
      • Insurance Financial Advisory Services
      • Acting as Insolvency Professional
      • Administrative Services

    Companies Act, 2013

    • An auditor appointed under the Companies Act, 2013, is prohibited from providing certain services to the company or its holding company or subsidiary company, such as:
      • Accounting and book-keeping services
      • Internal audit
      • Design and implementation of any financial information system
      • Actuarial services
      • Investment advisory services
      • Investment banking services
      • Rendering of outsourced financial services
      • Management services
      • Other services as may be prescribed
    • An auditor can perform other services with the approval of the company's Board of Directors or audit committee.
    • For the sake of clarity, a person is considered to be in practice even when they offer to perform accounting services, regardless of whether they are actually engaged with clients yet.

    Chartered Accountants Act, 1949

    • A Chartered Accountant can be "in practice" when they provide services for remuneration.
    • The "Council" can define what services are "rendered by Chartered Accountants in practice."
    • Services like personnel recruitment and selection fall under "Management Consultancy and other Services."

    Companies Engaging in Accountancy

    • Companies, including LLPs with a company as a partner, cannot practice as chartered accountants.
    • Directors, managers, secretaries, and other officers knowing of such contravention can be fined.
    • Only chartered accountant partners in an LLP can act and sign on behalf of the firm when appointed as auditors.

    Members in Practice: Designation Restrictions

    • Members can use the "CA" prefix before their names regardless of their practice status.
    • Section 7 of the Act prohibits members in practice from using other designations besides Chartered Accountant.
    • Members not in practice can use other descriptions but cannot call themselves a Chartered Accountant.
    • Members can use letters/descriptions indicating membership in recognized Institutes of Accountancy and other qualifications.
    • "Merchant Banker / Advisor to an issue" are allowed but the designation should not be prominent in client documents.
    • Members holding positions in Companies, Political Parties, clubs, etc., cannot mention those positions as part of their designation.
    • Members can use "A.C.M.A" or "F.C.M.A" after their name if they are members of the Institute of Cost and Works Accountants.
    • Members can mention membership in recognized foreign Institutes of Accountancy through a Memorandum of Understanding/ Mutual Recognition Agreement.
    • Members cannot designate themselves as a Cost Accountant, Income-Tax Consultant, Company Secretary, Cost Consultant, or Management Consultant.
    • Members are allowed to appear before authorities if permitted by law, they cannot use "Corporate Lawyer" as a designation.
    • Members cannot use "CPA" (Certified Public Accountant) on their visiting cards.
    • Members can practice as Company Secretaries and/or Cost Accountants, but cannot use the respective designations simultaneously with "Chartered Accountant."

    Branch Office Maintenance

    • Section 27 requires each branch office of a Chartered Accountant or a Firm of Chartered Accountants to be in charge of a separate member of the Institute.
    • Exemptions apply for members practicing in hill areas with temporary offices in the plains for limited periods.
    • The Chartered Accountant in charge of a branch office must be a partner or a full-time paid assistant of the firm.
    • Being in charge of a branch office requires the member to actively associate with it, meaning residency of at least 182 days or attendance for at least 182 days.
    • One member can be in charge of two offices if they are located in the same accommodation.
    • A name-board for a firm cannot be put up at a member's residence, but a single member is permitted to have a nameplate there.
    • A second office can be located in the same premises as the first, within the same city, or within 50km of the first office's city.
    • The member is required to declare their main office, which acts as their professional address.
    • A retired non-Chartered Accountant employed to run a branch office within the 50km radius is not a violation.

    KYC Norms for CA in Practice

    • The Council of ICAI issued mandatory KYC norms for attestation functions.
    • Information required for individuals:
      • Name, PAN/Aadhar Number, Business Description, Copy of last Audited Financial Statement, Type of engagement.
    • Information required for corporate entities:
      • Name, Address, Business Description, Parent Company Name (if subsidiary), Copy of last Audited Financial Statement, Type of engagement, Company PAN, Company Identification Number, Director names & addresses with identification numbers.
    • Information required for non-corporate entities:
      • Name, Address, PAN Number, Business Description, Partner names & addresses with PAN/Aadhar/DIN numbers, Copy of last Audited Financial Statement, Type of engagement.

