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Professional Ethics
ICAI’s Motto – ‘Ya Esha Supteshu Jagrati’ is adopted from Kathopanishad & it denotes ‘eternal vigilance’
– awakening when world is asleep

Overview of Code of Ethics

• Part 1 – Complying with Code, Fundamental • Part 4A – Independence for Audit & Review
Principles & Conceptual Framework Engagements
• Part 2 – Professional Accountants in Service • Part 4B – Independence for Assurance
including those who are in public practice due Engagements Other than Audit & Review
to their relationship with firm as employee • Each section of Code is structured as
• Part 3 – Professional Accountants in Public Introduction, Requirements & Application
Practice • Code of Ethics vs L&R – L&R prevails

Fundamental Principles - Code of Ethics of ICAI

1. Integrity – Subsection 111 4. Confidentiality - Subsection 114

• Straightforward & honest in all • Not disclose info acquired from client or
professional relationships & fair dealing & employer (including Prospective or Ex)
truthfulness • Not use confidential info for personal
• Not knowingly be associated with reports advantage or 3rd party’s advantage
where he believes that info – • Circumstances when Accountants are
o Contains materially false or misleading required to disclose confidential info are
statement o Disclosure is required by law
o Contains statement provided negligently o Disclosure is permitted by law &
or authorized by client or employing org
o Omits required info & it would be o There is professional duty to disclose,
misleading when not prohibited by law –
o If he provides modified report for ▪ To comply with technical &
above matters, then he is not in breach professional standards
• When he is associated with above info, he ▪ To comply with requirements of Peer
shall take steps to be disassociated from Review or Quality Review
that info ▪ To respond to inquiry or
investigation by regulatory body
2. Objectivity - Subsection 112 ▪ To protect his professional interests
• Not compromise professional judgment due in legal proceedings or
to bias, conflict of interest or undue • Considerations in deciding whether to
influence of others disclose confidential info
o If interest of 3rd party is harmed
3. Professional Competence & Due Care – o Whether all relevant info is known &
Subsection 113 o Proposed type of disclosure & to whom
• Attain & maintain professional knowledge o Whether parties to communicate are
& skill as required appropriate recipients
• Act diligently as per technical &
professional standards 5. Professional Behaviour - Subsection 115
• Diligence means to act as per requirements • Comply with L&R & avoid conduct that
of assignment, carefully, thoroughly & on discredit profession (3rd Party Test)
timely basis • He shall not make –

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 Professional Ethics

• Ensure that those working under his o Exaggerated claims for anything
authority have appropriate training & o Disparaging (downgrading) references
supervision to work of others
• Aware users of his services, of inherent o Violates Ad Guidelines of Council
limitations in services

• In situation when complying with 1 fundamental principles conflict with others. He should consult
with - Others within firm or employing org, TCWG, ICAI, Legal counsel
• However, it does not relieve him from responsibility to exercise professional judgment to resolve
conflict or to disassociate from matter creating conflict, unless prohibited by L&R

Threats to Principles

1. Self-interest threat 3. Advocacy threat

• Financial or other interest will • Promote client’s or employing org’s position
inappropriately influence Accountant’s to point that his objectivity is compromised
judgment or behaviour • E.g. of Threats during professional service
• E.g. of Threats during professional service o Acting as advocate for client in disputes
o Direct financial interest in client with 3rd parties
o Close business relationship with client o Lobbying in favour of legislation for
o Access to confidential info that can be client
used for personal gain o Promoting interests/shares of client
o Quoting low fee & difficult to perform • E.g. of Threats during professional activity
services as per standards for that price o Manipulating info in prospectus to
o Discovering significant error when obtain favourable financing
evaluating service by member of his firm
• E.g. of Threats during professional activity 4. Familiarity threat
o Holding financial interest in, or receiving • Due to long/close relationship with
loan or guarantee from, employing org. client/employing org, he will be too
o Participating in incentive arrangements sympathetic to their interests
by employing org. • E.g. of Threats during professional service
o Having access to assets for personal use o Having close family member who is
o Being offered gift from supplier of director or officer of client
employing org o Director or officer of client having
recently served as EP
2. Intimidation threat o Audit team member having long
• Deterred from acting objectively due to association with client
pressures, including undue influence • E.g. of Threats during professional activity
• E.g. of Threats during professional service o He is responsible for FR of employing
o Threatened with dismissal from org when close family member makes
engagement due to disagreement about decisions affecting FR
matter o Having long association with individuals
o Pressured to agree with client’s making business decisions
judgment as client has more expertise
on matter 5. Self-review threat
• Not appropriately evaluate results of
previous judgment made or activity

