Professional Documents
Culture Documents
―Member in Practice‖
Sec.2 (2): A Member of the Institute shall be deemed ―to be in practice‖ when individually or in
Partnership with CA‘s in practice, he, in consideration of remuneration received or to be received:
(1) Engages himself in practice of accountancy, or
(2) Offers to perform or perform services 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 accountant, or
(3) 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
(4) Renders such other services as, in the opinion of the Council, are or may be rendered by a CA in
practice.
Other Points:
(1) The words ―to be in practice‖ with their grammatical variations and cognate expressions shall be
construed accordingly.
(2) If a Member in Practice has been granted permission to also hold COP of sister Institute(s) I Bar
Council, such a Member shall be treated as a Member in full time practice.
(3) 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-
(a) Acts as a Liquidator, Trustee, Executor, Administrator, Arbitrator, Receiver, Adviser or
Representative for costing, financial or taxation matters, or
(b) Takes up an appointment made by the Central Government or State Government or a Court of Law
or any other legal authority, or
(c) Acts as a Secretary, unless his employment is on a salary-cum-full-time basis.
(4) The Act of setting up of an establishment offering to perform accounting services would tantamount to
being in practice even though no Client has been served.
(5) A Member of the Institute is deemed to be in practice during the period he renders ―service with armed
forces‖.
1. A CA in practice is not permitted to do (a) Broking, (b) Underwriting, and Cc) Portfolio Management.
2. Consultant for Derivative Products: If the consultation in respect of Derivative Products includes
management of Clients‘ Assets Portfolio also, CA Prabhu, being in practice, cannot be engaged in
such activity.
3. Trading in Derivatives:
(a) Trading in Derivatives shall be considered as a separate business of the Chartered Accountant.
(b) If a CA holds Certificate of Practice, then for conducting Derivative Trading, special permission
from the ICAI is required under Clause 11 of Part I of First Schedule, since this is not covered in
General Permission category.
(c) If a Member does not hold Certificate of Practice, then he is free to do trading in Derivative
Transactions.
Refer to Points 12 and 17 in Para 20.1.2. The CA is not guilty of professional misconduct.
Associate: Any person shall, on his name, being entered in the Register, be deemed to have become an
Associate Member of the Institute and be entitled to use the letters A.C.A. after his name to indicate that he
is an Associate Member of the ICAI.
Fellow: On an application made and granted in the prescribed manner, the name of the following
categories of Members shall be entered in the Register as a Fellow of the Institute and shall be entitled to
use the letters F.C.A. after his name to indicate that he is a Fellow Member of the ICAI —
Member, being an Associate who has been in continuous practice in India for atleast 5 years,
Member who has been an Associate for a continuous period of not less than 5 years and who possesses
such qualifications as may be prescribed to ensure that he has experience equivalent to the experience
normally acquired as a result of continuous practice for a period of 5 years as a CA.
3 CREDENT PROFESSIONAL STUDIES
Fees: Fees, not exceeding ` 5,000, for grant of FCA Status shall be notified by the Council. The Fees can
be increased upto ` 10,000, with the prior approval of Central Government. An Associate Member, on
being admitted as a Fellow during the year, shall pay only the differential amount to the Institute for that
year.
Rendering Services: A Member, who is not in practice, is precluded from accepting engagement to render
services of any of the types normally prescribed for a CA, even though for doing so, he does not require
any special qualifications.
CA Capacity only: Once a person becomes a Member of ICAI, he is bound by the provisions of the CA
Act and its Regulations. If he appears before the Income Tax Tribunal as an Income Tax Representative
after becoming a Member, he could appear so only in his capacity as a CA and a Member of ICAI. A
Member of ICAI 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.
Fees: Every Member shall pay annual fees, not exceeding ` 3,000, for his COP, on or before 1 April of
every year. The Fees can be increased upto ` 6,000, with the prior approval of Central Government.
Grounds for Cancellation of Certificate of Practice: The Certificate of Practice shall be liable for
cancellation if—
(a) The name of the holder of the Certificate is removed from the Register, or
(b) 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
(c) Member has ceased to practice, or
(d) Member has not paid the annual fees for COP till 30th September of the relevant year.
Restoration of cancelled COP: If the COP is cancelled for non-payment of annual fees for COP, then it
may restored by the Council, with effect from the date of cancellation on payment of the additional fees
notified by the Council.
A CA in practice has been suspended from practice by the High Court‘s order for a period of 6 months.
During his period of suspension he wants to practice as an Income Tax Practitioner as defined u/s 288(2) of
the Income-Tax Act and as provided under Income-Tax Rules, as he holds the degree in commerce as well
as of law of a recognised university. Can he do so? State reasons.
Naresh is a Ph.D. in Taxation and a CA. He was suspended from the Membership of ICAI for 1 year under
the orders of High Court. During the period of suspension, he engaged himself in tax representation work.
Comment.
1. Once a person becomes a Member of ICAI he is bound by the provisions of the CA Act and its
Regulations. If he is suspended and is not holding Certificate of Practice, he cannot in any other
capacity take up any practice separable from his capacity to practice as a Member of ICAI.
2. A CA whose name has been removed from the Membership for professional and/or other misconduct
during such period of removal, cannot appear before the tax authorities or other bodies, before whom
he could have otherwise appeared in his capacity as an Advocate, Tax Consultant, Cost Accountant,
Company Secretary, etc.
3. In the given case, the CA would not be allowed to represent before the Income-Tax Authorities for the
period he remains suspended.
Branch Office of CA
Definition of Office: Office is a ―place where a name-board is fixed or where such place is mentioned in
the letterhead or any other documents as a place of business.‖ However, the name-board can be put in the
place of residence of a Member with the designation of Chartered Accountant, provided it is a name-plate
or a name-board of an individual Member and not of the Firm.
Member In charge:
(a) Where a CA in practice or a Firm of such CA‘s has more than one office in India, each one of such
offices shall be in the separate charge of a Member of the Institute.
(b) A Member can be in-charge of two offices if they are located in one and the same accommodation.
(c) A CA incharge 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
the CA / Firm.
Active Association: The Member should be actively associated with such office. Such association shall be
deemed to exist —
(a) If the Member resides in the place where the office is situated for a period of not less than 182 days in a
year, or
(b) If he attends the said office for a period of not less than 182 days in a year, or
(c) In such other circumstances as establishes such active association.
Intimation to Council: Every CA in practice or a Firm of such CA‘s maintaining more than one office
shall send to the Council, a list of offices and the persons in charge thereof and shall keep the Council
informed of any changes in relation thereto.
Hill Area Exemption: The conditions for exemption in respect of Members practicing in hill areas are —
(a) Such Members / Firm will be allowed to open Temporary Offices in a city in the plains for a limited
period not exceeding 3 months in a year.
(b) The Regular Office need not be closed during this period and all correspondence can continue to be
made at the Regular Office.
(c) 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.
(d) 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.
(e) Before commencement of every winter, the Member / Firm shall inform the Institute that he / it is
opening the Temporary Office from a particular date. After the office is closed at the expiry of the
period of permission, an intimation to that effect should be sent to the Institute by Registered Post.