    Chartered Accountants in Service

    • A Chartered Accountant can be in service if they are employed in:
      • Commerce, Industry, Service, Public Sector, Education, Not-for-profit Sector, Regulatory bodies, Professional bodies, or under contracts with these entities.

    Disciplinary Procedure

    • The Chartered Accountants Act, Sections 21, 21A, 21B, 21C, 22-A and 22-G, and the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct of Cases) Rules, 2007, outline the disciplinary procedure for investigating misconduct among members of the Institute of Chartered Accountants of India (ICAI).

    • The disciplinary procedure begins with the receipt of a complaint against a member of the ICAI, along with the prescribed fee, or information regarding alleged misconduct.

    • The Disciplinary Directorate then reviews the complaint and forms a prima facie opinion.

    • If the Directorate finds that the misconduct falls under the First Schedule of the Act, the matter is placed before the Board of Discipline.

    • If the Directorate finds that the misconduct falls under the Second Schedule or both, the matter is placed before the Disciplinary Committee.

    • The Board of Discipline and the Disciplinary Committee have independent authority to accept or reject a complaint.

    • If the complaint is rejected by either body, the process ends.

    • If the complaint is accepted, the investigation proceeds.

    Professional Ethics & Liabilities of Auditors

    • Code of Ethics: It outlines professional standards and conduct expectations for Chartered Accountants (CAs).
    • Purpose of the Code: To ensure and uphold CA profession's credibility and independence by protecting the interests of the profession and public.
    • Scope of the Code:
      • Part 1: Applies to all professional accountants, outlining fundamental principles, a conceptual framework, and compliance requirements.
      • Part 2: Specific guidance for professional accountants in service (e.g., employed in commerce, industry, the public sector, education, non-profits, or regulatory bodies).
      • Part 3: Specific guidance for professional accountants in public practice, including independence standards for assurance engagements.
        • Part 4A: Independence standards for audit and review engagements.
        • Part 4B: Independence standards for assurance engagements other than audit and review engagements.
    • Key Concepts in the Code:
      • Integrity: Requires honesty, fairness, and truthfulness in all professional relationships. CAs should not knowingly associate with misleading or false information.
      • Objectivity: Prohibits any bias or influence that could compromise judgment. CAs must remain impartial in their professional activities.
      • Professional Competence and Due Care: Requires CAs to maintain professional knowledge and skills, exercise sound judgment, and work diligently in accordance with relevant standards and legislation. Continuous professional development (CPD) helps maintain competence.
      • Confidentiality: CAs are obligated to respect the secrecy of information acquired through professional relationships.
      • Professional Behavior: This principle encompasses professional courtesy, respect, and commitment to upholding the reputation of the profession.
    • Consequences For Ethical Violations: Disciplinary action against the CA, potentially leading to professional sanctions.
    • Importance of Ethics:
      • Public Interest: The accounting profession operates within a framework of public trust, and CAs have a responsibility to act in the best interests of the public.
      • Credibility and Reputation: The ethical behavior of individuals and firms contributes to the overall credibility and reputation of the profession.
      • Confidence and Trust: Sound ethical standards are crucial for fostering confidence and trust in financial reporting and other profession-related services.
      • Moral Compass: Ethics provide a moral compass for making decisions and acting in a responsible and principled manner.

    Confidentiality

    • Accountants are required to maintain confidentiality of information acquired through professional and employment relationships.
    • Confidentiality is beneficial for public interest by encouraging clients to share information with their accountants.
    • Confidential information cannot be disclosed without proper authority unless required by law or professional duty.
    • Accountants have a duty to protect confidential information even after the relationship with the client or employer ends.

    Circumstances for Disclosure

    • Accountants may be required to disclose confidential information in specific circumstances:
      • When required by law, such as during legal proceedings or reporting infringements.
      • When permitted by law and authorized by the client or employer.
      • When there is a professional duty or right to disclose, not prohibited by law, such as for:
        • Peer or Quality Review.
        • Responding to inquiries by professional or regulatory bodies.
        • Protecting the accountant's interests during legal proceedings.
        • Complying with technical and professional standards.

