By: CA.

Pankaj Garg

Chapter Professional Ethics &

19 Liabilities of Auditors

(1) Fundamental principles to be followed by a Professional Accountant:

(a) Integrity: A professional accountant should be straightforward and honest in all
professional and business relationships.
(b) Objectivity: Professional accountant should not compromise professional or business
judgements because of bias, conflict of interest or undue influence of others.
(c) Professional Competence: A professional accountant has a continuing duty to attain
& maintain professional knowledge & skill required to ensure that a client/employing
organization receives competent professional services. He should act diligently and in
accordance with applicable technical & professional standards.
(d) Confidentiality: A professional accountant should respect confidentiality of
information acquired as a result of professional & business relationships.
(e) Professional Behaviour: A professional accountant should comply with relevant laws
and regulations and should avoid any action that discredits the profession.
Compliance with the Fundamental Principles: Sec. 110 of Code of Ethics
❖ A professional accountant shall comply with each of the fundamental principles.
❖ Fundamental principles of ethics establish the standard of behaviour expected.
❖ If professional accountant faces a situation in which complying with one principle
conflicts with complying with other principles, he may consider consulting, with:
(i) Others within the firm or employing organization. (iii) Institute
(ii) Those charged with governance. (iv) Legal counsel.
❖ However, such consultation does not relieve the accountant from responsibility to
exercise professional judgment to resolve the conflict or, if necessary, and unless
prohibited by law or regulation, disassociate from the matter creating the conflict.

(2) Threats involved in compliance of Fundamental Principles:

(a) Self-interest Threats: Threat that a financial or other interest will inappropriately
influence a professional accountant’s judgement or behaviour.

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(b) Self-Review Threats: Threat that a professional accountant will not appropriately
evaluate
❖ results of a previous judgment made; or
❖ an activity performed by him, or by another individual within his firm or
employing organization, on which he will rely when forming a judgment as part
of performing a current activity.
(c) Advocacy Threats: Threat that a professional accountant will promote a client’s or
employing organization’s position to the point that his objectivity is compromised.
(d) Familiarity Threats: Threat that due to a long or close relationship with a client
employing organization, a professional accountant will be too sympathetic to their
interests or too accepting of their work.
(e) Intimidation Threats: Threat that a professional accountant will be deterred from
acting objectively because of actual or perceived pressures, including attempts to
exercise undue influence over the accountant.
Fundamental Principles

A Professional Accountant shall comply with each of the fundamental principles.

Accountant identify a threat to compliance with the fundamental principles.

Evaluate whether such threat is at an acceptable level.

Threats are at Threats are not at acceptable level

acceptable level
Address the threats by:
(a) Eliminating them, or
(b) reducing them to an acceptable level
through
(a) eliminating circumstances creating the threats.
(b) applying safeguards where applicable.
(c) declining or ending specific professional activity.

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Circumstances that may create threats for a professional accountant when undertaking
a Professional Service
(A) Self-Interest Threats
(1) Having a direct financial interest in a client.
(2) Quoting a low fee to obtain a new engagement and the fee is so low that it
might be difficult to perform professional service in accordance with applicable
technical and professional standards for that price.
(3) Having a close business relationship with a client.
(4) Having access to confidential info. that might be used for personal gain.
(5) Discovering a significant error when evaluating results of a previous
professional service performed by a member of the accountant’s firm.
(B) Self-Review threats:
(1) Issuing an assurance report on the effectiveness of the operation of financial
systems after implementing the systems.
(2) Having prepared the original data used to generate records that are subject
matter of the assurance engagement.
(C) Advocacy Threats:
(1) Promoting the interests of, or shares in a client.
(2) Acting as an advocate on behalf of a client in litigation with 3rd parties.
(3) Lobbying in favour of legislation on behalf of a client.
(D) Familiarity Threats:
(1) Having a close or immediate family member who is a director/officer of client.
(2) A director or officer of the client, or an employee in a position to exert direct
and significant influence over the subject matter of the engagement.
(3) Long association of audit team member with audit client.
(E) Intimidation Threats:
(1) Being threatened with dismissal from a client engagement or the firm because
of a disagreement about a professional matter.
(2) Feeling pressured to agree with the judgment of a client because the client has
more expertise on the matter in question.
(3) Being informed that planned promotion will not occur unless the accountant
agrees with an inappropriate accounting treatment.

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(4) Having accepted a significant gift from a client & being threatened that
acceptance of this gift will be made public.

Circumstances that may create threats for a professional accountant when undertaking
a Professional Activity
(A) Self-Interest Threats:
(1) Holding a financial interest in, or receiving a loan or guarantee from,
employing entity.
(2) Participating in incentive compensation arrangements offered by employing
entity.
(3) Having access to corporate assets for personal use.
(4) A professional accountant being offered a gift or special treatment from a
supplier of the employing organisation.
(B) Self-Review threats:
Determining the appropriate accounting treatment for a business combination after
performing the feasibility study supporting the purchase decision.
(C) Advocacy Threats:
Having opportunity to manipulate information in a prospectus in order to obtain
favourable financing.
(D) Familiarity Threats:
(1) Being responsible for financial reporting of employing organization when an
immediate or close family member employed by organization makes decisions
that affect the financial reporting of the organization.
(2) Having a long association with individuals influencing business decisions.
(E) Intimidation Threats:
(1) Professional accountant or immediate or close family member facing threat of
dismissal or replacement over a disagreement about:
❖ The application of an accounting principle.
❖ The way in which financial information is to be reported.
(2) Attempt to influence decision making process of professional accountant, e.g.
with regard to awarding of contracts or application of an accounting principle.

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Safeguards to be applied to eliminate threats:
(1) Assigning additional time & qualified personnel to required tasks when an
engagement has been accepted might address a self-interest threat.
(2) Having an appropriate reviewer who was not a member of the team to review work
performed or advise as necessary might address a self-review threat.
(3) Using different partners & ETs with separate reporting lines for provision of non-
assurance services to an assurance client might address self-review, advocacy or
familiarity threats.
(4) Involving another firm to perform or re-perform part of engagement might address
self-interest, self-review, advocacy, familiarity or intimidation threats.
(5) Separating teams when dealing with matters of a confidential nature might address
a self-interest threat.

(3) Non-compliance with Laws and Regulations (NOCLAR)

Meaning of NOCLAR
Acts of omission or commission, intentional or unintentional, which are contrary to the
prevailing laws or regulations committed by:
❖ a client/professional accountant’s employing organisation;
❖ TCWG/Management of a client or employing organisation;
❖ other individuals working for or under the direction of a client/employing organisation.
Applicability of NOCLAR
Applicability of NOCLAR has been restricted to
(a) Audits assignment of entities listed in India having NW > 250 Cr. (in case of
members in practice) and
(b) Senior Professional Accountants (KMP), being employees of listed entities.

❖ NOCLAR will be applicable if a professional accountant is made aware of non-

compliance in the course of providing a professional service to a client.
❖ He is not required to investigate, nor responsible for ensuring complete compliance.
❖ A professional accountant is expected to apply knowledge and expertise, and exercise
professional judgment. However, he is not expected to have a level of knowledge of
laws & regulations greater than that which is required to undertake engagement.