Second Office Exemption: A Second Office can be opened without such second office being under the
separate charge of a Member, provided the Second Office is located —
(a) in the same premises, in which the first office is located, or
(b) in the same city, in which the first office is located, or
(c) within a distance of 50 km from the municipal limits of a city, in which the first office is located.
A Member having two offices of the type referred to above, shall have to declare, which of the two offices
is his main office, which would constitute his professional address.
Note: Write the provisions for exemption available in respect of Second Office (indicated above).
1. In the given case, the Second Office is located beyond 50 kms from the Municipal Limits of Mumbai
City. The exemption in respect of Second Office is not available.
2. The CA in practice has contravened the provision of Sec.27, since the suburb ―Branch‖ is not under the
separate charge of a Member. Hence, Mr. Guna is guilty of professional misconduct under Clause (1)
of Part II of Second Schedule.
Note: Write the provisions for exemption available in respect of Second Office (indicated above).
Hari is not guilty of professional misconduct, as the Second Office is within 50 kms.
Misconduct
―Other Misconduct‖ in relation to Members of the Institute under the Schedules of the CA Act
Part IV of First Schedule Part III of Second Schedule
A Member of the Institute, whether in practice or not, shall be A Member of the Institute,
deemed to guilty Other Misconduct, if he — whether in practice or not, shall
is held guilty by any Civil or Criminal Court for be deemed to be guilty of Other
offence an which is punishable with imprisonment for a term not Misconduct, if he is held guilty
exceeding 6 months. by any Civil or Criminal Court
in the opinion of the Council, he brings disrepute to the for an offence which is
profession or the Institute as a result of his action, whether or not punishable with imprisonment for
The act of Siva will certainly bring disrepute to the profession. Hence, the Bank can file a complaint with
ICAI for disciplinary action under First Schedule, Part IV, Clause 2 - Other Misconduct.
4. Procedure in Investigation [Sec.21(4)]: In order to make investigations under the provisions of this
Act, the Disciplinary Directorate shall follow the prescribed procedure.
5. Withdrawal of Complaint [Sec.21(5)]: Where a complainant withdraws the complaint, the Director
(Discipline) shall place such withdrawal before the Board of Discipline or, as the case may be, the
Disciplinary Committee, and the said Board or Committee may, if it is of the view that the
circumstances so warrant, permit the withdrawal at any stage.
6. No prima facie case [Sec.21A(4)]: The Director (Discipline) shall submit before the Board of
Discipline all information and complaints where he is of the opinion that there is no prima facie case
and the Board of Discipline may, if it agrees with the opinion of the Director (Discipline), close the
matter, and in case of disagreement, may advise the Director (Discipline) to further investigate the
matter.
7. Board of Discipline rsec.21A1 and Disciplinary Committee rsec.21B1
Item Board of Discipline Disciplinary Committee
Constitution 1. A person with experience in law and 1. The President or the Vice—
having knowledge of the disciplinary President of the Council as the
matters and the profession, to be the Presiding Officer.
Presiding Officer. 2. Two Members to be elected
2. Two Members one of whom shall be from amongst the Members of
Member of the Council elected by the the Council.
Council, and the other Member shall be 3. Two Members to be nominated
nominated by the Central Government by the Central Government from
from amongst the persons of eminence amongst the persons of
having experience in the field of Law, eminence having experience in
Economics, Business, Finance or the field of Law, Economics,
Accountancy. Business, Finance or
3. Director (Discipline), as the Secretary of Accountancy.
the Board. The Council may constitute more
Disciplinary Committees as and
when it considers necessary.
Procedure The Board of Discipline shall follow summary Disciplinary Committee shall follow
disposal procedure in dealing with all the cases the specified procedure, in
before it. considering the cases placed before
it.
John, a practising CA, entered into partnership with Salim, a qualified Chartered and Cost Accountant,
holding Certificate of Practice as a Cost Accountant. Is John guilty of professional misconduct?
21 CREDENT PROFESSIONAL STUDIES
CA Final May 1996
Mr.P, a CA 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. Give your views in light of CA Act and Schedules thereto.
CA Final Nov.2005
Hint/Principle: Refer Clause (4) of Part I of First Schedule.
In the above cases, the CA in practice will not be guilty of professional misconduct, if the person with
whom he enters into Partnership, is covered by (b) above.
Hint / Principle: Refer to the provisions of Clause (4) of Part I of First Schedule
1. The ICAI‘s Council and Central Government have the power to prescribe such Professional Bodies
with whom Members of ICAI can enter into Partnership.
2. The Resident Members of ICAI residing abroad but entitled to be registered as a Member of Institute
u/s 4(1)(v), or whose qualifications are recognized by Central Government or the Council to enter into
Partnership, can form Partnership Firms with any practicing CA.
3. This amendment has enabled the Members of ICAI to form Multi—Disciplinary Firms and offer
Multi—Professional services in a competitive and commercial manner.
1. Under Clause (5) of Part I of First Schedule, a CA in practice is deemed to be guilty of professional
misconduct, if he secures, either through the services of a person who is not an employee of such CA or
who is not his Partner, or by means which are not open to a CA, any professional business.
2. The CA must seek work through the respect he enjoys, professional skill and talent, his confidence and
reputation. He must not seek work through any agency. All forms of canvassing on that account are
regarded unethical and are prohibited.
3. Nothing in Clause (5) shall be construed as prohibiting any profit—sharing or partnership arrangement
permitted in terms of Clauses (2), (3) & (4) of Part I of First Schedule.
Pull Model: The websites should be on a ―pull‖ model and not ―push‖ model of the technology. Only a
person who wishes to locate the CA‘s I Firms would have access to the information and the information
should be provided only on the basis of specific ―pull‖ request.
Permitted Features:
(a) Photograph: Display of Passport Size Photograph is permitted.
(b) Format: The CA‘s I Firms can create their own website subject to the overall guidelines laid down by
the Council. There is no actual format of website, prescribed by the ICAI.
(c) Colours: There is no restriction on the colours, which may be used in the website.
(d) Webpages: Individual Members would also be permitted to have their Web Pages in their Trade Name
or Individual Name.
(e) Different address: The address of the website can be different from the name of the Firm. But it should
not amount to soliciting Clients or professional work or advertisement of professional attainments or
services. The website address should be as near as possible to the Individual Name/ Trade Name, Firm
Name of the CA / Firm.
(f) Articles: Articles, Professional Information, Professional Updation and other matters of larger
importance or of professional interest can be displayed.
(g) Bulletin Boards: Bulletin Boards can be provided.
(h) Chat Rooms: Chat rooms can be provided to permit chatting amongst ICAI Members and between
Firms and the Clients. Confidentiality protocol should be observed.
(i) Online service: The Members / Firms can provide online advice to their Clients who specifically
request for the advice, whether free of charge or on payment.
(j) Search Facility: Listing on suitable search engine is allowed. (on fields of ―Chartered Accountants‖ or
―CA‖ or ―Indian CA‖, ―Indian CPA‖, ―Indian CA‖ or any permutation or combination related thereto).
(k) Secrecy: Adequate secrecy of the matters of the Clients handled through website should be ensured.
(l) Links: The Website may provide a link to the website of ICAI, its Regional Councils and Branches
and also the Website of Government / Government Departments / Regulatory Authorities / other
Professional Bodies such as, American Institute of Certified Public Accountants (AICPA), The
Institute of Chartered Accountants of England and Wales (ICAEW) and The Canadian Institute of
Chartered Accountants (CICA).