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 Professional Ethics

o Being informed that planned promotion performed by himself or by another

will not occur unless he agrees with individual within his firm or employing org
inappropriate a/cing treatment • E.g. of Threats during professional service
o Accepting gift from client & threatened o Issuing assurance report on
that such acceptance will be made public effectiveness of financial systems after
• E.g. of Threats during professional activity implementing systems
o He or close family member facing threat o Having prepared original data that are
of dismissal over disagreement about - subject matter of assurance
▪ Application of a/cing principle engagement
▪ Way in which financial info is to be • E.g. of Threats during professional activity
reported o Determining appropriate a/cing
o Individual attempting to influence treatment for business combination
decision-making process of Accountant after performing feasibility study
supporting purchase decision

Evaluation of Threats - if it is at acceptable level Safeguards - Actions that accountant takes to

• Acceptable level - Level at which Accountant reduce threats to acceptable level
using reasonable & informed 3rd party test E.g. of safeguards include –
would conclude that he complies with • Assign additional time & qualified personnel
fundamental principles • Having appropriate reviewer, not team
member, review work performed
Addressing Threats • Using diff partners & teams with separate
If threats are not at acceptable level, he shall reporting lines for non-assurance services to
eliminate/reduce them by – assurance client
• Declining specific professional activity • Involving another firm to perform/re-
• Eliminating circumstances creating threats perform engagement
• Applying safeguards to reduce threats • Separating teams when dealing with
confidential matters

Membership of ICAI

Types of Members of ICAI Removal of Name from Register

• Associate Member - Entitled to use letters • Who is dead
A.C.A. after his name • From whom request received for Removal
• Fellow Member • Who has not paid fee
o Associate who is in continuous practice in • Who is found to have any disabilities
India for at least 5 years mentioned above
o Associate who possesses such qualification
experience equivalent to 5 years of Restoration of Membership
continuous practice • If member is removed from Register for non-
o Entitled to use letters F.C.A. after his payment of fee, then on receipt of application
name & fee, he may be entered again in Register
• Effective date for restoration of membership
Disabilities for Membership o Application made within same year of
• Not attained age of 21 years removal - From date on which it was
• Unsound mind as adjudged by competent removed (Same case for COP Restoration)
court

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 Professional Ethics

• Undischarged insolvent o Removal of name under orders of Board of

• Being discharged insolvent, has not obtained, Discipline or Disciplinary Committee or
from court, certificate stating that his Appellate Authority or High Court - As per
insolvency was caused by misfortune without such orders
any misconduct on his part o In other cases - From Date of application
• Convicted by court whether in/outside India, receipt
of offence involving moral turpitude &
punishable with imprisonment or offence Penalty for Falsely Claiming to be Member
committed by him in his professional capacity Any person who –
unless, he has either been granted pardon or • Not being member of ICAI
CG has removed disability o represents that he is member of ICAI or
• Removed from membership due to guilty of o uses designation CA
misconduct • Being member of ICAI, but not having COP,
• Failure on his part to disclose fact that he represents that he is in practice
suffers from any of above disabilities would • Shall be punishable on first conviction with
constitute professional misconduct fine upto Rs. 1000 & on subsequent conviction
with imprisonment upto 6 months or with fine
upto Rs. 5,000 or with both
• Failure to pay fine - rigorous imprisonment for
3 months

Chartered Accountants in Practice (CAiP)