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Responsibility of the senior professional accountants in service relating to NOCLAR
(1) Obtaining an Understanding of the Matter.
(2) Addressing the Matter: discuss with the immediate superior, if any.
(3) Determining whether further action is needed: assess appropriateness of response
of the accountant’s superiors, if any, and TCWG.
Further action that the senior professional accountant might take includes:
(a) Informing management of parent entity of the matter;
(b) Disclosing matter to an appropriate authority; or
(c) Resigning from the employing organisation.
(4) Seeking Advice: Consider consulting internally; Obtaining legal advice; or consulting
on a confidential basis with the Institute.
(5) Determining Whether to Disclose Matter to an Appropriate Authority: preclude if
doing so would be contrary to law or regulation.

NOCLAR vs. SA 250

(a) Applicability: SA 250 applicable only on Audit engagements; NOCLAR is applicable
on professional accountants in service and in practice.
(b) Scope: SA 250 deals with auditor’s responsibilities for (a) laws having direct effect
on determination of material amounts & disclosures in F.S.; (b) laws & regulations
that do not have direct effect on determination of amounts and disclosures in F.S.,
but compliance with which may be fundamental to operating aspects of business.
NOCLAR, in addition, takes into account non-compliance that causes substantial
harm resulting in serious consequences in financial or non-financial terms.
(c) Coverage: SA 250 does not define stakeholders. NOCLAR is related to effect of
non-compliance on investors, creditors, employees as also the general public.

Documentation Requirements in NOCLAR

❖ How management/TCWG have responded to the matter.
❖ Course of action the accountant considered, the judgments made and decisions that
were taken.
❖ How accountant is satisfied that responsibility of public interest has been fulfilled.

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(4) Membership of the Institute
Types of Members – Sec. 5
(a) Associate Member - Any person, whose name entered in Register of members.
(b) Fellow Member -
❖ Associate member who has been in continuous practice in India for > 5 years;
❖ Member who has been an associate for a continuous period of > 5 years & has
experience equivalent to experience normally acquired as a result of continuous
practice for a period of 5 years as a Chartered Accountant.
Disability to become a member - Sec. 8
A person shall not be entitled to have his name entered in the Register if he -
(a) has not attained the age of 21 Years at the time of his application; or
(b) is of unsound mind and stands so adjudged by a competent Court; or
(c) is an undischarged insolvent; or
(d) being a discharged insolvent, has not obtained from Court a certificate stating that
his insolvency was caused by misfortune without any misconduct on his part; or
(e) has been convicted by a competent Court, of offence involving moral turpitude &
punishable with imprisonment unless he has been granted a pardon by the CG; or
(f) has been removed from membership being found guilty of misconduct.

Removal of Name from Register of Members - Sec. 20

Council may remove from the Register the name of any member of the Institute:
❖ who is dead; or
❖ from whom a request has been received; or
❖ who has not paid any prescribed fee required to be paid by him; or
❖ who is found to have been subject to any of the disabilities mentioned in Sec. 8.
Restoration of Membership - Regulation 19
❖ Council, on an application, received from a member whose name has been removed
from the Register for non-payment of fees, restore his name, if he is otherwise
eligible, on his paying arrears of annual membership fee and entrance fee.
❖ Restoration shall be with effect from date on which application & fee are received:
❖ However, where such application is received within same year in which name was
removed, name may be restored from date on which it was removed from Register.

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Penalty for falsely claiming to be a member - Sec. 24
Circumstances imposing penalty: Any person who:
(a) Not being member of ICAI - represents that he is a member of Institute, or
uses the designation Chartered Accountant, or
(b) Being member of ICAI; not having COP - represents that he is in practice, or
practices as a CA.
Amount of Penalty: For First Conviction: Fine upto ₹ 1,000
For subsequent conviction: Fine upto ₹ 5,000 or
imprisonment upto 6 Months or both.

(5) Chartered Accountants in Practice

Certificate of Practice - Sec. 6
No member of ICAI, whether in India/Outside India, shall be entitled to practice unless
he has obtained Certificate of Practice
❖ Member of ICAI, cannot accept any work prescribed for practicing CA in capacity as
a Chartered Accountant (i.e. Member of ICAI), unless he holds COP.
❖ If a member surrenders his COP for any period due to misconduct, he cannot accept
any work in his capacity as a CA, for the period for which COP has been cancelled.
❖ However, he can accept the work in any other capacity, for example, in capacity as
an advocate, GST Practitioner or Insolvency Professional etc.
Cancellation of COP - Regulation 10
Certificate of Practice (CoP) shall be liable for cancellation, if:
(a) name is removed from the Register; or
(b) Council is satisfied, that certificate was issued on 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 annual fee for COP till 30th Sep. of relevant year.
Restoration of COP - Regulation 11
Council may restore CoP, on an application made in approved Form & on payment of
prescribed fee, w.e.f. date on which it was cancelled, to a member whose certificate has
been cancelled due to non-payment of annual fee & application, complete in all respects,
together with fee, is received by the Secretary before the expiry of the relevant year.

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Members Deemed to be in Practice - Sec. 2(2)
Member holding COP = Practicing CA
Member without holding COP = Deemed to be in practice if he renders
the services as covered u/s 2(2)
A Member of the Institute shall be deemed to be in practice, when individually or in
partnership with another CA in Practice or members of recognised Professional Bodies

for a consideration, engages himself into the prescribed activities*.

*Prescribed Activities: (i) Accountancy Work
(ii) Auditing / Verification / Certification
(iii) Assistance in Accounting Practices
(iv) Management and Other Consultancy Services

❖ Sec. 2(2)(iv) provides that a member will be deemed to be in practice if he renders

such other services, as in opinion of Council, can be rendered by CA in practice.
❖ Council passed a resolution mentioning therein the entire range of services which a
CA in practice can render.
❖ As per that list of Management Consultancy & Other Services, a CA in practice can
render multiple services as prescribed in the resolution, including:
(a) Personnel recruitment and Selection;
(b) Acting as Advisor or Consultant to an Issue of Securities;
(c) Acting as Registered Valuer under the Companies Act, 2013;
(d) Acting as Insolvency Professional in terms of IBC, 2016; and
(e) Administrative Services. (Assisting clients with their routine tasks)
❖ However, it is specifically mentioned that a CA in practice cannot render services of:
(a) Broking (b) Underwriting; and (c) Portfolio Management

Members to be known as “Chartered Accountants” - Sec. 7

- Every member of ICAI in practice shall use the designation “Chartered Accountant”.
- Any other designation in addition thereto or substitution thereof is not allowed.
(For Example: Tax expert, Corporate Law Advisor, Management Consultant etc.)
- Members who are not in practice may use the designation “Chartered Accountant”.

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- Recognised degrees/qualifications and memberships of professional bodies – allowed
to be mentioned on visiting cards, letter heads etc.
- Prefix ‘CA’ is allowed to be used by any member.
- Merchant Banker/Advisor to an issue: Members may obtain registration as category IV
Merchant Banker under SEBI regulations and & as Advisor or Consultant to an issue.
In client Companies’ offer documents, name & address of CA or firm of CAs acting
as Advisor or Consultant could be indicated under caption “Advisor/Consultant”.
However, name and address of such CA /firm of CAs should not appear prominently.

Maintenance of Branch Office – Sec. 27

Office: A place where name Board of firm is fixed; and
which is described as office, on office documents like letter heads, etc.
Note: Name Board of firm is not allowed to be used at residence.
However, name board of individual member is permitted at residence.
Branch Office:
❖ A member in practice can open any no. of branches in India, provided every branch
has a separate incharge, who is a CA & Partner/Employee (may/may not hold CoP).
❖ Requirement of Sec. 27 shall be satisfied only if member is actively associated with
such office.
❖ Such association shall be deemed to exist if member resides in the place where office
is situated for a period of not less than 182 days in a year or if he attends the said
office for a period of not less than 182 days in a year.