(m) Date: The website should mention the date upto which it is updated and the information should not be
at material variance from the information as per the ICAI‘s records.
(n) Listing: Listing of website address in databases of — (I) CA Societies, (ii) Professional Body or
Association or Chamber of Commerce in which the CA I Firm is a Member, or (iii) Other bodies
offering listing to CA‘s, is permitted with / without payment.
Prohibited Features:
(a) No private circulation: The information contained in the website should not be circulated on their own
or through e-mail or by any other mode or technique except on a specific ―pull‖ request.
(b) No request to hit website: No circular / other advertisement / other material of any kind soliciting
people to visit the website, shall be issued. However, website address can be mentioned on letterheads
and professional stationery.
(c) No Logo: No logo of any sort can be used on the website.
(d) No Advertisements: No advertisement in the nature of banner or any other nature will be permitted.
A CA sent printed card and circular letter soliciting work. Held as guilty M.J.Gadre Vs
under Clause (6). W.G.Ambekar (1952)
A CA wrote to the Ministry of Commerce & Industry to enroll the name of
K.C.G.Satyawadi
his Firm in the list of Auditors maintained by the Department. Held as guilty
(1955)
under Clause (6)
A CA Firm issued a Letter of Authority to another CA to accept and carry
out audits of Co-operative societies on the Firm‘s behalf. The other CA
V.B.Kirtane (1957) and
issued circulars of which the Firm was not aware. Held the Firm was not
M.R.Walke (1957)
guilty under Clause (6). The person in whose favour the letter of authority
was held guilty.
A CA sent an application to the Chairmen of Co-operative society offering G.K.Joglekar (1957)
himself for appointment as an Auditor. Held that the infringement was a and D.G.Jawalker
serious breach of professional ethics and guilty under Clause (6). (1957)
A CA sent a letter of request for being appointed as Auditor. Guilty under
S.K.Swain (1960)
Clause (6)
A CA sent a printed circular to a person unknown to him offering his services
in profit planning and profit improvement programmes. The circular
B.S.N.Bhushan (1965)
conveyed the idea that it was meant for strangers only. Held guilty under
Clause (6) for using circulars to solicit Clients and professional work.
A CA wrote several letters to the Assistant Registrar of Co-operative D.C.Pal (1966)
Societies, Government of West Bengal, stating that though his firm was on D.N.Dasgupta (1969),
3. Possible Reasons for change: Change in Auditor may arise in the following cases —
(a) Where there is a change of venue of business and a local accountant is preferred, or
(b) Where the Partner who has been dealing with the Client‘s affairs retires or dies, or
(c) Where temperaments clash, or
(d) Where the Client has some good reasons to feel dissatisfied.
5. Professional Reasons for non - acceptance: Professional reasons for not accepting an audit could
be -
(a) Non - compliance of the provisions of the Companies Act as per Clause (9),
(b) Under - cutting of fees,
(c) Non - Payment of Undisputed Audit Fees by Auditees, other than in case of sick units for
carrying out the statutory audit under the Companies Act, or various other statutes, and
(d) Issuance of a Qualified Report.
In the first three cases, an Auditor who accepts the audit would be guilty of professional
misconduct. In the last case, he may accept the audit if he is satisfied that the attitude of the Retiring
Auditor was not proper and justified, based on full facts of the case.
There should be positive evidence of the fact that the communication addressed to J.S.Bhati
the Outgoing Auditor by the Incoming Auditor, reached the former‘s hands. vs
Certificate of Posting of a letter, cannot be taken as positive evidence of its Council of
delivery to the addressee. ICAI
7. The Council has also laid down the following –
(a) Compulsory Communication: The requirement in communicating with the previous Auditor
being a CA in practice would apply to all types of audit, viz. Statutory Audit, Tax Audit, Internal
Audit, Concurrent Audit or any other kind of audit.
(b) Optional Communication: The practice of communication with the Predecessor may also be
followed for — (i) Certification, (ii) Verification of the books of account for special purpose,
(iii) Appointment as a Liquidator, Trustee or Receiver and his predecessor was a CA. In case of
assignments done by other professionals not being CA‘s, it would be a healthy practice to
communicate. It would also be a healthy practice if a Tax Auditor appointed for conducting
(c) Previous Auditor means the immediately preceding Auditor who held same or similar
assignment comprising same I similar scope of work. Communication is required even where the
Previous Auditor happens to be an Auditor for a year other than the immediately preceding year.
(d) Lack of Time: In case of Government assignments, where the time schedule given for the
assignment is such that there is no time to wait for the reply from the Outgoing Auditor, the
Incoming Auditor may give a conditional acceptance of the appointment and commence the
work which needs to be attended to, immediately after he has sent the communication to the
Previous Auditor. In his acceptance letter, he should make clear to the Client that his acceptance
of appointment is subject to professional objections, if any, from the Previous Auditor and that
he will decide about his final acceptance after taking into account the information received from
the Previous Auditor.
A CA commenced the work of audit on the very day he sent letter to the Previous S.N. Johri vs
Auditor. Held, guilty under Clause (8). The appointment could be accepted only N.K.Jain
when the Outgoing Auditor does not respond within a reasonable time. (1973)
A CA sent a Registered Letter to the Previous Auditor after the commencement Radhey Shyam vs
of the audit by him. Held guilty under Clause (8). Dubey (1974)
A CA commenced the audit within 5 days of the date of his appointment without
S.B.Chidrawaar vs
sending any communication to the Previous Auditor. The Previous Auditor also
C.K.Rao (1974)
denied the receipt of any communication. Held guilty under Clause (8).
A CA sent a communication to the Previous Auditor under Certificate of Posting
without obtaining any acknowledgement thereof. Held, guilty under Clause (8). M.L.Agarwal vs
Certificate of Posting of a letter could not be taken as positive evidence of its J.S.Bhati (1975)
delivery to the addressees.
Sending letter alone under Certificate of Posting is not sufficient in case of
audit of –
Societies — A.K.Thodani vs A.P.Bhadani (1988)
Charitable Societies — J.Patnaik vs Y.Pani (1988)
Schools — J.S.Bhati vs M.L.Aggarwal (1991)
Tax Audit of Partnership Firms — S.K.Jain vs D.K.Karmakar (1989), V.A.
Various Cases
Parikh vs R.I.Galledar (1991), M R Daga & Co vs R K Vora (1992)
Tax Audit of State Textile Corpn — M S Padmanabhan Nair vs R
Chidambaram (1996)
Co—Operative Banks — D.H.Firke vs L.B.Jadhav (1991)
Statutory Audit of Companies — S.K.Kansal vs S.L.Gupta (1992),
N.H.Kumbhani & Co vs P.V.Dalal (1993)
Mehra Khanna &
A CA sent under Postal Certificate, letters to the Previous Auditor before Co vs
appointment and also before commencement of audit by him. There was no proof Man Mohan
that they were received by the Previous Auditor. Held guilty under Clause (8). Mehra
(1976)
A CA sent a letter by ordinary post to the Previous Auditor after the acceptance of K.K.Sud Vs
the audit assignment. No evidence was produced to show that the said letter was K.N.Chandia
2. It is obligatory on the Incoming Auditor to ascertain from the Company that the appropriate procedure
in the matter of his appointment has been duly complied with, so that no Shareholder or Retiring
Auditor may, at a later date, challenge the validity of such appointment.