    Considerations for Disclosure

    • When deciding whether to disclose confidential information, the accountant should consider:
      • Potential harm to any party involved.
      • Whether all relevant information is known and substantiated.
      • The proposed type of communication and its recipient.
      • The appropriateness of the communication's recipients.

    Professional Behaviour

    • Accountants must adhere to the principle of professional behaviour, adhering to relevant laws and regulations.
    • Any conduct that discredits the profession is prohibited, including activities that would jeopardize the integrity, objectivity, or reputation of the profession.
    • Accountants should not engage in activities that compromise their professional reputation.
    • When promoting their services, accountants should not make exaggerated claims or disparage others' work.
    • Accountants should ensure their advertising complies with ethical standards set by the institute.

    Fundamental Principles and Conflicts

    • The fundamental principles of professional ethics establish standards of behaviour for accountants.
    • Ethical conflicts may arise when complying with one principle conflicts with others.
    • Accountants should consult with appropriate parties, such as those in the firm, legal counsel, and the Institute, to resolve conflicts.
    • Documentation of the conflict, discussions, decisions, and rationales is encouraged.

    Threats to Fundamental Principles

    • Threats to compliance with the fundamental principles are categorized as:
      • Self-interest threats: Financial or other interests inappropriately influencing judgment.
      • Self-review threats: Inability to objectively evaluate previous work.
      • Advocacy threats: Promoting a client's position to the detriment of objectivity.
      • Familiarity threats: Close relationships compromising objectivity.
      • Intimidation threats: Pressures deterring objective action.

    Examples of Threats

    • Examples of self-interest threats include:

      • Direct financial interest in a client.
      • Quoting low fees that may hinder professional service standards.
      • Close business relationships with clients.
      • Accessing confidential information for personal gain.
      • Discovering significant errors in previous work.

    • Examples of self-review threats include:

      • Issuing an assurance report on financial systems implemented by the accountant.
      • Using original data prepared by the accountant for an assurance engagement.

    • Examples of advocacy threats include:

      • Promoting a client's interests, even if it compromises objectivity.
      • Advocating for a client in litigation or disputes.
      • Lobbying for legislation on behalf of a client.

    • Examples of familiarity threats include:

      • Close relationships with family members who are client directors or officers.
      • Long associations with individuals influencing client business decisions.

    • Examples of intimidation threats include:

      • Threats of dismissal for disagreement on professional matters.
      • Pressure to agree with client judgment when the accountant lacks expertise.
      • Promises of promotion contingent on acceptance of inappropriate accounting treatment.
      • Accepting gifts from clients with the threat of disclosure.

    Addressing Threats

    • Threats to compliance with fundamental principles must be addressed by eliminating them or reducing them to an acceptable level.
    • Actions to address threats include:
      • Eliminating the circumstances creating the threat.
      • Applying safeguards to reduce threats.
      • Declining or ending the professional activity.

    Safeguards

    • Safeguards are actions that effectively reduce threats to an acceptable level.
    • Examples of safeguards include:
      • Assigning qualified personnel for specific tasks.
      • Having external reviewers assess work.
      • Using separate engagement teams for assurance and non-assurance services.
      • Engaging another firm to perform or re-perform part of the engagement.
      • Separating teams when dealing with confidential matters.

    Non-Compliance with Laws and Regulations (NOCLAR)

    • NOCLAR pertains to acts of omission or commission, intentional or unintentional, by a client or employing organization, those charged with governance, management or employees, that are contrary to laws or regulations.
    • This excludes personal misconduct unrelated to business activities and non-compliance by parties other than those listed in NOCLAR’s definition.
    • Personal misconduct of a client or employing organization’s employees does not constitute NOCLAR.
    • Accountants facing NOCLAR must address it, recognizing that turning a blind eye is not acceptable.
    • NOCLAR aims to increase awareness of professional accountants' legal and regulatory responsibilities when faced with such situations;
    • Professional accountants are not required to investigate or ensure complete compliance with laws and regulations.
    • Accountants are not expected to have expertise in all laws and regulations; their knowledge should be sufficient to perform their professional engagements.
    • The ultimate determination of whether an act constitutes non-compliance rests with a court or other adjudicative body.
    • Disclosure of NOCLAR to an appropriate authority is not required if it would be contrary to law or regulation.
    • The objective is not to investigate but to ensure awareness and understanding of the responsibilities of the professional accountant.
    • NOCLAR emphasizes management and those charged with governance’s roles in addressing NOCLAR.