Significance of COP Members - Deemed to be in Practice – If he

• No CA is allowed to practice unless he has COP • Does practice of accountancy or
• CA not in practice is precluded from • Offers to perform/performs auditing of
accepting engagement to provide services transactions or records or preparation or
prescribed for CA, even though, it does not certification of statements or
require special qualifications • Provides professional services for a/cing,
• Council is of view that – presentation or certification of financial
o Once a person becomes member, he is bound facts or
by CA Act. When he appears before • Provides other services that are provided by
Income-tax Tribunal as Income-tax CAiP. E.g. ‘service with armed forces’
representative, he can appear only as CA. • In his professional capacity & neither in
He cannot set CA Act at naught (no personal nor in capacity as employee, acts as
importance) by contending that even though liquidator, trustee, executor, administrator,
he is suspended from practice, he is arbitrator, receiver, adviser or representative
entitled to practice in some other capacity for costing, financial or taxation matters or
o CA can have no other capacity separable appointed by CG or SG or Court or other legal
from his capacity to practice as member authority or acts as Secretary unless his
o Digital Consultancy Representation is employment is on salary-cum-full-time basis
allowed (Regulation 191)

Cancellation of COP – If Explanation -

• Name of COP holder is removed from Register • CA who is salaried employee of CAiP shall be
or deemed to be in practice only for purpose of
• COP was issued on basis of incorrect info or training Article Assistants
by mistake or

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 Professional Ethics

• Member has ceased to practice or • Act of setting up establishment will be

• Member has not paid annual fee for COP till considered to be in practice even though no
30th September client is served
• If COP is cancelled, holder shall surrender it • Section 144 of Co Act, 2013 - Auditor shall
to Secretary provide to Co. only such other services as
approved by BOD or audit committee, but not
Co. not to Engage in Accountancy following services (whether directly or
• Term “Co.” include LLP which has Co. as its indirectly to Co. or its holding Co. or
partner subsidiary Co.) –
• No Co. whether or not Indian, shall practice as o A/cing & book-keeping services
CA o Design & implementation of financial info
• If any Co. contravenes above then, every system
director, manager & officer, who is knowingly o Outsourced financial services
party to such contravention, shall be o Internal audit
punishable with fine on first conviction upto o Actuarial services
Rs 1,000 & on subsequent conviction upto Rs o Investment advisory services
5,000 o Investment banking services
o Mgt services
CAiP Prohibited from using Designation other o Other services as prescribed
than CA
• CAiP cannot use any designation other than CA, Mgt Consultancy & other Services
nor any other description • CAiP is permitted to provide “Mgt Consultancy
• CA who is not in practice & does not use & other Services”
designation of CA, may use any other • It does not include - Statutory audit, tax
description representation or consulting or liquidator,
• Merchant Banker/Advisor to Co. issue - In trustee, executor, administrator, arbitrator
Co.’s offer docs & Ad for capital issue, Name or receiver
& Address of CA or Firm can be mentioned • It includes –
under “Advisor/Consultant to Issue”, provided o Financial Mgt planning
it not appears prominently. However, cannot o Capital structure planning
be mentioned in his visiting cards o Working capital Mgt
• CAs who are Directors in Co., Members of o Project reports & feasibility studies
Political Parties, Member of Parliament, o Tax implications of above 4 services
Municipal Councillor, holding positions in orgs o Cash flow statements, profitability, sources
are not permitted to mention these positions & application of funds
• CA cannot designate himself as Cost o Budgeting
Accountant, but can use letters A.C.M. or o Inventory Mgt & storage
F.C.M. after his name o Market research & demand
• Not allowed to state himself as Income-tax o Price-fixation
Consultant, Cost Accountant, CS, Cost o Mgt a/cing systems & cost control
Consultant, Mgt Consultant or Corporate o Control methods & Mgt reporting
Lawyer, Cybersecurity Expert o Personnel recruitment & selection
• CA cannot use ‘CPA’ on visiting cards o Executive & Wage incentive plans
• CAiP may practice as CS/Cost Accountant. But o Mgt & operational audits
he shall not use designation of such Institute o Valuations of shares & business (Not P&M)
simultaneously with “CA” & Amalgamation, Registered Valuer
• Permitted o Business Policy, corporate planning & Org
o To mention membership of foreign growth
institute of Accountancy, which is o Org structure, development of HR, training,
recognized through Memorandum of job evaluation