3. The word ‗ascertain‘ used in Clause (9) means ―to find out for certain‖. The Incoming Auditor
should not merely accept a certificate from the Management of the Company that the provisions of law
in relation to appointment have been complied with. He has to verify the relevant records of the
Company and ascertain compliance with the provisions of the Companies Act.
The Company failed to appoint the Auditor at its AGM. The Board
appointed a CA as Auditor of a Company. The Incoming Auditor wrote to
the Previous Auditor of his appointment and U.C Majumdar vs
and finished the audit on the same date. Held that the vacancy was not a J.N.Saikia (1954)
casual vacancy and as the CA was under misapprehension as to the true
legal position, he was warned.
Situation Hint/Answer
X & Co, CA‘s, were informed by True Ltd, that
they have been appointed as Auditor of the
Company in place of ABC & Co, who have been
removed, however, subject to the approval of the
Shareholders in the ensuing AGM. X & Co.
accepted the appointment and commenced the
work without their appointment being approved by
shareholders of the company. Is the action of X &
Co. correct?
The CA is guilty of professional
CA Final Nov.1999
misconduct under Clause 9 of Part
I of First Schedule.
P, a CA, had accepted appointment as an Auditor
of QRS Ltd without ascertaining from the
Company whether the requirement of the
Companies Act had been complied with. However
he realized this defect only after acceptance. Is he
guilty of professional misconduct?
CA Final Nov.2003
Illustration:
Mr X a Practicing CA accepts the appointment as Auditor of ABC Ltd, which was previously held by
another CA. Explain the circumstances in which the Incoming Auditor be deemed to be guilty of
professional misconduct under the CA Act
1. Failure to communicate with the Previous Auditor in writing. [Clause 8, Part I, First Schedule]
2. Failure to ascertain compliance with the requirements of Companies Act. [Clause 9, Part I, First
Schedule]
3. Where the Previous Auditor had issued a Qualified Audit Report and the Incoming Auditor does not
ascertain the full facts of the case before accepting the assignment, and accepts the assignment too
readily.
2. Members are prohibited from charging or accepting any remuneration based on a percentage of profits
or on the happening of a particular contingency, e.g. successful outcome of an appeal in revenue
proceedings. Such charging of fees would undermine his integrity and impairing his independence.
3. Fees should not be regarded as being contingent, if fixed by a Court or other Public Authority.
4. Exceptions: Regulation 192 exempts Members from the operation of this clause in the following cases -
Category Fees based on a percentage of
Receiver or Liquidator. Realisation or disbursement of assets.
Auditor of a Co-Operative Society. Paid - Up Capital / Working Capital / Gross or
Net Income Profits.
Valuer for the purposes of Direct Taxes & Duties. Value of Property valued.
A CA charged fees at a certain percentage of the expected relief. Held that he R.B.Basu vs
was guilty under Clause (10). P.K.Mukerji(1956)\
Situation Hint/Answer
Jaydev has charged a fee for representing his The CA is guilty of professional misconduct under
Client in an Income Tax appeal based on the Clause 10 of Part I of First Schedule. Refer R B
expected relief to his Client as a result of appeal. Is Basu vs P K Mukerji above.
there any professional misconduct?
CA Final Nov 1996
The Chairman of an Audit Committee of a 1. Refer Clause 10 and Para 2 above. The action of
Bluechip Company, who is a CA, asked the Firm the CA Firm to quote fees on success fee basis to
in which he was previously a Partner, to quote their ensure their appointment, is an act of professional
fee on a success fee basis so as to ensure that a misconduct.
professional work is assigned to such Firm. Is this 2. Also, the Chairman of Audit Committee is a CA.
1. Full-time or part-time employment in Business Concerns, provided that the Member and / or his
relatives do not hold ―substantial interest‖ in such concerns.
2. Full-time or part-time employment in Non - Business Concerns.
3. Office of Managing Director or a Whole Time Director of a Body Corporate, provided the Member and
/ or his relatives do not hold substantial interest iii that concern.
4. Interest in family business concern(s) (including such interest devolving on the Members as a result of
an inheritance succession / partition of the family business) or concerns in which interests has been
acquired as a result of relationships, and in the Management of which no active part is taken.
[See Note below]
5. Interest in an Educational Institution.
Meaning of Terms:
1. ‗Relative‘, in relation to a Member, means the husband, wife, brother or sister or any lineal ascendant or
descendant of that Member.
(b) In the case of any other concern, if such Member is entitled or the other person referred to above or
such Member and one or more of the other persons referred to above or persons of such number and
/ or are more sections of such persons are entitled in the aggregate, at any time during the relevant
years not less than 20% of the profits of such concern.
3. Relevant Years: For the purpose of Clause (11) Part I First Schedule, read with Appendix 10, ―Relevant
Year‖ means Year / Period in which not less than 20% of voting power / 20% share of profits were
owned beneficially.
Note: Where the authority to sign documents given above is delegated by a CA / Firm, the absolute
responsibility lies with the CA / Firm. The fact that the documents have not been signed by a CA is
not a defence to him or to the Firm in an enquiry relating to professional misconduct.
Situation Hint/ Answer
CA Smart, a practicing CA was on Europe tour Principle: Write the provisions of Clause
between 15th Sep and 25th Sep. On 18th Sep, a 12 of Part I of First Schedule, given above.
message was received from one of his Clients for a Conclusion: CA Smart is guilty of
Stock Certificate to be produced to the Bank on or Professional Misconduct.
before 20th Sep. Due to urgency, CA Smart directed his
Assistant, who is also a Chartered Accountant, to sign
and issue the Stock Certificate after due verification, on
his behalf. Comment on whether there is any
professional misconduct. CA Final May 2011
Mr. ‗A‘ is a practicing CA, working as Proprietor of Issue of Audit Queries & attending routine
M/s A & Co. He went abroad for 3 months. He matters as Authorised Representative is
delegated the authority to Mr. ‗Y‘ a Chartered permissible.
Accountant, his employee, for taking care of routine Issuing Production Certificate under Central
matters of his office. During his absence, Mr. ‗Y‘ has Excise Act, constitutes misconduct for
conducted the under mentioned jobs in the name of M/s Employee CA, for contravention of ICAI
A & Co. Regulations.
(i) He issued the audit queries to Client which Mr. A is guilty of Professional Misconduct
were raised during the course of audit. under Clause (12) of Part I of First
(ii) He issued Production Certificate to a Client Schedule.
under Central Excise Act, 1944.
(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 CA Act, 1949.
CA Final May 2014
A Firm of Auditors of a Limited Company gives Power Principle: Write the provisions of Sec.26 of
of Attorney to an Employee - CA to sign Reports and the CA Act and Clause 12 of Part I of First
Financial Statements of the Company. Comment. Schedule.
CA Final May 2007 Conclusion: The CA Firm is guilty of
professional misconduct under Clause 12 of
Part I of First Schedule and also under
Clause 1 of Part II of Second Schedule for
contravening Sec.26.