❖ Exceptions to requirements of separate in-charge: 2 Exceptions

Exception 1: Members practicing in hilly area: may open a temporary office in plains
during winter season for a period of 3 months, without separate in-charge, subject to
fulfillment of prescribed conditions:
 Name board of firm to be displayed at temp. office only during these 3 months.
 Temp. office should not be mentioned as place of Business on office documents.
 Regular office need not be closed & correspondence may continue at that office.
 Before commencement of every winter and at the close of such temporary office,
it shall be obligatory on member to inform ICAI.

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Exception 2: 2nd Office can be opened without separate in charge if located in:
(a) same premises in which first office is situated; or
(b) same city; or
(c) within 50 kms. from the municipal limits of first office.

First Office End of MC Limits Second Office

(City A) (City A) (City B)
Situation – I:
Distance from City A (First Office) to City B (Second Office): 70 Kms.
Distance from City A (MC Limits) to City B (Second Office): 45 Kms.
Separate In-charge not Required
Situation – II:
Distance from City A (First Office) to City B (Second Office): 70 Kms.
Distance from City A (MC Limits) to City B (Second Office): 55 Kms.
Separate In-charge Required
Note: As per Regulation 189, intimation is to be given to Council, within one month of
opening or closing of branch office.

KYC Norms
Individual Client Corporate Entity Non-Corporate Entity
General • Individual Name • Name and Address • Name and address
Information • PAN No. or • Business description • PAN No.
Aadhaar No. • Name of Parent • Business Description
• Business Company • Partner’s Name &
Description • Copy of Last Audited address
• Copy of Last F.S. • Copy of Last
Audited F.S. Audited F.S.
Engagement Type of Type of Engagement Type of Engagement
Information Engagement
Regulatory • Company PAN No.
Information • Co. Identification No.
• Director’s Name,
address and DIN

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(6) Disclipinary procedure
Disciplinary Mechanism - Sec. 21
Complaint against member of ICAI of allege misconduct along with prescribed fee.

Disciplinary Directorate

Director (Discipline) shall arrive at a prima facie opinion on the occurrence of alleged
misconduct and decide whether he is guilty of professional or other misconduct falling in

First Schedule Second schedule or Both Schedule

Place the matter before Place the matter before

Board of Discipline Disciplinary Committee

If found guilty, it can If found guilty, it can

(i) reprimand the member (i) reprimand the member
(ii) remove name of the member (ii) remove name of member
upto 3 months permanent or for any duration
(iii) impose fine upto ₹ 1,00,000 (iii) impose fine upto ₹ 5,00,000

Any member aggrieved by order of Board of Discipline/Disciplinary Committee can prefer

an appeal within 90 days before
Appellate Authority

(i) Confirm, modify or set aside the order;

(ii) Impose, set aside, reduce or enhance penalty;
(iii) remit case to Board of Discipline or Disciplinary Committee for reconsideration; or
(iv) Pass such order as the Authority thinks fit.

Professional & other Misconduct - Sec. 22

- shall be deemed to include any act or omission provided in any of the Schedules.
- It shall not be considered as any limitation over powers of Director (Discipline)
to inquire into conduct of any member of the Institute under any other circumstance.

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Schedules to Chartered Accountants Act, 1949:
1st Schedule: Part I: Professional Misconduct (Members in Practice - 12 Clauses)
Part II : Professional Misconduct (Members in Service – 2 Clauses)
Part III: Professional Misconduct (Members Generally – 3 Clauses)
Part IV: Other Misconduct (Members Generally – 2 Clauses)
2nd Schedule: Part I: Professional Misconduct (Members in Practice - 10 Clauses)
Part II : Professional Misconduct (Members Generally – 4 Clauses)
Part III: Other Misconduct (Members Generally – 1 Clause)

(7) First Schedule: PART – I (Professional Misconduct for Members in Practice)

Clause – 1: Restriction on allowing use of firm’s name to others:
A CA in practice is deemed to be guilty of professional misconduct

if he allows any person to practice in his name as a CA Unless such person is a member
holding Certificate of Practice (CoP) AND PARTNER / EMPLOYEE
Example: CA Mr. A allows Mr. B to practice in his name i.e. Mr. A

Not a CA CA

Not holding CoP Holding COP

Other than Either Partner or

Partner/Employee Employee

Mr. A – Guilty of Guilty of Guilty of No Misconduct

Misconduct Misconduct Misconduct

Clause 2: Sharing of profits with others:

A CA in practice is deemed to be guilty of professional misconduct, if he

pay or allow or agree to pay or allow, directly or indirectly any share, commission or
brokerage in profit of professional work with others

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Except with
(a) a member of the institute
(b) partner
(c) a retired Partner
(d) legal representative of deceased partner
(If provided in partnership deed)
(e) persons having prescribed qualifications
(Reg. 53A: CS, Cost Accountant, Actuary, B.E., B.Tech, B.Arch, LLB, MBA)
(f) members of recognised Professional bodies
(Reg. 53A: ICSI, ICWAI, IIA, IAI and Bar Council)

Sale of Goodwill: Council resolved that sale of Goodwill is permitted in case of death of
a proprietor. However, ICAI permission to practice in name of deceased firm is to be
taken within one year from date of death of proprietor.
Council decision w.r.t. sale of Goodwill: (if dispute exist among legal representative)
In case of death of a proprietor, legal representatives are entitled to sell Goodwill of
firm of deceased Prop.
However, if any dispute exists among legal rep., following conditions to be satisfied:
(1) Intimation of existence of dispute to be given to ICAI within 1 year from date
of death.
(2) Goodwill to be sold / transferred within one year from date of resolution of
dispute.
Note: In this case, ICAI will keep name of firm in Abeyance, for a period of one
year from the date of resolution of dispute.
Other Points:
(i) Consideration towards sale of goodwill should be determined in lumpsum though
payment may be made in parts.
(ii) Consideration as a %age of future realization is not permitted.
(iii) In case of partnership firms, when all partners die at same time, above council
decision would also be applicable.
(iv) Accepting assignments wherein a %age of professional fee is deducted by Govt.
to meet admn. & other expenditure will not amount to professional misconduct.

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Clause 3: Restrictions on sharing of other’s profit:
A CA in practice shall be deemed to be guilty of professional misconduct, if he

accepts or agree to accept, any profits of professional work of a person who is not a
member of ICAI
Note: This restriction is not applicable in respect of persons covered under Reg. 53A.

Clause 4: Restriction on Partnership:

A CA in practice is deemed to be guilty of professional misconduct, if he

enters into partnership in India or outside India with a person other than
(a) Member in practice
(b) Members of Recognised professional Bodies
[Reg. 53B: Members of ICSI, ICWAI, IIA, IAI, Bar Council & Professional bodies
outside India, whose qualifications of accountancy are recognised by Council of ICAI]
(c) Persons who but for his residence abroad are entitled to be regd as Members.
(d) Persons having prescribed qualifications
[Reg. 53A: CS, CWA, Actuary, B.E., B.Tech, B.Arch, LLB & MBA]

Clause 5: Restriction on securing work through services of others:

CA in practice is deemed to be guilty of professional misconduct, if he secured
professional work: (a) through services of a person other than Partner or employee; or
(b) through the means which are not open to a CA.
Note: Securing work through arrangements as prescribed u/c (2), (3) and (4) will not
be considered as contravention of Clause (5).