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 Professional Ethics

Understanding/Mutual Recognition o Systems analysis & computer related

Agreement. E.g. South African Institute of services & EDP
CAs (SAICA), Institute of Certified Public o Advisor to issue, including –
Accountants (CPA Ireland) & Institute of ▪ Drafting prospectus & listing agreement
CAs in England & Wales (ICAEW) ▪ Publicity budget, selection of bankers,
o “Insolvency Professional” or “Registered brokers & underwriters
Valuer” on his visiting card & letter head ▪ Selection of Registrars, printers &
advertisers
Maintenance of Branch Offices ▪ Advice on post issue activities
• If CAiP or Firm has more than 1 branch in ▪ Broking, Underwriting & Portfolio Mgt
India, each branch should be in separate are not permitted
charge of a CA o Investment counselling
• Failure will constitute professional misconduct o Registrar to issue/for transfer of shares
• CA in-charge of branch of another firm o Quality Audit
should be associated with him/firm either as o Environment Audit
partner or as paid assistant (must be full- o Energy Audit
time employment) o Recovery Consultant in Banking Sector
• CA in charge of branch shall be actively o Insurance Financial Advisory
associated with such branch - Reside at place o Insolvency Professional
of Branch/Attend branch for atleast 182 o Admin Services - require little professional
days in year judgment & are clerical in nature. Like Word
• CA is allowed to put name-board at place of processing services, preparing admin forms
residence with designation ‘CA’, provided it is for client approval, submitting forms as
name-board of individual member & not of instructed by client, monitoring statutory
firm filing dates & advising client. E.g. Functions
• Exemption from having separate in-charge for of GST practitioner
members practicing in hill areas. Conditions are
o Allowed to open temporary offices in plains KYC Norms for CAiP
for upto 3 months in year (any 3 months) • Mandatory to all assignments (including
o Regular office need not be closed during consultancy)
this period & all correspondence can be • If Client is Individual
made there o General Info
o Name board of firm at temporary office ▪ Name
should not be displayed at times other ▪ PAN No. or Aadhar No
than above permitted period ▪ Business Description
o Temporary office should not be mentioned ▪ Copy of last Audited FS
in letterheads, visiting cards or other docs o Engagement Info
as place of business ▪ Type of Engagement
o Before starting of every winter, inform • If Client is Corporate Entity (Additional)
ICAI about opening & closing of temporary o General Info
office by registered post ▪ Address of Entity
• Exemption from having separate in-charge for ▪ Name of Parent Co. in case of Subsidiary
second office, when - o Regulatory Info
o Both offices are located in same ▪ Co. PAN No.
accommodation ▪ Co. Identification No.
o Second office is located in same city as ▪ Directors’ Names & Addresses
first office ▪ Directors’ Identification No.
o Second office is located within distance of • If Client is Non-Corporate Entity (Additional)
50 km. from municipal limits of city of ▪ Partner’s Names & Addresses (with
first office PAN/Aadhar/DIN No.)

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o CA having 2 offices shall have to declare,

which of them is his main office & thus his
professional address

Schedules to Act

Schedule Part Applicability Clauses Type of Misconduct

I CA in Practice 12 Professional
First II CA in Service 2 Misconduct
III All CA 3
IV All CA 2 Other Misconduct
I CA in Practice 10 Professional
Second II All CA 4 Misconduct
III All CA 1 Other Misconduct

How to Present Answers for Clauses

1. Write Clause No. & Explain Clause
2. Copy Facts of the case from question
3. Link Facts with Clause
4. State your Conclusion
Note – If confused b/w multiple clauses – Mention All Clauses

First Schedule

Part 1 - Professional Misconduct in relation to CAiP

Intro Line - CAiP is deemed to be guilty of professional misconduct if he -

Clause (1) Allows anyone to practice in his name unless such person is also CAiP & his partner or
employee

Above clause safeguards public against unqualified accountant practicing as qualified accountants

Clause (12) Allows person who is not CAiP or CA who is not his partner to sign on his behalf or on
behalf of his firm, any Balance Sheet, P/L, report (professional opinion) or FS

Power to sign routine docs on which professional opinion or authentication is not expressed are
permitted to be delegated -
• Issue of audit queries during audit
• Asking for info or issue of questionnaire
• Letter forwarding draft observations/FS
• Initiating & stamping of vouchers & schedules prepared for audit
• Acknowledging & carrying on routine correspondence with clients
• Issue of memorandum of cash verification & physical verification or recording results in books of
clients
• Issuing acknowledgements for records produced
• Raising of bills & issuing acknowledgements for money receipts
• Attending to routine matters in tax practice (subject to Section 288 of Income Tax Act)