Situation Hints/Answers
A CA in practice, in spite of repeated requests from
the Secretary of ICAI, fails to submit Form 18. Is Guilty under Clause 2 of Part III of First Schedule
he liable for misconduct? CA Final May 2000
AB & Co. a Firm of CAs, included the name of P as
a partner while filing an application for
empanelment as Auditor for Public Sector Bank
Guilty under Clause 2 of Part III of First Schedule
Branches. It was subsequently noticed that on the
date of application, P was not a Partner with AB &
Co. Comment. CA Final Nov 2007
Mr. X, a CA, was employed as a Paid Assistant with
a CA Firm. On 31 December, he leaves the services
of the Firm. Despite many reminders from ICAI he
Guilty under Clause 2 of Part III of First Schedule
fails to reply regarding the date of leaving the
services of the Firm .Comment.
CA Final May 2010
Second Schedule
Illustration:
Parekh, a CA, was invited by the Chamber of Commerce to present a paper in a symposium on the issues
facing Indian Leather / Textile Industry. During the course of his presentation, he shared some of the vital
information of his Client‘s business under the impression that it will help the Nation to compete with other
countries at International level. Comment on the above, with reference to the CA Act, 1949 and Schedules
thereto. CA Final May 2004, Nov. 2014
Note: Write the provisions of Clause 1 of Part I of Second Schedule.
Illustration:
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 few items in the Financial Statements. The information is available in your working
paper file. Explain your response in view of Professional Ethics. CA Final May 2000
Note: Write the provisions of Clause 1 of Part I of Second Schedule
1. The Auditor should respect the confidentiality of information acquired in the course of his work and
should not disclose any such information to a third party without specific authority or unless there is a
legal or professional duty to disclose. [SA 200]
2. Working Papers are the property of the Auditor. The Auditor may, at his discretion, make portions of or
extracts from his working papers available to his Client. [SA 230]
3. In the above case, the Auditor cannot disclose information in his possession, without the specific
permission of the Client Company. If the queries by the Bank are in the nature of clarification of certain
Financial Statement items, the Auditor may provide the required explanations, after obtaining the
Client‘s consent.
C. Timing of Disclosure:
Situation Timing of disclosure
If disclosure is consented to by the Client. Immediately.
If the suppression is trivial. When the current return is submitted.
If there is any possibility that the collection of Immediately e.g. when Client disposes of his
tax would be prejudiced. property or removing himself from the jurisdiction
of that Income - Tax Authorities.
A CA in practice, in the course of the audit of Listed Company, discovered serious violations of the
provisions of the Companies Act, informed the Registrar of Companies out of public Interest. Is there any
misconduct? CA Final May 2013
You are appointed to compile Financial Statement of Z & Company (a Partnership Firm) for tax purposes.
During the course of work, you learn that the Inventory is grossly understated. On pointing out the same,
the Partners of Z & Co., tell you that it is outside your scope since you are not conducting an audit and the
said figures duly certified by the Firm should be accepted. Comment. CA Final Nov. 2014
Hint/ Answer: It is not the duty of a Member to shield Client from the consequences of his frauds. Subject
to the restriction discussed above, the Member shall not be treated as Guilty of Professional Misconduct.
Illustration:
A Practicing Member of ICAI also holds Membership of AICPA (i.e. CPA Qualification). He wants to
certify the Financial Statements of a Multinational Company having its presence in India. Is he permitted to
do so?
1. Members of ICAI, who are also Members of AICPA and are eligible to sign the Financial Statements as
CPA‘s (i.e. as Members of AICPA), may do so. The ICAI‘s Ethical Standards will still apply.
2. When ICAI Members sign the Financial Document(s) as CPA‘s, they will be required to indicate in an
appropriate manner, that their Firm is an Indian Accounting Firm registered with ICAI, under the CA
Act, 1949. The Member should reflect the fact that his Firm falls within the purview of the ICAI, in the
relevant document(s) certified by him.
Relative and Substantial Interest are as defined in Appendix 10. [Refer Para. 20.3.29]
Relevant Years for the purpose of Clause (4) of Part I of Second Schedule means the year / period to
which the Report / Certificate relates and the year / period during which the said Report / Certificate is
signed
A CA conducted the audit of accounts of an Evening College besides
working in the same College as Lecturer / Vice—Principal. Held H R Shetty (2003)
guilty under Clause (4).
A CA audited the accounts of a Private Company in which his wife
Promila Jain vs Hardesh Kant
held 65% Shares, i.e. holding substantial interest, and was also the
(2004) B.D.Bhatia (2004)
Director of the Company. Held guilty under Clause (4).
Doing Statutory Audit without disclosing substantial interest in the
ICAI vs Shri Vijay R Ashar
Company in the Auditor‘s Report violates Clause (4) of Part I of the
[Dec 08 CA Journal Page 1006]
Second Schedule.
Situation Hint/Answer
Mr. A has been appointed as the Statutory Auditor This is permissible as the person having Substantial
of a Private Limited Company where his Spouses‘ Interest is not a Relative.
Sisters‘ husband is having 75% Ownership. Is it [Refer Para. 20.3.29 for meaning of Relative]
permissible? CA Final Nov. 2012
Mrs. Fair is a Director of XYZ Pvt Ltd, having The CA is guilty of Professional Misconduct
15% Shareholdings in the Company. During 2014, under Clause 4, Part I, Second Schedule, if
the Company appointed C.A. Mr.Lovely, Shareholding equals or exceeds 20% of Total
Illustration:
Mr. Fair, a practising CA, was appointed to carry out a Balance Sheet Audit of a Non-Profit Organisation.
The Internal Auditors detected certain irregularities at one of the Branches of the organisation, which
Mr.Fair had failed to detect. Is Mr.Fair guilty of professional misconduct? CA Final Nov. 1997
Illustration:
The Cashier of a Company committed a fraud and absconded with the proceeds thereof. This happened
during the course of accounting year. The Chief Accountant of the Company also did not know about the
fraud.
In the course of audit at the end of the year, the Auditor failed to discover the fraud. After the audit was
completed, however, the fraud was discovered by the Chief Accountant. Investigation made at that time
indicates that the Auditor did not exercise proper skill and care and performed his work in a desultory and
haphazard manner. With this background, the Directors of the Company intend to file disciplinary
proceedings against the Auditor. Discuss the position of the Auditor with regard to the disciplinary
proceedings. CA Final Nov. 2003
Illustration
A search was conducted u/s 132 of the Income-Tax Act in the premises of a leading merchant led to the
discovery of two sets of account books - one set to record all the income correctly, and another set to record
only limited income. Han, a CA has issued the Tax Audit Report on the basis of second set of account
books. Is he liable to the Income-Tax Department in the above circumstance? Will your answer be
different, if first set of books carried evidence of checking by the CA? Explain. CA Final May 1998
Ramesh, a CA, was appointed by Rajeev & Co. to prepare the Statement of Accounts and Income Tax
Returns. He examined the books of accounts and signed a few statements including the Trading and Profit
and Loss Account and Balance Sheet. He also forwarded the Statements of Account of the Firm to the
Income Tax Department, stating that the accounts were verified by him. But the Income Tax Department
73 CREDENT PROFESSIONAL STUDIES
late discovered that the profits shown in the above Statements were incorrect and false. The Department,
therefore, brought legal action against the Auditor for his negligence in duty. Comment.