Clause 6: Restrictions on solicitation of work:

A CA in practice shall be deemed to be guilty of professional misconduct, if he solicits
Clients or professional work, directly or indirectly, by
(a) Circular
(b) Advertisement
(c) Personal Communication

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(d) Interview; or
(e) other means (e.q. website)
Exceptions (Permitted solicitations):
(i) Securing professional work from another CA in practice.
(ii) Responding to tenders:

Exclusive Area (b) Non-Exclusive Area

(e.q. Statutory Audit) (e.q.: Internal Audit,
Stock verification,
Minimum fees Minimum fees Computerisation of Records
prescribed in not prescribed
tenders in tenders

Response to Response to Response to tenders permitted

tenders permitted tenders not permitted
Note: Earnest Money deposit (security deposit) if asked, can be deposited.
Council Guidelines for solicitation:
1. Empanelment for allotment of audit/ professional work
→ In respect of organisations, where a panel of CA’s exists, a member is free to
request to place his name on the panel.
→ Roving enquiries for existence of such panel is not permitted.
→ It is permissible to quote fees on enquiries being received.
2. Responding to Tenders
→ CA in practice shall not respond to any tender in areas of services which are
exclusively reserved for CAs.
→ Such restriction shall not be applicable where min. fee is prescribed in tender.
→ EMD/Security Deposit: Council is of the view that while interference with the
practices prevailing for requirement of EMD/Deposit is not required.
3. Publication of Books or Articles
→ It is not permissible to mention in book/article published by a member, any
professional attainment(s), whether of member or firm of CAs.
→ Designation “Chartered Accountant” and name of the firm may be indicated.

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4. Issue of Greetings cards: Member is permitted to use designation “Chartered
Accountant” and name of firm in greeting cards, invitations etc. provided these are
sent only to clients, relatives & friends of members.
5. Advertisement for Silver, Golden, and like celebrations
To advertise events is not permitted. However, advertisement for such celebrations
may be published in newspaper or newsletter.
6. Sponsoring Activities
→ Sponsoring an event is not permitted except event conducted by a Programme
Organizing Unit (PoU) of ICAI, provided such event has the prior approval of
Professional Education (CPE) Directorate of ICAI.
Continuing
→ Members sponsoring activities relating to CSR may mention their individual
name with prefix “CA”. Mention of Firm name or CA Logo is not permitted.
7. Soliciting work by roving enquiries
It is not permissible to address letters, e-mails or circulars specifically to persons
who are likely to require services of CA since it would tantamount to advertisement.
8. Scope of representation u/s 140(4) of Companies Act 2013
→ Representation should not be used to secure needless publicity and soliciting
for his continuance as an auditor.
→ May set out in a dignified manner how he has been acting independently
through his term of office and his willingness to continue as an auditor.
9. Acceptance of original professional work: Acceptance of original work emanating
from a client introduced by another member is not permitted.
However, if any professional work of such client comes to him directly, it should be
his duty to ask the client that he should come through the other member dealing
generally with his original work.
10. Public Interviews: Permitted subject to condition that it should not result in

publicity.
Council Guidelines for development of website
(1) No standard format is prescribed and no restriction on use of colours.
(2) Website should run on ‘pull’ model not on ‘push’ model of technology.
(3) Mention of Website Address on professional stationery is permitted.
(4) Members are not allowed to use logo (other than prescribed by ICAI) on website.

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(5) Photographs of any sort (other than passport size photo of member) is not
permitted.
(6) Educational videos on topics of professional relevance are permissible.
(7) Chat rooms can be provided which permit chatting amongst members and between
Firms and its clients. The confidentiality protocol would have to be observed.
(8) Firms can provide document management facility with distinct log in and password
facility to the clients to access copies of their documents on the Firm website.
(9) Firm can provide link of its page on Social Networking site. However, members
should not solicit people to visit or like their respective page(s) on such social
Networking site.
(10) Details should be so designed that it does not amount to soliciting client.
(11) Website may provide a link to website of ICAI, its regional councils, branches and
also, to websites of Govt./Govt. departments/Regulatory Authorities only.
(12) Address of website should be as near as possible to the individual name/trade
name, firm name of the CA.
(13) Name of clients and fees charged is not permitted to be given on website, except
when required by any regulator.

Clause – 7: Restrictions on advertisement:

A CA in practice shall be deemed to be guilty of professional misconduct, if he

(a) advertises his professional attainments or service; or

(b) uses any designation/ description other than “Chartered Accountant”
on Professional documents letter heads, visiting cards etc.
Note: Recognized qualifications/memberships of other recognized institutions may be
used.
Guidelines w.r.t. advertisement
(a) Words like income-tax consultant, cost consultant or management consultant - not
allowed.
(b) A member empanelled as Insolvency Professional or Registered Valuer can mention
“Insolvency Professional” or “Registered Valuer” respectively on his visiting card &
letter head.

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Chapter 19 Professional Ethics
(c) Persons eligible otherwise, subject to permission may practice as advocates but can’t
use designation “Chartered Accountant” and “Advocate” simultaneously.
(d) Name of CA acting as director in the company is permissible to appear in the
prospectus of the company, however descriptions regarding his expertise, specialisation
and knowledge in any particular field is not permitted.
(e) Use of logo/monogram of any kind/form/style/design/colour etc. whatsoever on any
display material or media e.g. paper stationery, documents, visiting cards, magnetic
devices, internet, sign board, be prohibited.
(f) Common logo is prescribed by ICAI. Any other logo is not permissible.
(g) Use of CA logo in the stamp is permissible, subject to CA logo guidelines.

Clause – 8 “Prior Communication with predecessor auditor”

A CA in practice shall be deemed to be guilty of professional misconduct, if he

accept a position as Auditor previously held by another CA or certified auditor without

first communicating with him in writing.
Points to remember in relation to clause 8:
(a) Professional reasons for not accepting Audit:
(i) Non-compliance of provisions of Secs. 139 & 140 of Companies Act, 2013.
(ii) Non-payment of undisputed audit fee (except sick unit).
(iii) Issuance of a qualified Report.
In (i) and (ii), acceptance of audit amounts to professional misconduct. In (iii),
member may accept audit if he thinks that attitude of retiring auditor wasn’t
proper and justified.
(b) Where previous auditor is not available for accepting payment of undisputed audit
fees & it is not otherwise possible to transfer the payment to him electronically,
Incoming Auditor may advise client to purchase DD of amount equivalent to
undisputed Audit Fees of Retiring auditor, and may accept the Audit assignment
after verifying the same.
(c) Mode of communication:
• Registered post acknowledgement due
• By hand against an acknowledgement in writing.

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Professional Ethics Chapter 19
• Acknowledgement of communication from retiring auditor’s vide e-mail
address registered with Institute or his last known official e-mail address, or
• Unique Identification Number (UDIN) generated on UDIN portal.
(d) Mere posting of a letter under certificate of posting is not sufficient.
(e) Communication received back by Incoming Auditor with “Office found Locked”
written on Acknowledgement Due shall be deemed as having been delivered.
(f) If Communication is received back with remarks “No such office exists at this
address”, & address of communication is same as regd. with Institute on date of
dispatch, letter will be deemed to be delivered, unless retiring auditor proves that
it was not really served and that he was not responsible for such non-service.
(g) Requirement for communicating would apply to all types of audits i.e. statutory
audit, tax audit, internal audit, concurrent audit or any other kind of audit.