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 Professional Ethics

• Any other matter of office administration & routine work of practice

Note –
• Sign/Issuance of Any Certificate is not a routine work and cannot be delegated
• If authority to sign docs given above is delegated by CA or firm, then fact that docs are not signed
by him is not defence to him or to firm in professional misconduct
• If CA, while signing doc is required to disclose his name, then he should do so. If there is no such
statutory requirement, then he may sign in name of firm

Clause (2) Pays or Agrees to pay, directly or indirectly, any share, commission or brokerage in
fees or profits of his professional business, to anyone other than CA or partner or retired partner
or legal representative of deceased partner or member of professional body having qualification
as prescribed, for providing such professional services in or outside India

Qualifications Prescribed (Regulation 53A) – CS, CMA, Actuary, Engineering, B.Tech, Architect,
Law, Advocate & MBA
• CA giving % of audit fees from Co-operative Societies to SG – Allowed
• CA giving % of fees as office allowance – Not Allowed (substance over nomenclature)
• CA giving % of fees to Poor Article – Not Allowed
• Share of Profit/Sale of Goodwill –
o Partnership Firm - Legal Representative of deceased partner can continue to receive share of
firm, only if deed provides. Same is applicable even when all partners die at same time
o Proprietorship Firm –
▪ No sharing of fees b/w Legal Representative & Purchaser of Goodwill on death of Proprietor
▪ Goodwill Payments may be made in instalments, if sale agreement provides
▪ Goodwill can be sold/transferred to another CA if sale is completed within 1 year of death
▪ Name of firm will be kept in abeyance (not removed) only upto 1 year from death
▪ Legal heir has to obtain permission of Council within 1 year of Death
▪ If dispute b/w legal heir – inform ICAI within 1 year about dispute – Name is reserved for
1 year from dispute settlement
o Selling Practice/Right to Use Firm Name = Sale of Goodwill

Clause (3) Accepts or agrees to accept part of profits of professional work of non-CA

• Exception – Regulation 53A, Referral fees from CAiP

• Registered Valuer is not an exception

Clause (4) Enters into partnership, in or outside India, with person other than CAiP or member of
professional body having qualifications as prescribed or non-resident who is entitled to register as
CA or who is recognized by CG or Council

• Qualification Prescribed (Regulation 53B) – Same as Regulation 53A except MBA

• CAiP cannot form multi-disciplinary partnerships until Regulators of other professions also permit
partnership with CAs

Clause (5) Secures any professional business either from non-employee or non-partner or by means
not open to CA except as per clauses (2), (3) & (4)

Acts of partners & employees for securing professional work are subject to Clauses (6) & (7)

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Clause (6) Solicits professional work, directly or indirectly by circular, Ad, personal communication
or interview or by any other means

Exception
• CA securing professional work from another CAiP or
• Responding to tenders or enquiries - CAiP shall not respond to tender for services that are
exclusively reserved for CAs. E.g. Audit & attestation services unless minimum fee is
prescribed in tender or unless services are open to other professionals as well. “Minimum fee”
should commensurate with size, value, volume, manpower requirement & nature of work

Forms of soliciting work are

• EMD/Security Deposit – Permitted. However, Cost sheet must be maintained by CA responding to
tenders, for details of costs being incurred for number of persons involved, hours to be spent, etc

• Ad of Coaching may amount to indirect solicitation violating Clause (6). However, they may put sign
board mentioning name of coaching, contact details & subjects taught only, outside their coaching
premises. For size & type of sign board, Guidelines as applicable to Firms would apply

• Ad in press prohibited – Also not permitted to circulate letters to possible clients. Personal
canvassing or canvassing for clients of previous employer through employees is also not permitted.
Exceptions are –
o CA requesting another CAiP for professional work
o CA advertising changes in partnerships or dissolution of firm or change in address of practice
& contact numbers, provided they are limited to facts & consideration given to appropriateness
of area of distribution of newspaper or magazine & number of insertions
o CA is permitted to issue classified Ad in journal/newsletter of ICAI to give info for sharing
professional work or for seeking partnership or salaried employment of accountancy nature,
provided it only contains CA’s name, address or contact number, fax number, e-mail & address of
social networking sites. Mere factual position of experience & area of specialization, to seek
response to Ad, are permitted