    NOCLAR Applicability in India

    • NOCLAR applies to professional accountants in service and in public practice.
    • Professional accountants in service, employed by listed entities, must address NOCLAR per Section 260 of the Chartered Accountants Act, 1949.
    • This applies to senior professional accountants, defined as directors, officers, or senior employees with significant influence over the organization’s resources.
    • Accountants in public practice must comply with NOCLAR per Section 360 of the Chartered Accountants Act, 1949 when performing audits for entities listed on Indian stock exchanges with a net worth exceeding 250 crore rupees.

    NOCLAR vs. SA 250

    • SA 250 applies only to audits while NOCLAR applies to professional accountants in service and in practice.
    • SA 250 focuses on laws directly affecting financial statement amounts and disclosures while NOCLAR also considers non-compliance causing substantial harm, financially or otherwise.
    • NOCLAR expands to include the impact on investors, creditors, employees, and the general public, while SA 250 doesn't define stakeholders.
    • In exceptional circumstances, NOCLAR permits an accountant to disclose imminent breaches of law that would cause substantial harm to stakeholders.
    • This provision doesn't exist in SA 250.

    Responding to NOCLAR

    • The professional accountant must respond to NOCLAR. The approach depends on whether they are in service or public practice.
    • In service:
      • Understand the NOCLAR situation.
      • Address the matter.
      • Seek advice.
      • Determine if further action is needed.
      • Decide whether to disclose to an appropriate authority.
      • Document the process.
    • In public practice:
      • Understand the NOCLAR situation.
      • Address the matter.
      • Seek advice.
      • Determine if further action is needed.
      • Determine whether disclosure to an appropriate authority is necessary.
      • Document the processes.
    • The "appropriate authority" for disclosure depends on the nature of the NOCLAR: for example, fraudulent financial reporting would go to SEBI.

    Confidentiality Provisions

    • The Chartered Accountants Act, 1949, outlines confidentiality provisions for members in practice and service.
    • Members in practice (Clause (1) of the Second Schedule) cannot disclose client information without consent, except as required by law.
    • Members in service (Clause (2) of the Second Schedule) cannot disclose confidential information acquired during employment, except as required by law or with employer consent.
    • These provisions are aligned with NOCLAR’s confidentiality requirements.

    Documentation in NOCLAR

    • Professional accountants must document:
      • Management’s or those charged with governance’s responses to NOCLAR.
      • Courses of action considered, judgments made, and decisions based on reasonable and informed third-party standards.
      • How the accountant fulfilled their public interest responsibility.
    • This documentation is in addition to auditing standards requirements, such as:
      • Documenting significant matters arising during the audit.
      • Documenting discussions with management, those charged with governance, and others.
      • Documenting identified or suspected non-compliance and results of discussions about it.

    Institute of Chartered Accountants of India (ICAI) Membership

    • After applying to the ICAI Council, the applicant's name is entered in the Register and a certificate of membership is issued.
    • The Register includes the member’s full name, date of birth, domicile, residential and professional address, date of entry in the Register, qualifications, whether they hold a Certificate of Practice, and other prescribed particulars.

    Disabilities for Membership

    • Several circumstances prevent a person from becoming an ICAI member:
      • Age under 21 years at the time of application.
      • Being declared of unsound mind by a competent court.
      • Being undischarged insolvent.
      • Being a discharged insolvent without a court certificate stating the insolvency was caused by misfortune.
      • Being convicted of an offense involving moral turpitude or a professional offense, unless a pardon was granted or the Central Government removed the disability.
      • Previous removal from ICAI membership due to professional or other misconduct.
    • Failure to disclose any of these disabilities constitutes professional misconduct.