Clause – 9: Compliance of Section 139 and 140 of companies Act, 2013:

A CA in practice shall be deemed to be guilty of professional misconduct, if he

accepts an appointment as auditor of a company without first ascertaining compliance

of Secs. 139 and 140 of Companies Act, 2013 (read with Sec. 141)

Aspects to be verified by Incoming Auditor to ascertain whether Company has complied

with the provisions of Sec. 140 of the Companies Act
❖ Whether a member of Company has given special notice of resolution as required u/s
140(4). Notice shall be sent by members to company not earlier than 3 months
but at least 14 days before date of the meeting at which resolution is to be moved.
❖ Whether special notice has been sent to all members of the Company as required
u/s 115 of Companies Act, 2013 at least 7 days before date of General Meeting.
❖ Whether special notice has been sent to retiring auditor as required u/s 140(4).
❖ Whether representation received from retiring auditor has been sent to members of
Company as required u/s 140(4).
❖ Whether representation received from retiring auditor has been considered at general
meeting & resolution proposed has been properly passed at the general meeting.

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Chapter 19 Professional Ethics
Clause – 10: Restriction on charging fees on %age Basis:
A CA in practice shall be deemed to be guilty of professional misconduct, if he

charges or offers to charge, accepts or offers of accept in respect of any professional

work, the fees which is based on - %age of profits; or
- contingent upon finding; or
- results of such engagement
except as permitted under Regulation 192.
Regulation 192: Restrictions on Fees
• In case of receiver or liquidator: on the basis of %age of realisation or disbursement
of assets.
• In case of co-operative society: on the basis of %age of paid-up capital or working
capital or gross/net income or profits.
• In case of valuer for purposes of direct taxes and duties: on the basis of %age of
value of property valued.
• In case of management consultancy services: on percentage basis which may be
contingent upon the findings, or results of such work.
• In case of fund raising services: on %age of fund raised.
• In case of debt recovery services: on basis of %age of debt recovered.
• In case of services related to cost optimization: on a %age of the benefit derived.
• Any other services as decided by Council: (i) Acting as Insolvency professional.
(ii) Non-Assurance Services to Non-Audit Clients.

Clause 11: Restrictions on engaging into other occupations:

A CA in practice shall be deemed to be guilty of professional misconduct, if he

engages into any business or occupation, other than that of profession of chartered
accountant, unless permitted.
- Practicing CA may become director of a company, provided he or his partner is not
auditor of that company.
- To become MD/WTD in a company, prior permission from the council is required.

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Professional Ethics Chapter 19
Regulation 190A:
Occupations for which permission granted generally
1. Employment under C.A. in practice or firms of such CAs.
2. Private tutorship.
3. Authorship of Books/Articles.
4. Part time tutorship under coaching organization of institute.
5. Editorship of professional journal.
6. Acting as Surveyor/Loss Assessor under Insurance Act.
7. Acting as Recovery Consultant in the Banking Sector.
8. Owning agricultural land and carrying out agricultural activity.
9.
Occupations for which specific and Prior approval is required
1. Full time/Part time employment in Business concerns provided he/his relative do
not hold substantial interest in such concerns.
Relative - Husband, wife, brother or sister or any lineal ascendant or descendent.
2. Full time/Part time employment in non-business concern.
3. Office of MD/WTD of body corporate provided that the member and/or any of his
relatives do not hold substantial interest in such concern.
4. Interest in family business concerns.
5. Part time/Full time lectureship for courses other than ICAI Examinations.
6. Part time/Full time tutorship under any educational institution other than coaching
organisation of institute.
7. Editorship of journals other than professional journals.
8. Any other Business/Occupation for which Executive Committee considers that
permission may be granted.

Note: General permission (for private tutorship & part-time tutorship with ICAI) and
specific permission (for part-time or full-time tutorship under any educational
institution other than ICAI) is subject to the condition that the direct teaching
hours devoted to such activities taken together should not exceed 25 hours in a
week in order to be able to undertake attest functions.

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Chapter 19 Professional Ethics
Note: In a situation, where a practicing CA is a director in a holding company, it is
recommended that he should not accept the audit of subsidiary company.
Example: Mr. A (Practicing CA) is a director of H Ltd. whether Mr. A can accept
audit of S Ltd. (Subsidiary of H Ltd.)
Answer: Though there is no legal restriction under provisions of CA Act, 1949, but
it is advisable, not to accept audit, as it might affect his independence.

Clause 12: Signing of Reports and financial statements:

A CA in practice shall be deemed to be guilty of professional misconduct, if he allows

a person, not being a member in practice Or a member not being his partner to sign on
his behalf or behalf of his firm any Report or Financial Statement
Notes:
It is clarified by council that power to sign routine documents on which a professional
opinion or authentication is not required, may be delegated. Examples:
- Issue of audit queries during the course of audit.
- Asking for information or issue of questionnaire.
- Letter forwarding draft observations/financial statements.
- Initiating and stamping of vouchers and schedules prepared for audit.
- Acknowledging and carrying on routine correspondence with clients.
- Issue of memorandum of cash verification and other physical verification
- Issuing acknowledgements for records produced.
- Raising of bills and issuing acknowledgements for money receipts.
- Attending to routine matters in tax practice.
- Any other matter incidental to the office administration and routine work.

(8) First Schedule: PART – II (Professional Misconduct for Members in Service)

A member in service, shall be deemed to be guilty of professional misconduct, if he
Clause – 1: pay or allow or agree to pay, directly or indirectly, to any person any share
in emoluments of employment undertaken by him.
For Example: Mr. X agree to pay 50% of his salary of first month to ABC
consultants as consideration for arranging employment.

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Professional Ethics Chapter 19
Clause – 2: accept or agree to accept, any part of fees, profits or gains from a
Lawyer, CA or broker engaged by Co., firm or other person (i.e. Employer)
or agent or customer of such company firm or other person

by way of commission or Gratification.

For Example: Mr. A (Finance Manager) of ABC Ltd. ask for 50% share in
fees of Advocate, as consideration to refer legal cases of ABC Ltd. to him.

(9) First Schedule – Part III – Professional Misconduct – Members Generally

A member of ICAI, whether in practice or not, is deemed to be guilty of professional
misconduct, if he
Clause – 1: not being a fellow member, but acting as a fellow member.
Clause – 2: does not supply the information called for, or does not comply with the
requirements asked for, by ICAI, its Council, Committees, Director
Discipline, Board of Discipline, Disciplinary Committee, Appellate Authority
or QRB.
Note: Providing false information to ICAI, its Council, etc. will amount to
Professional Misconduct under Clause 3, Part II of Second Schedule.
Clause – 3: While inviting professional work from another CA or responding to tenders
or advertises professional work as per permitted means under clause 6 & 7
of Part I of First Schedule provides the information, knowing to be false.

(10) Other Misconduct – Part IV of First Schedule

- Part III of Second Schedule for Members Generally
A member of the Institute, whether in practice or not, shall be deemed to be guilty of
Other Misconduct, if he

Clause – I, Part IV, First Schedule Clause I, Part III, 2nd Schedule

is held guilty of any offence by any Civil is held guilty of any offence by any
or Criminal Court, which is punishable with Civil or Criminal Court, which is punish
imprisonment for a term upto 6 Months able with imprisonment for > 6 months

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Chapter 19 Professional Ethics
Clause – 2, Part IV, First Schedule:
A member of the Institute, whether in practice or not, shall be deemed to be guilty of
Other Misconduct, if he

brings any disrepute to the profession or the Institute as a result of his conduct,
Examples:
whether or not related with the professional work.
(i) Dishonor of cheques due to insufficient funds.
(ii) Using Coercive methods to obtain a loan.
(iii) Non-repayment of loan.
(iv) Retaining client’s records without sufficient cause.
(v) Misappropriation of funds, etc.