In the assessment procedure of MIs Cloud Ltd, the Income Tax Officer observed some irregularities.
Therefore, he started investigation of the Books of Accounts audited and signed by Mr. Old, a practicing
CA. While going through the books, he found that MIs Cloud Ltd used to maintain two sets of Books of
Accounts, one is the official set and other is covering all the transactions. The Income Tax Department
filed a complaint with the ICAI saying Mr. Old had negligently performed his duties. Comment.
CA Final May 2014
Illustration
A CA in practice was alleged to have signed two Balance Sheets on two different dates for the same
financial year, the first one with a Clean Report and the second one with a Qualified Report. In a criminal
proceeding he made a statement before the magistrate that he had signed only the second Balance Sheet.
Subsequently it was found that he had in fact given the Clean Report at a later date, but signed the first
Balance Sheet under an earlier date. Examine his conduct in the light of CA Act. CA Final May 1999
Note: Write the provisions of Clause 7 of Part I of Second Schedule.
1. There are two counts of charge herein — (a) Signing two Balance Sheets on two different dates for the
same financial year, and (b) Making a false statement before the Magistrate.
2. On the first count, the CA is guilty of professional misconduct under Clause 7, based on his own
admission of the facts of signing the two Balance Sheets on two different dates for the same financial
year.
3. On the second count, the CA is guilty of ―Other Misconduct‖. The CA, whether in practice or not, will
be guilty of ―Other Misconduct‖, if in the opinion of the Council, he brings disrepute to the profession
or the Institute as a result of his action, whether or not related to his professional work. [Clause (2) of
Part IV of First Schedule]
Illustration:
You are the Auditor of a Company, which raised finance from the Capital Market on the basis of a
Prospectus issued a few years back. The main object for raising the finance was specified to be setting up a
project on Information Technology.
The Company advanced monies so raised to various parties ‗related‘ to Directors. These parties had no
standing whatsoever with information technology. In the Balance Sheet, these Advances appeared as a
Current Asset under the head ―Loans Unsecured - considered good‖. There was no mention in the Notes to
74 CREDENT PROFESSIONAL STUDIES
Accounts about the nature and purpose of such advances. You have given a routine Audit Report without
any qualifications.
One fine morning, the Directors and these ‗related‘ parties disappear. The Company has just vanished. Can
you be hauled up for professional misconduct? Do you have any liability under any law?
CA Final Nov. 2000
1. Schedule III Requirements:
(a) All unutilised monies out of the issue must be separately disclosed in the Balance Sheet of the
Company indicating the form in which unutilised funds have been invested.
(b) Loans granted by the Company to its Directors or parties (Firms, Private Companies, etc.) in which
the Director is a Member / Partner / Director, should be specifically disclosed.
(c) The Company has failed to comply with the requirements of Schedule III, thus vitiating the true
and fair view of Financial Statements.
3. Conclusion: In S.N. Dasgupta‘s case, it was laid down that the Auditor‘s duty was, ―verifying not
merely the arithmetical accuracy of the statements of account but also their substantial accuracy by
confirming that they include all the particulars requiring disclosure by the Articles or the Companies Act
and otherwise represents true and fair state of affairs of the Company.‖ Thus, in the given case, the
Auditor can be held guilty of professional misconduct under Clause (7).
Illustration:
Z, a practicing CA, issued a certificate of circulation of a periodical without going into the most elementary
details of how the circulation of a periodical was being maintained, i.e. by not looking into the Financial
Records, Bank Statements or Bank Pass Books, by not examining evidence of actual payment of Printers
Bills, and by not caring to ascertain how many copies were sold and paid for. Comment on the above.
CA Final May 2012
X, a practicing CA, issued a circulation certificate for a periodical on the basis of Outward Memos, which
was later found to be false. Comment on the above. CA Final May 2010
A CA certified that an Audit Clerk was in service with him while he was also
employed elsewhere with another Employer between 11 A.M. and 5 P.M. He
J.K.Ghosh (1955)
attended the CA‘s office thereafter until 8 P.M. Held the CA was guilty of
misconduct for making a misstatement to the ICAI.
A CA id not pay stipend to Articled Clerks as per Regulations and asked the
Articled Clerks to work in excess of the hours prescribed under the Various Cases
Regulations. Held guilty under Clause (1).
A CA agreed to take a person as an Articled Clerk in a vacancy shortly to
arise. He received the premium for the purpose and made him believe that he
was taking him in vacancy. Infact the CA had filled up that vacancy earlier by A.K Basu vs
taking another Audit Clerk. The Audit Clerk came to know from the Institute P.K.Mukherjee
that the Deed of Articles was not registered as that was forwarded with a (1956).K Ghosh(1955)
request for entertaining an extra Articled Clerk. Held the CA was guilty of
serious misconduct.
A CA – (1) issued false certificates to two Articled Clerks stating that he had
refunded the entire premium, while a part of it was claimed as a set off against
food and halting allowances given to them while they were working in out -
stations, (2) violated Regulation 62 by not refunding the premium within the M.N.Bhargava (1958)
time specified, and (3) the refund of premium in instalments in one case was
not as specified in the certificate. Held guilty of dishonest behavior both as
regards his Clients and Articled Clerks.
A CA entered into an improper arrangements to permit his Articled Clerk to
Lawrence Tellis vs
serve his articles under another CA in another place, and sent false particulars
S.G.Mandre (1951)
to the Institute, knowing them to be false. Held, guilty of misconduct.
A CA took into Articles, a government Employee, and granted him a
certificate of completion of services, without informing the Institute. Held M Rajamany (1952)
guilty of misconduct.
A CA after signing the Articles of Agreement, failed to forward the articles
and the statement of particular to the ICAI, inspite of repeated enquiries from
Mohan Sehwani vs.
the Articled Clerk. He failed to take notice of communications addressed to
Sunderlal Fatehpuria
him in that behalf. He had two other Articled Clerks along with the present one
(1958)
whose articles were not sent for registration and took up a fourth Articled
Clerk without being entitled to do so. Held guilty for breach of Regulations.
Rehman, a CA in practice, took a loan of Z 20,000 from a Firm in which his Articled Clerk and his father
were both interested, Is he guilty of professional misconduct?
81 CREDENT PROFESSIONAL STUDIES
M/s. XYZ, a Firm of CAs has taken a Loan for acquiring a home from a Company whose Managing
Director‘s son is an Articled Assistant with A, a Partner of M/s. XYZ. The Articled Assistant had no direct
interest in the Company and the Loan was not related to his engagement. Comment. CA Final Nov. 2014
1. Regulation 47 of CA Regulations, 1988 dealing with ―Premium from Articled Clerks‖ reads as under:
―No amount shall be charged from, or be payable by, an articled clerk or any other person on his behalf,
directly or indirectly, whether by way of premium or as loan or deposit or in any other form in
connection with his engagement as an Articled Clerk‖.
2. Accepting a loan from the Firm where an Articled Clerk is interested will violate Regulation 47, only if
it can be proved that the engagement of Articled Clerk is dependent upon this fact.
3. If the Articled Clerk has already been engaged and his engagement is not related to the loan transaction,
Regulation 47 will not be attracted. Therefore, the CA will be guilty of professional misconduct under
Clause (1), if it is proved that the loan was related to the engagement of the Articled Clerk.