• Application for empanelment – Many institutions prepare panels of CAs for allotment of audit &
other work. If existence of such panel is in knowledge of CA, he can request such org to place his
name on panel. However, he is prohibited to make roving enquiries by applying to any such org for
having his name included in such panel. Permitted to quote fees on enquiries received from such
org

• Publication of Books, Articles or Presentation - Prohibited for CA to mention, in his book or article
or presentation, any professional attainment, whether his or his firm’s. However, he may indicate
designation “CA” & name of firm

• Issue of Greeting Cards or Invitations - Not permitted to issue them indicating CA’s professional
designation, status & qualifications etc. However, designation “CA” & Name of firm can be used
in greeting cards, invitations for marriages & religious ceremonies & invitations for inauguration of
his office, change in office premises & change in contact numbers, provided they are sent only to
clients, relatives & friends of member concerned. Ad is not permitted for above

• Ad for Silver, Golden, Platinum or Centenary celebrations - Not permitted to advertise events
organised by Firm. However, Ad for above may be published in newspaper or newsletter

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• Sponsoring Activities
o Not permitted to sponsor event. However, permitted for event conducted by Programme
Organizing Unit of ICAI having prior approval of Continuing Professional Education Directorate
o CAs sponsoring CSR activities may mention their individual name with prefix “CA”. However,
mention of Firm name or CA Logo is not permitted

• Sharing Firm Profile with Prospective Client - Not permitted unless it is in response to Proposed
client’s specific query

• TV or Movie Credits - Ensure that exhibition of name of CA/Firm is not made differently as
compared to other entries in credits

• Soliciting professional work by making roving enquiries - Not permitted to address letters, emails
or circulars specifically to persons who are likely to require services of CA

• Scope of Auditor’s representation u/s 140(4) of Co. Act - Wording of his representation should be
such that, apart from opportunity not being abused to secure needless publicity, it does not amount
to soliciting for his continuance as auditor. Letter should merely set out in dignified manner how
he has been acting independently & conscientiously & may indicate, his willingness to continue as
auditor

• Acceptance of professional work by CA from client introduced to him by another CA - Not accept.
If client comes to him directly, he should ask client that it should come through other CA dealing
generally with his original work

• Giving Public Interviews - Ensure that such interviews are not highlighting their professional
attainments. Any detail must be given only as response to specific question, & of factual nature only

• Ads under Box numbers in newspapers – Prohibited

• Educational Videos - May be uploaded on internet, no reference should be made to Firm wherein
he is partner/proprietor. Also, it should not contain contact details or website address

• CA wrote letters to Army Canteens giving details about him & his experience, his partner & office
& norms for charging audit fees - Guilty under Clauses (5) & (6)

• CA sent letters to other CAs claimed to be pioneer in liaisoning with govt depts as expertise for
getting clearances – Guilty under clause (6)

Website of CA Firms
• Standard format of Website is not given to provide independence to Members
• Ensure that Website run on “pull” model & not “push” model to ensure that person who wishes to
locate CAs would only have access to info & info should be provided only on specific “pull” request
• Ensure that none of info contained in Website be circulated except on specific “pull” request
• Not issue any circular or any Ad to solicit people to visit Website
• Permitted to mention Website address on professional stationery & email
• Following info is allowed to be displayed on Websites –
o Member/Trade/Firm name
o Year of establishment
o Member/Firm’s Address (both Head Office & Branches), Tel. No, Fax No, E-mail ID

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o Nature of services rendered (only on specific “pull” request)