(11) Second Schedule – Part I – Professional Misconduct – Members in PRACTICE

Clause – I: Disclosure of Client’s information
A CA in practice shall be deemed to be guilty of professional misconduct, if he

discloses client’s information acquired during the course of professional work to others
Except when (a) permitted by client; or
(b) required by law.

Clause 2: Certification without Examination

A CA in practice shall be deemed to be guilty of professional misconduct, if he

certifies or submits in his name or firm’s name a report on examination of F.S. unless
examination of such statement and related records has been made by him, his partner,
employee or another CA in practice.

Clause 3: Permitting use of name in Connection with Estimate of Earnings

A CA in practice shall be deemed to be guilty of professional misconduct, if he permits
his name or firm’s name to be used in connection with an estimate of earnings, which
is contingent upon future transactions in a manner which leads to belief that he
vouches for the accuracy of the forecast.

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Professional Ethics Chapter 19
Notes: In this reference, practicing CA must ensure compliance of requirements of SAE-
3400 “The Examination of Prospective Financial Information (PFI)”. As per SAE 3400,
(i) Preparation of PFI is responsibility of management.
(ii) While preparing PFI, following disclosure must be there:
(a) Source of information, (b) Basis of forecast, & (c) Assumptions used.
(iii) A Practicing CA, if engaged by management for prepn of PFI, he should ensure
appropriate disclosures and in the “Accountant Report”, it should be stated that
no vouching done for the accuracy of the forecast.

Clause – 4: Expressing opinion on F.S. of entity in which member has S.I.

A CA in practice shall be deemed to be guilty of professional misconduct, if he

expresses an opinion on the financial statements of an entity in which he, his partner
or firm is having substantial interest.
Notes:
1. A member of the Institute cannot express the opinion in the following cases:
(a) Where the member himself is owner/partner of concerned business.
(b) Where the partner/relative of CA has substantial interest in concerned business.
(c) Where the member himself or his partner or relative is a director.
2. Members are not permitted to write books of account of their auditee clients.
3. A statutory auditor cannot be the internal auditor of the same entity.
4. An internal auditor cannot be the tax auditor/GST Auditor of the same entity.
5. A member shall not accept the assignment of audit of a Company for a period of 2
years from date of completion of his tenure as Director, or resignation as Director
of the said Company.

Clause – 5: Failure to disclose a material fact

A CA in practice shall be deemed to be guilty of professional misconduct, if he

fails to disclose a material fact, known to him which is not disclosed in the F.S. but
disclosure of which is necessary to make the F.S. not misleading when he is associated
with these F.S. in professional capacity*. (*either as auditor/accountant/reviewer)

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Chapter 19 Professional Ethics
Note: Auditor’s duties of disclosure of significant facts is towards stakeholders. It will
not be sufficient to inform significant facts only to Managing Committee of the Entity.

Clause – 6: Failure to report a Material Misstatement:

A CA in Practice shall be deemed to be guilty of professional misconduct, if he

fails to report a material misstatement, known to him to appear in financial statements

with which he is concerned in a professional capacity.

Clause 7: Failure to exercise due diligence:

A CA in practice shall be deemed to be guilty of professional misconduct, if he

(a) does not exercise due diligence or (b) is grossly negligent in performance of
(i.e. Care, Skill, Competency) his duties (i.e. Total ignorance)
Note: Similar provisions provided for members in service by Chapter II of Council
General Guidelines, 2008.

Clause 8: Failure to obtain evidences to form on opinion:

A CA in practice shall be deemed to be guilty of professional misconduct, if he

(a) fails to obtain sufficient or (b) its exceptions are sufficiently

information which is necessary material so as to negate the
for expression of opinion the expression of opinion
Example: Auditor Collect audit Evidences Audit Procedures & Techniques

Evaluate audit Evidence

Draw conclusion and

issue audit report
Situation I: Audit reports issued – without collecting audit Evidence
Situation II: Audit Evidences Collected - Disclaimer issued instead of
indicate existence of misstatement Qualified or Adverse report

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Professional Ethics Chapter 19
Clause 9: Failure to invite attention to material departure form auditing standards:
A CA in practice shall be deemed to be guilty of professional misconduct, if he

fails to invite attention to any material departure from Generally accepted auditing
practices/ procedures.
Notes:
❖ Audit of Listed Companies: Statutory Audit of Listed Companies under Companies
Act, 2013 shall be done by only those auditors who have subjected themselves to
Peer Review process & hold a valid certificate issued by the PRB.
❖ FRN and Membership No.: Members are required to mention Membership number and
FRN to all reports issued pursuant to any attestation engagements, including
certificates, issued by them as proprietor of/ partner in the said firm.
❖ Unique Document Identification Number (UDIN): Member in practice shall generate
UDIN for all kinds of the certification, GST and Tax Audit Reports and other Audit,
Assurance and Attestation functions undertaken/signed by him.

Clause 10: Failure to Keep client’s money in separate A/c

A CA in practice shall be deemed to be guilty of professional misconduct, if he

(a) fails to keep the client’s or (b) uses the client’s money for purposes
money in separate Bank A/c other than those specified by client.
Suggestions made by Council:
(a) An advance received by a CA against services to be rendered does not fall under
Clause (10) of Part I of the Second Schedule.
(b) Moneys received for expenses, e.g., payment of prescribed statutory fees, purchase of
stamp paper etc., which are intended to be spent within a reasonably short time need
not be put in a separate bank account. Reasonable short time depend upon the
circumstances of each case.
(c) Moneys received for expenses which are not intended to be spent within a reasonably
short time should be put in a separate bank account immediately.
(d) Moneys received by a Chartered Accountant, in his capacity as trustee, executor,
liquidator, etc. must be put in a separate bank account immediately.

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Chapter 19 Professional Ethics
Examples:
(a) Client deposited ₹ 5 Lacs with CA to be paid for GST liability. CA deposited the
amount in his own bank account.
(b) Client deposited ₹ 10 Lacs with CA for advance Tax payment. But CA uses the
amount for personal purposes and later on remitted to client.
Note: Defalcation or Embezzlement of money received in professional capacity will be
deemed to be a professional misconduct under Clause 4, Part II of Second Schedule.

(12) Second Schedule – Part II – Professional Misconduct – Members Generally

Clause – 1: A member of the Institute, whether in practice or not, shall be deemed to
be guilty of professional misconduct, if he contravenes the

(a) Provisions of this Act (for example – Sec.2(2),6,27); or

(b) Regulations made under this Act (for example – Reg.47, Reg.48); or
(c) Guidelines issued by the council. (Council General Guidelines, 2008)

Clause - 2: A member of the Institute, being an employee, shall be deemed to be guilty

of professional misconduct, if he

discloses confidential information of Employer unless permitted by Employer

or required by Law
Note: Similar provisions are covered in Clause I, Part I of 2nd Schedule, for
Members in Practice.