Note: As the Articled Clerk is interested in the lending Firm, it is assumed that before taking the loan, the
CA has ensured that the Articled Clerk had sought the permission of the Council under Regulation 65, for
engaging in any other occupation.
Illustration:
A CA in practice had confirmed in the application made by his Articled Clerk to the Council for permission
to study that the normal working hours of his office were 11 a.m. to 6 p.m. and the hours during which the
Articled Clerk was required to attend college classes were 7 a.m. to 9.30 a.m. On inquiry from Principal of
the College, it was ascertained that the Articled Clerk used to attend classes from 10 a.m. to 1.55 p.m. The
CA pleaded ignorance about the Articled Clerk attending the College Classes during office hours. Will the
CA be held guilty of professional misconduct? CA Final May 2003, 2012
Note: Write the provisions of Clause (1) of Part II of Second Schedule.
1. As per the CA Regulations, the CA is expected to impart proper practical training. The CA did not
obtain any Certificate from the Principal of the College regarding the class timings.
2. The CA is guilty of professional misconduct in the discharge of his professional duties.
Illustration:
While taking ―Q ―as his Articled Assistant, Sri. R, a practicing CA proposed that the Stipend as per
regulations will be paid once a year calculated on the monthly rates prescribed by lCAl to which Q also
agreed. Comment.
1. Principle: As per Regulation 48, Stipend to Articled Assistant should be paid on a monthly basis. Non
compliance thereof would constitute misconduct under Clause 1 of Part 2 of Second Schedule.
2. Conclusion: R will be deemed to be guilt of professional misconduct for non - payment of stipend on
monthly basis, even though his Articled Assistant also agreed to his proposal.
11. Directions in case of Unjustified Removal of Auditors: A Member in practice shall follow the
direction given by the Council or an appropriate Committee or on behalf of any of them, to him
being the Incoming Auditor(s) not to accept the appointment as Auditor(s), in the case of
unjustified removal of the earlier Auditor(s).
A CA recommended to the ICAI and permitted his Articled Clerk to attend college
during his regular office hours. He pleaded ignorance inspite of the fact that the
Articled Clerk took leave often and came late to the office. Held the CA was guilty
M.A.Dave (1974)
of professional misconduct. Articled training is mutual obligation, which requires
an abiding interest by the employer in the Articled Clerk, which needs constant
watchfulness and vigilance.
A CA was employed as a Manager of a Firm of Registered Accountants. He
applied for admission as Fellow stating that he was a Partner, while he was not. J.R.Chatrath
Held guilty of misconduct as he had made the statement that he was a Partner (1952)
knowing it to be false.
A CA in practice while applying for renewal of his COP indicated that he was not
engaged in any other business or occupation. The admitted fact was that he had
entered into Partnership with Non-Members for the purpose of carrying on
K.S.Dugar (1980)
business. He was operating the Bank Account, receiving the money from customers
and looking after the affairs of the partnership. Held guilty of professional
misconduct.
A CA permitted his Articled Clerk to be in whole-time employment elsewhere
without the permission of the Council. It was proved that the CA was fully aware
of this fact. Held guilty since he - (a) allowed the Articled Clerk to work elsewhere N.K.Gupta (1980)
without the Council‘s permission, and (b) failed to disclose this fact to the ICAI in
the prescribed Form.
During the course of the hearing before Disciplinary Cases, a Member gave a
wrong statement duly verified and also a wrong statement on oath knowing it to be K.S.Dugar (1987)
false. Held guilty of professional misconduct.
A Member stated that another Member was working in his Firm as a Paid P.C.Sood
Assistant. This statement was found to be false and was found to have been made P.B.Kapoor
knowing it to be false. Held guilty of professional misconduct. (1988)
A CA included another CA‘s name as Partner in his Firm, in his application for
empanelment as Auditor of Branches of Public Sector Banks, submitted to the
L.N.Gupta (1991)
Institute. In fact the said Member was not a Partner of the said Firm on the date of
the said application. Held guilty of professional misconduct.
H.K.Gupta
A CA wrongly stated that he was in full-time practice in the Bank Audit
(1999)
Empanelment Form, whereas he was in employment as Manager (F&A) with a
S C Srivastava
Company. Held guilty of professional misconduct.
(2001)
A CA submitted an application of his Firm for Bank Audit Empanelment
mentioning under the head ―Details of Disciplinary proceedings pending against
any Partner / Proprietor‖ as ―NIL‖, whereas a prima fade case against the Member A.K.Mehra
existed. Held guilty of professional misconduct, as he had deliberately furnished (1991)
false information when he was fully aware that disciplinary proceedings were
pending against him.
A Member can be associated with a cultural or religious organisation but this K.Bhattacharjee
association and facilities connected with it cannot be used, as a vehicle to gain vs
professional work. B.K.Chakraborty
It is undesirable on the part of a Member to pressurize for re-appointment even (1988)
Illustration:
Mr. ‗G‘, while applying for a Certificate of Practice, did not fill in the columns which solicit information
about his engagement in other occupation or business, while he was indeed engaged in a business. Give
your comments. CA Final May 2014
Refer K.S.Dugar Case above. G is guilty of professional misconduct under Clause (3) of Part II of
Second Schedule.
ANNEXURE
CONTINUING PROFESSIONAL EDUCATION AND THE REQUIREMENTS FOR A
87 CREDENT PROFESSIONAL STUDIES
QUALIFIED CA
1. Continuing Professional Education: CPE is a Post Qualification requirement that must be complied
by every Member. It is used to describe the educational activities that assist Chartered Accountants
(CA5) to achieve and maintain the required quality in the professional services that they render.
2. Requirement: Every Member is required to devote the minimum amount of time, as may be prescribed
the ICAI, in relation to professional learning and development. Such learning could either be Structured
(S) or Unstructured Learning (U). This requirement is explained as under -
3. Structured Learning: CPE Programmes in the form of Conferences, Seminars, Workshops, Modular
Training Programmes, Refresher Programmes, Certificate Courses, Conventions, faculty in CPE
seminars,e - Learning, etc
4. Unstructured Learning: Self-learning Modules & courses, Reading and individual home study in the
Journal, ‗The Chartered Accountant‘ of ICAI, reading technical, professional, financial or business
literature, Group or bilateral discussion on technical issues, Acting as visiting faculty or guest faculty at
the various Universities / Management Institutions I Institutions of National Importance, Providing
solutions to questionnaires / puzzles available on Web / Professional Journals, Internal Training
Programmes being organised by firms of CAs having 7 or more partners, Viewing of programmes
hosted on the web channel of ICAI, etc.
A. DEFINITIONS:
1. Network: ―Network amongst two or more Firms means an arrangement to facilitate the better
functioning of the affiliate Member Firms in the interest of the profession and not for acquisition of
any gain. Such Network shall include the formal Network to use the collective resources such as
turnover, infrastructures, manpower, location for execution of professional services of one or more
type.‖
Explanation:
(a) An Affiliation as referred to above shall also include –
having an association with an accounting entity within or outside India such that it results
directly or indirectly in a common professional economic or beneficial interest.
one or more of the entities holding out that it is so affiliated or networked.