    Types of Members

    • ICAI members can be Associates or Fellows.
    • An Associate member is any person whose name is entered in the Register. Associates are entitled to use the letters "A.C.A." after their name.
    • A Fellow member is an Associate member who has been in continuous practice for at least five years or has equivalent experience, as determined by the Council. Fellows are entitled to use the letters "F.C.A." after their name.
    • The Council may remove a member's name from the Register for:
      • Death.
      • At the member’s request.
      • Non-payment of prescribed fees.
      • Being subject to disabilities mentioned in Section 8 of the Chartered Accountants Act, 1949.
    • If a member's name is removed for non-payment of fees, it can be restored upon application and payment of arrears and additional fees.

    Restoration of Membership

    • Membership restoration depends on how the name was originally removed from the Register:
      • Removed for non-payment of fees: Restoration is effective from the date it was removed, provided the application and fees are submitted within the same year of removal.
      • Removed under orders from the Board of Discipline, Disciplinary Committee, Appellate Authority, or High Court: Restoration follows those orders.
      • Removed for other reasons: Restoration is effective from the date the application and fees are received.

    Penalties for Falsely Claiming Membership

    • The text doesn't provide specific information about this topic.

    The Chartered Accountants Act, 1949

    • Only members of the Institute of Chartered Accountants of India (ICAI) can designate themselves as Chartered Accountants (CA)
    • A person who falsely represents themselves as a CA can be fined up to ₹1000 on first conviction and imprisoned for up to 6 months or fined up to ₹5000 or both on subsequent convictions
    • A CA must hold a Certificate of Practice to practice as a CA
    • A member of the Institute whose name has been removed from the membership register for professional misconduct may not appear before taxation authorities or other bodies for the period of removal
    • A member of the Institute can have no capacity for practice other than as a CA
    • A member of the Institute can have no other capacity that allows them to practice, other than as a CA

    Certificate of Practice

    • A Certificate of Practice is required for a CA to practice in India or elsewhere
    • The Council of ICAI issues the Certificate of Practice and can cancel it under prescribed circumstances
    • A Certificate of Practice must be renewed annually by paying a fee to the Council

    Members Deemed to be in Practice

    • A member of the ICAI is deemed to be in practice if they perform any of the following services for remuneration:
      • Engage in the practice of accountancy
      • Audit or verify financial transactions, books, accounts, or records
      • Prepare, verify or certify financial accounting and related statements
      • Render professional services or assistance relating to accounting procedure, financial fact, or data recording, presentation, or certification.
      • Provide any other services a practicing CA can provide
    • A member of the ICAI deemed to be in practice is bound by the provisions of the Chartered Accountants Act, 1949 and its regulations
      • Such a member must comply with regulations even when acting in a capacity other than as a practicing CA

    Management Consultancy and Other Services

    • A CA in practice is permitted to provide a range of "Management Consultancy and other Services."
    • These services include:
      • Financial management planning and financial policy determination
      • Capital structure planning and advice regarding raising finance
      • Working capital management
      • Preparing project reports and feasibility studies
      • Preparing cash budget, cash flow statements, profitability statements, statements of sources and application of funds
      • Budgeting, including capital budgets and revenue budgets
      • Inventory management, material handling, and storage
      • Market research and demand studies
      • Price-fixation and other management decision making
      • Management accounting systems, cost control, and value analysis
      • Control methods and management information and reporting
      • Personnel recruitment and selection
      • Setting up executive incentive plans, wage incentive plans
      • Management and operational audits
      • Valuation of shares and business and advice regarding amalgamation, merger, and acquisition
      • Acting as a Registered Valuer under the Companies Act, 2013
      • Business Policy, corporate planning, organization development, growth, and diversification
      • Organization structure and behavior, development of human resources
      • Systems analysis and design, and computer-related services
      • Acting as an advisor or consultant to an issue
      • Investment counselling in respect of securities
      • Acting as a registrar to an issue and for transfer of shares/other securities
      • Quality Audit
      • Environment Audit
      • Energy Audit
      • Acting as a Recovery Consultant
      • Insurance Financial Advisory Services
      • Acting as an Insolvency Professional
      • Administrative Services, examples include:
        • Word processing services
        • Preparing administrative or statutory forms
        • Submitting forms as instructed by the client
        • Monitoring statutory filing dates