Clause – 3:A member of the Institute, whether in practice or not, shall be deemed to
be guilty of professional misconduct, if he provides

false information to ICAI, its Council, Committees, Director Discipline, Board

of Discipline, Disciplinary Committee, Appellate Authority or QRB.
Note: Not providing information to ICAI, its Council, Committees, Director
Discipline, Board of Discipline, Disciplinary Committee, Appellate Authority or
QRB is considered as professional misconduct u/c 2, Part III - First Schedule.

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Professional Ethics Chapter 19
Clause – 4: A member of the Institute, whether in practice or not, shall be deemed to
be guilty of professional misconduct

if he defalcates or embezzles the money received in professional capacity.

Note: Using client’s money for purposes other than prescribed will fall u/c 10
of Part I of 2nd Schedule.

(13) Second Schedule – Part III – Other Misconduct – Members generally

Already Covered – Refer topic no. 10

(14) Council General Guidelines, 2008

Chapter I: Preliminary - Guidelines applicable to all members whether in practice or not.

Chapter – II: Conduct of a Member in Service

A member of the Institute who is an employee (a) shall exercise due diligence; and
(b) shall not be grossly negligent.
Note: Similar provisions are covered for practicing members u/c 7, Part I (2nd Schedule).

Chapter –III: Appointment of a member as cost Auditor Omitted

Chapter – IV: Expressing opinion on F.S. of related Entities Omitted

Chapter – V: Maintenance of Books of account

A member in practice or firm of CAs shall maintain and keep in respect of his/its
professional work, proper book of account including (i) Cash book and (ii) Ledger
Note: Limits prescribed u/s 44 AA of Income Tax Act, 1961 are not relevant.

Chapter – VI: Specified No. of Tax Audit Assignments

Specified No. for a CA in practice or a proprietor firm = 60
Specified No. for a firm of CAs = 60 per partner
(1) For individual CA, who is also a partner in a firm, specified no. in aggregate is 60.
(2) A practicing CA who is partner in 2 or more firms, specified no. in aggregate for
that partner in all the firms remains at 60.

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Chapter 19 Professional Ethics
(3) Audits conducted u/s 44AD, 44ADA and 44AE are not considered.
(4) Audit of H.O + ≥ 1 Branch = 1 Audit
Audit of ≥ 1 Branches of same company = 1 Audit
(5) Tax audit reports, in case of a firm of CAs can be signed by any Partner on behalf
of the firm.

Chapter–VII: Nonpayment of undisputed fees of Predecessor auditor

A member in practice shall not accept appointment as auditor of an entity if undisputed
Example: Mr. Y appointed as auditor in place of Mr. X
audit fee of another CA for carrying out statutory audit under the Companies Act, 2013

or other statutes has not been paid except in case of sick units.
No prior communication by Y Prior communication by Y before accepting audit
before accepting audit.
X’s Response

(a) Non-Payment of (b)Non-compliance (c) Non-Payment of

Undisputed audit Fees of Sec.139/140 disputed Fees

Sick unit not a Sick unit

Mr. Y accept Mr. Y accept Mr. Y accept audit Mr. Y accept audit
audit audit

Professional No Misconduct Professional Professional No Misconduct

Misconduct Misconduct Misconduct

Clause 8, Part I Clause 1, Part II Clause 9, Part II

of First Schedule Second Schedule First Schedule

Chapter-VIII: Specified No. of Audit Assignments (in case of a company):

Specified No. for a CA in practice or a proprietor firm = 30
Specified No. for a firm of CAs = 30 per partner

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Professional Ethics Chapter 19
Note: In computing 30 audit assignments, include audit of private companies or other
companies, with the exception of OPC and Dormant Companies.
Specified No. of Audit Assignment u/s Sec. 141(3)(g):
20 audits excluding (a) audit of Private companies having PUC < 100 Cr.,
(b) OPC,
(c) Small Company
(d) Dormant Company.
Record of Audit Assignments: CA in Practice or a firm of CAs, shall maintain a record
of audit assignments of Company, including the following:
(a) S. No.
(b) Name of Company
(c) Registration No.
(d) Date of Appointment
(e) Date of Acceptance

Chapter-IX: Acceptance of audit in case of certain Entities

In case of PSU / Govt. Companies / Listed Companies &
Other Public Companies having Turnover ≥ 50 Crores,

a member in practice shall not accept the audit, if he is rendering ‘Other Work’ or
‘Services’ to that entity at a fee which is higher than the fees offered for the audit.
(i.e. Remuneration of audit cannot be lower than the remuneration of Other Work.)

Chapter-X: Acceptance of audit in case of Indebtedness

A practicing CA shall not accept audit of an Entity in which he is indebted for the
amount as prescribed by law under which audit is to conducted; or
> ₹ 1,00,000
Examples:
(a) Audit under companies Act, 2013 can be accepted if indebtedness is upto ₹ 5 Lac.
(b) Audit under Income–tax Act, 1961 can be accepted if indebtedness is nil.
(c) Audit under any other law in which no limit is prescribed, can be accepted if
indebtedness is upto ₹ 1,00,000.

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Chapter 19 Professional Ethics
Chapter – XI: Directions in case of unjustified removal of auditors
Incoming auditor shall comply with the directions given by the council of ICAI.

Chapter-XII: Minimum Fees: “Repealed by Council”

Chapter-XIII: Guidelines on Tenders: Already covered with Clause 6, Part I - 1st Schedule

Chapter-XIV: Unique Document Identification Number:

A member in practice shall generate Unique Document Identification Number (UDIN) for
all kinds of the certification, GST & Tax Audit Reports and other Audit, Assurance &
Attestation functions undertaken/signed by him (i.e. generation of UDIN is mandatory).

Chapter-XV: Guidelines for Networking: Will be covered separately

Chapter-XVI: Logo Guidelines:

Logo consists of letter ‘CA’ with tick mark inside a rounded rectangle with white
background.
Members are encouraged to use new logo. Do not change design & colours, including
white background.
Refrain from rotating or tilting the logo.

Chapter-XVII: Guidelines for Corporate form of Practice:

Council decided to allow members in practice to hold the office of MD, WTD or Manager
of a body corporate provided that it is engaged exclusively in rendering Management
Consultancy and Other Services permitted by the Council in pursuant to Sec. 2(2)(iv)
of the CA Act, 1949 and complies with the below mentioned conditions:
 Management Consultancy Company shall have distinct name, approved by Institute.
 After approval of name and incorporation under Companies Act, the Management
Consultancy Company is required to be registered with the Institute.
 If practitioner/sole proprietorship/partnership firm is statutory auditor of an entity
then MCC should not accept internal audit or book-keeping or other professional
assignments, which are prohibited for the statutory auditor firm.

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Professional Ethics Chapter 19
 MCC shall comply with clauses (6) & (7) of Part I of the First Schedule and
other directives issued by ICAI and give an undertaking in this regard.

(15) Council Guidelines for Advertisement, 2008

(A) Online Third Party Platforms:
CA or Firm of CAs can provide consultation and advice through Websites of 3rd
parties like banks, newspapers etc. subject to condition that on Website, contact
address of CA is not provided nor such Website will contain any material which
advertises professional achievements of such CA.
Name of CA firm with suffix “Chartered Accountants” would not be permitted.