(b) An Entity shall not be treated as an affiliate of another merely for the reason that they –
share professional knowledge and data base,
88 CREDENT PROFESSIONAL STUDIES
refer certain professional assignments or authorize the other to represent certain specific
matters.
(c) If different Indian Firms are networked with a common Multi—National Accounting Firm (MAF)
then irrespective of the presence I absence of any ‗affiliate‘ relationship between the Indian Firms
inter - se, they shall be considered as part of a Network.
2. Formal Network:
(a) Formal Network means a Network amongst two or more Firms registered with the ICAI, where
the object of Network is to use the collective resources of the affiliates for execution of
professional services of one or more types at one and / or at multi—locational points.
(b) The resources would include financial, technical and other logistic support required to execute the
professional assignments. In such type of network, the common resources may be pooled and
exhibited together before the service user as those belonging to one particular set of professionals.
3. Referral Practice: Referral Practice means a practice to refer professional work by a Firm to one of
its associate / affiliate either situated at a different place or rendering professional services not
provided by it, to the user of the services. The pre—dominant objective of such a Network is not to
pool in their collective resources and exhibit them as those belonging to one particular set of
professionals.
B. NAME OF NETWORK:
1. The Network may have distinct name which should be approved by the ICAI. To distinguish a
―Network‖ from a ―Firm‖ of CA‘s, the words ―& Affiliates‖ should be used after the name of the
network and the words ―& Co.‖ / ―& Associates‖ should not be used. The name of the Network should
be approved by the ICAI.
2. Standards prescribed in Regulations 190 of the CA Regulations, 1988 shall be applicable to the name of
Network. However, even if a name is provided and subsequently it is found that the same is undesirable
then, the said name can be withdrawn at any time by the ICAI. The ICAI shall reject any undesirable
name and provisions in respect of names of Companies as prescribed in the Companies Act, shall be
applicable in spirit.
3. The Network should neither be permitted to advertise nor to use logo. The Firms constituting the
Network are permitted to use the words ―Affiliates / Members of ....― (a network of Indian CA Firms) on
their professional stationery.
4. Network may work without a Name also.
C. CONSTITUTION OF NETWORK:
1. Proprietory / Partnership Firm(s) as well as individual Member(s) are permitted to form a Network.
2. A Proprietory / Partnership Firm as well as individual Member are allowed to join only one Formal
Network.
3. Firms having common Partners shall join only one Network.
D. REGISTRATION:
1. A Formal Network is required to be registered with the ICAI.
2. Referral Practice requires no registration.
3. It is for each Firm to decide whether its affairs and relations with another Firm results in creation of a
Formal Network. The Network shall evaluate for itself whether or not it is a Formal Network requiring
registration with the ICAI.
4. If different Indian Firms are networked with a common MAF, then irrespective of the presence /
absence of any ‗affiliate‘ relationship between the Indian Firms inter—se, they shall be considered as
part of a Network. As such, for these Firms the registration with the ICAI is not mandatory. It is only if
89 CREDENT PROFESSIONAL STUDIES
these Indian Firms decide to constitute a Formal Network, then the registration with the ICAI is
mandatory.
F. ETHICAL COMPLIANCE:
Once the relationship of Network arises, whether registered or not with the ICAI, it will be necessary for
such a Network to comply with all applicable ethical requirements prescribed by the ICAI from time to
time in general, and the following requirements in particular -
1. If one Firm of the Network is the Statutory Auditor of an Entity, then the Associate [including the
Networked Firm(s)] or the said Firm directly / indirectly should not accept the Internal Audit or Book
Keeping or such other professional assignments which are prohibited for the Statutory Auditor Firm.
2. Notification No. 1 -CA(7) / 60 / 2002 dated 8th March, 2002 in respect of ceiling on Non—Audit Fees
is applicable in relation to a Network as follows -
(a) For a constituent Member of a Network who is doing statutory audit (including its Associate
Concern and / or Firm(s) having common Partnership), it shall be the same as mentioned in the
said Notification, and
(b) For other constituent Member(s) of the same Network collectively, it shall be 3 times of the fee
payable for carrying out the statutory audit of the same undertaking I Company.
3. In cases where rotation of Firms is prescribed by any regulatory authority, no Member Firm of the
Network can accept appointment as an Auditor in place of any Member Firm of the network which is
retiring. However, this restriction shall not apply in case of appointment as Statutory Central Auditor
of Government Agencies / Undertakings such as PSUs, Public Sector Banks and Financial Institutions
etc.
4. The Constituent Member Firms of a Network & the Network shall comply with all the Ethical
Standards prescribed by the Council from time to time.
G. OTHER ASPECTS:
90 CREDENT PROFESSIONAL STUDIES
Aspect Description
The Network itself will not carry on any business for acquisition of gain for itself and
Object of
only act as a facilitator for its Members / constituent Member Firms to pursue their
Network
professional jobs.
Consent of The Network shall obtain consent of the Client to engage an affiliate in discharging
Client the professional assignments.
Responding Only one Firm / Member can apply on behalf of the Network showing the collective
to Enquiries strength of all the constituent Firms of the Network, when responding to any enquiry.
Issuing Only the Firm(s) / Member(s) forming Network are eligible to issue / sign / attest any
Reports Certificate I Report I Professional Document I Assignment.
In case of alleged violation of the provisions of the Act, Regulations framed
Violation of thereunder, guidelines I directions laid down by the Council from time to time and
Act Code of Ethics, by the Network Firm, the Proprietary / Partnership Firm(s) I
Individual Member constituting the Network would be answerable.
2. Conditions:
(a) Name: The Management Consultancy Company shall have a distinct name which shall be
approved by ICAI.
(b) Registration: After approval of the Name, the Company is required to get itself registered with the
Institute.
(c) Logo: The Management Consultancy Company shall not be permitted to use logo.
(d) Ethical Requirement: If the Individual Practitioner / Sole-Proprietorship Firm / Partnership Firm
are the Statutory Auditor of an Entity then the Management Consultancy Company should not
accept the Internal Audit or Book keeping or such other Professional Assignment which are
prohibited for the Statutory Auditor Firm.
(e) Advertisements: The Management Consultancy Company shall give an undertaking that it shall
comply with Clauses (6) & (7) of Part-I of the First Schedule to the CA Act, 1949 (non -
91 CREDENT PROFESSIONAL STUDIES
advertisements, non solicitation of Clients) and such other directives as may be issued by the
Institute from time to time.
(f) Object Clause: The Object Clause of such a Company should restrict itself only to the
Management Consultancy & Other Services prescribed by the Council pursuant to powers u/s
2(2)(iv) of the CA Act, 1949.
2. Objective: The Member(s)/Firm(s) should ensure that the contents of th Write up are True to the
best of their knowledge and belief and are in conformity with these Guidelines and be aware that
the ICAI does not own any responsibility whatsoever for such contents or claims by the Writer
Member(s) / Firm(s).
3. Meaning: ―Write Up‖ means the writing of particulars according to the Information given in the
Guidelines setting out Services rendered by the Members or Firms and any Writing or Display of
the particulars of the Member(s) in Practice or of Firm(s) issued, circulated or published by way of
Print or Electronic Mode or Otherwise including in Newspapers, Journals, Magazines and Websites
(in Push as well in Pull mode) in accordance with the Guidelines.