    Restrictions on Services Provided by Auditors Under the Companies Act, 2013

    • An auditor appointed under the Companies Act, 2013 cannot provide certain services to the company or its holding or subsidiary companies.
    • These services include:
      • Accounting and book-keeping services
      • Internal audit
      • Design and implementation of any financial information system
      • Actuarial services
      • Investment advisory services
      • Investment banking services
      • Rendering of outsourced financial services
      • Management services
      • Any other kind of services as may be prescribed

    Additional Points

    • A member is deemed to be in practice if they are acting in their professional capacity as a liquidator, trustee, executor, administrator, arbitrator, receiver, adviser or representative for costing, financial, or taxation matters
    • A member is deemed to be in practice If they are taking an appointment made by the Central Government or a State Government or a court of law or any other legal authority
    • A member is deemed to be in practice if they act as a Secretary unless their employment is on a salary-cum-full-time basis
    • Being in practice is not only when one is actively engaged in the practice of accountancy but also when offering to perform accounting services whether or not the services are in fact performed.
    • A member is deemed to be in practice when rendering services with armed forces.

    Services Offered by Chartered Accountants

    • Chartered Accountants in practice can offer a wide range of management consultancy services including human resource development, training programs, work study, job descriptions, job evaluations, and workload evaluations.
    • A Chartered Accountant in practice may not use any designation other than ‘Chartered Accountant’.
    • Members in practice are permitted to use the letters ‘CA’ as a prefix before their names regardless of whether they are in practice or not.
    • A firm of Chartered Accountants can be appointed as an auditor of a company as per the Companies Act, 2013, as long as it does not have a company as its partner, according to the Chartered Accountants Act, 1949.

    Branch Office Regulations

    • A Chartered Accountant in practice or a firm with more than one office in India must have a member of the Institute in charge of each office.
    • There is an exemption for Chartered Accountants in practice in hill areas, allowing them to open temporary offices in a city for a maximum of 3 months a year.
    • The temporary office must not be displayed on letterheads, visiting cards, or professional documents.
    • A Chartered Accountant in charge of a branch office must be associated with the firm as a partner or paid assistant.
    • A Chartered Accountant can be in charge of two offices located within the same accommodation.
    • Chartered Accountants are not permitted to put up a name board of the firm at their residence.

    KYC Regulations

    • Chartered Accountants in practice are required to comply with Know Your Client (KYC) norms.
    • Mandatory KYC norms must be applied to all attestation engagements.
    • KYC norms include information about the client’s name, PAN number, Aadhar card number, business description, type of engagement, and the last audited financial statement.
    • For corporate clients, KYC norms also require information about the parent company, if applicable, as well as regulatory information such as company PAN number, company identification number, director's names, addresses, and identification numbers.
    • For non-corporate clients, KYC norms require information about the partner’s names, addresses, and PAN/Aadhar card/DIN numbers.

    Chartered Accountants in Service

    • A Chartered Accountant in Service is a professional accountant employed in any capacity in commerce, industry, service, the public sector, education, the not-for-profit sector, regulatory bodies or professional bodies.

    Disciplinary Procedure for Chartered Accountants

    • The Chartered Accountants Act, Sections 21, 21A, 21B, 21C, 22-A and 22-G, along with the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct of Cases) Rules, 2007, outline the procedure for investigating misconduct of members.

    • The process begins with a complaint, accompanied by the prescribed fee, or information, against a member of the Institute of Chartered Accountants of India (ICAI).

    • This information is then provided to the Disciplinary Directorate for assessment.

    • The Directorate will determine if there appears to be a prima facie case for misconduct.

    • If the Directorate finds that the complaint falls under the First Schedule, the matter is placed before the Board of Discipline.

    • If the Directorate finds that the complaint falls under the Second Schedule or both, or if the complaint is not considered a prima facie case, the matter is placed before the Disciplinary Committee.

    • The Board of Discipline and the Disciplinary Committee have the option to accept or reject the matter for further investigation.

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    Test your knowledge on the fundamental principles in the Code of Ethics for Chartered Accountants. This quiz assesses your understanding of ethical guidelines essential for the integrity of the profession. Challenge yourself to identify what constitutes a fundamental principle.

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