(B) Publication of Name or Firm Name in the Telephone or other Directories:

CAs and Firm of CAs may have entries made in a Telephone Directory (in printed
& electronic form) either by making a special request or by means of an additional
payment subject to:
(i) Entry should not appear in any other section/category except that of ‘CAs’
(ii) Member/firm should belong to town/city in respect of which directory is being
published.
(iii) Order of the entries should not be in any manner other than alphabetical.
(iv) Entry should not be made in a differential or prominent manner giving the
impression of publicity/advertisement.
(v) Entries should not be restricted and should be open to all CAs/Firm of CAs in
particular city/town in respect whereof the directory is published.
(vi) Members can also include their names in trade/social directories.

(C) Application based Service provider Aggregators:

Listing with online App based service provider Aggregators, wherein other categories
like businessmen, technicians, event organisers etc. are also listed, is not permitted.

(D) Specialised Directories for limited circulation:

Name, description & address of member (or firm) may appear in any directory
or list of members of a particular body in which names are listed alphabetically.

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Chapter 19 Professional Ethics
In addition, a member may give where appropriate, directorships held and
reasonable personal details and may state his outside interests.
He should not, however, give the names of any of his clients.

(E) Permitted Advertisements:

(i) Advt. for recruiting staff in the member’s own office.
(ii) Advt. on behalf of clients requiring staff or to acquire or dispose of business or
property.
(iii) Advt. for the sale of a business or property by a member acting in a
professional capacity as trustee, liquidator or receiver.
When advertising for staff, it is desirable to avoid expression “a well-known firm”.

(16) Self-regulatory measures:

(a) Branch Audits: of a company should not be conducted by its statutory auditors
consisting of > 10 members, but should be conducted by local firms
of auditors consisting of < 10 members.
(b) Joint Audit: In case of large companies, practice of associating a practicing firm
with< 5 members as Joint auditors should be encouraged.
(c) Ratio Between Qualified and Unqualified Staff: A practicing firm of CAs in audit
work should have at least 1 member for every 5 non-qualified
members of staff, excluding articled and audit clerks, typists, peons
and other persons not engaged directly in such professional work.
(d) Disclosure of Interest by Auditors in other Firms: As a good and healthy practice,
auditors should make a disclosure of the payments received by
them for other services through the medium of a different firm or
firms in which said auditor may be either a partner or proprietor.
(e) Recommended Minium Scale of Fees: Recommended scale of Fees is to be charged
as per the work performed for various professional assignments.
(f) Disclosure of Fees:
❖ For non Public Interest Entities: Disclosure is required where for 2 consecutive
years, gross annual professional fees from an audit client represents > 40% of
the total fees of the firm.

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Professional Ethics Chapter 19
❖ For Public Interest Entities*: Disclosure is required where for 2 consecutive
years, gross annual professional fees from an audit client represents > 20% of
the total fees of the firm
*Listed Entities, Banks and Insurance companies.
To whom Disclosure is to be made: To the ICAI
Exemptions from Disclosure:
(a) If total Fees received by Firm does < ₹ 20 lakh.
(b) Audit of Govt Companies, public undertakings, nationalised banks, PFI or
regulators.
(c) Appointments of auditors made by Govt.

(17) Recent Decisions of Ethical Standards Board:

(1) Member in practice cannot act as Trademark or Patent Attorney. Professional
advice in relation to IPR is a routine professional work and hence permissible.
(2) Member in practice cannot accept statutory audit of a society wherein immediate
family member (spouse or dependent), hold honorary position in managing
committee of the institutes governed by the society.
(3) There is no prohibition for internal auditor to acquire/purchase shares of Company.
(4) It is not permissible for a member to use Messaging Applications to send
messages to make people aware about his practice, & mention services provided.
(5) A Practicing CA being Director Simplicitor in a Company cannot sign ROC Forms
of Company as it is a direct conflict of role.
(6) A Practicing CA can act as Authorized Representative of a Foreign Company,
provided he is not auditor of the said Company.
(7) It is permissible for > 2 CAs in practice collectively to have joint training session
for their clients on GST, and share the fees collected from the clients thereof.
(8) A CA in service is allowed to take e-return registration if it does not conflict with
employment obligation. However, he cannot certify the return.
(9) If a Practicing CA is a non-executive director in a company, he or his Firm, should
not accept appointment as a statutory auditor of a Company which is a joint
venture of original Company, as it would impact independence.
(10) CA, who is a member of a Trust, cannot be its auditor.

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Chapter 19 Professional Ethics
(11) CA in practice may be an equity research adviser, but he cannot publish retail
report, as it would amount to other business or occupation.
(12) Practicing CA may engage himself as Registration Authority (RA) for obtaining
digital signatures for clients.
(13) CA can hold the credit card of a bank when he is also auditor of the bank, if o/s
balance on card does not exceed ₹ 1,00,000 beyond prescribed credit period limit.
(14) A Chartered Accountant in practice can act as mediator in Court.
(15) CA in practice is not permitted to accept audit of a bank, in case he has taken
loan against a FD.
(16) Statutory auditor/tax auditor cannot be the valuer of unquoted equity shares of the
same entity, if prohibited under statute.
(17) A member who has been Director of a Company, upon resignation from Company
may be appointed as auditor of the said Company after cooling period of 2 years.
(18) Practicing CA cannot become Financial Advisors and receive fees/commission from
Financial Institutions such as Mutual Funds, Insurance Companies, NBFCs etc.
(19) CA cannot exercise lien over client documents/records for non-payment of fees.
(20) It is not permissible for CA Firm to print its vision & values behind visiting cards.
(21) It is not permissible for a practicing CA to take agencies of UTI, GIC or NSDL.
(22) It is permissible for a member in practice to be a settlor of a trust.
(23) A member in practice cannot hold Customs Brokers Licence.
(24) A CA in service may appear as tax representative on behalf of his employer, but
not on behalf of other employees of the employer.
(25) A CA who is statutory auditor of a bank cannot accept stock audit of such bank.
(26) A CA Firm which has been appointed as internal auditor of a PF Trust by a Govt.
Co. cannot be appointed as its Statutory Auditor.
(27) Con. auditor of bank ‘X’ cannot be appointed as stat. auditor of bank ‘Y’,
sponsored by ‘X’.
(28) A CA/CA Firm can act as internal auditor of a company & statutory auditor of its
employees PF Fund under the Companies Act.
(29) Resident Director u/s 149(3) of the Companies Act, 2013 would be within scope of
Director Simplicitor, if he is non–executive director, required in the Board Meetings
only, and not paid any remuneration except for attending such Board Meetings.

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Professional Ethics Chapter 19
(18) Guidelines for Networking
Definition of Network: A Larger Structure

That is aimed at and aimed at profit; or

Co-operation aimed at sharing of
(a) Cost
(b) Ownership, control and management
(c) Quality Control Policies & Procedures
(d) Business Strategies
(e) Common Brand Name
(f) Significant Professional Resources
Notes:
(a) Larger structure aimed at facilitating referral of work does not create a network.
(b) Sharing of Immaterial Costs does not itself create a network.
(c) Sharing of only Audit methodology or Audit Manuals; Training Courses or Facilities
will not be considered as significant professional resources.
(d) Network be constituted as Partnership firm (upto 20 partners), LLP or company.
A firm is allowed to join only one network.
(e) Firms having common partners shall join only one network.
(f) The word “& Affiliates” shall be used after the name of network.
(g) Registration of network with the institute is mandatory.
(h) Network shall comply with all relevant Ethical requirements prescribed by ICAI in
general & in particular in cases, where rotation of firms is prescribed, no member
firm of network can accept appointment as an auditor in place of any member
of network which is retiring.
firm

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