o Partners – Name, Year of Qualification, Mobile, Email, Area of Qualification on “pull” request
o Details of Employees – Name, Designation, Area of experience on specific “pull” request
o Job vacancies for CA (including articleship)
o No. of article assistants (only on specific “pull” request)
o Nature of assignments handled on “pull” request. Names of clients & fee charged cannot be
given
o Note - Disclosure of names of clients/fees charged is permitted only if required by regulator
provided such disclosure is only to extent of requirement & is made only till member works under
such Regulator/such requirements are in force. If such disclosure is made, ensure that it is also
mentioned on website [in italics], below such disclosure, that “This disclosure is in terms of
requirement of [name of regulator] having jurisdiction in [name of country] vide [Rule under
which disclosure is required by Regulator]”
• Display of Passport style photograph is permitted (not Framed photo)
• Members may include articles, professional info, bulletin boards, professional updation & matters
of professional interest on website. Educational videos on topics of professionals are permitted
• Chat rooms can be provided to permit chatting amongst CAs & b/w Firms & its clients.
Confidentiality should be observed. Firms can provide document Mgt facility with distinct log in &
password facility to clients to access copies of their docs on Firm website
• Firm can provide link of its social networking site. However, it should not solicit people to visit or
like their page on social networking site
• Members/firms can provide online advice to their clients who specifically request for advice
• Details in Website should be so designed that it does not amount to soliciting professional work
• Website should ensure secrecy of matters of clients handled through Website
• No Ad in any nature will be permitted on Website
• Website should be befitting profession of CAs & should not have info which is unbecoming of CA
• Website may provide link to Website of ICAI, its Regional Councils & Branches & Govt./Regulatory
authorities/other Professional Bodies
• Website address should be as near as possible to individual name/trade name/firm name. But
it should not amount to soliciting professional work
• Website should mention info which is not at material variance from info as per ICAI’s records

Online 3rd Party Platforms

Non-CAs’ firms have set up their own websites providing advisory services on areas where CAs are
involved. Only consultancy & advice can be provided through such websites by CAs, with condition
that contact address of CA is not provided nor such website contains any ad of professional
achievements except stating that he is CA. Name of firm with suffix “CA” would not be permitted

Publication of Name or Firm Name in Telephone or other Directories published by Telephone

Authorities or Private Bodies
May have entries either by making special request or additional payment with restrictions -
• Entry should not appear in any other section except that of ‘CAs’
• Member/firm should belong to city for which directory is being published
• Order of entries should not be in any manner other than alphabetical
• Entry should not be made in prominent manner giving impression of publicity
• Entries should be open to all CAs/firms in particular city where directory is published
• Members can also include their names in trade/social directories

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Application based Service provider Aggregators

Not permitted for CA to list himself with online Application based service provider Aggregator, wherein
other category like businessmen, technicians, maintenance workers, event organizers etc. are also listed

Specialised Directories for limited circulation

• Name, description & address of member/firm may appear in directory or list of members of
particular body in which names are listed alphabetically.
• In addition, member may, directorships held & personal details & may state his outside interests.
He should not give names of his clients

Exemptions
• Exemption for publication of name & address of member/firm, with description CA, in Ad appearing
in press in following circumstances, provided Ad is not displayed more prominently than usual for
such ads or name of member/firm with designation CA appears in type not bolder than Ad –
o Ad for recruiting staff in member’s own office
o Ad inserted on behalf of client requiring staff or to acquire or dispose of business or property
o Ad for sale of business/property by CA acting in professional capacity as trustee, liquidator
or receiver
• When advertising for staff/article assistants, CAs should avoid expression such as “well-known
firm”. Ads should not contain any promotional element nor that services offered by CA are superior
to those offered by other CAs

Clause (7) Advertises his professional attainments or services, or uses any designation other than
CA on professional docs, visiting cards, letter heads or sign boards unless it is degree of University
established by law in India or recognized by CG or Council

Provided that CAiP may advertise through write up stating service provided by him or his firm &
particulars of his firm subject to following Guidelines
• No exaggerated claims for services offered or qualifications or experience
• Not make any disparaging (downgrading) references to work of others
• Not be of nature that may bring profession into disrepute
• Not contain testimonials or endorsements or names of clients (both past & present) or fees charged
• Not contain any info about achievements (except awards given by CG or SG or Regulatory bodies)
or any position held, or accreditation
• Monogram of any kind or use of catch words is not permitted
• Membership No./FRN should be mentioned
• Not be of font size exceeding 14
• Not be violative of CAs Act, 1949, CAs Regulations, 1988, Code of Ethics, 2020 or any Guideline

• Date of setting-up practice/firm – Not permitted on letter heads & professional docs but permitted
on website

• Practice as Advocate - CAiP may practice as advocates if permitted by Bar Council, but in such case,
they should not use designation ‘CA’ for matters involving practice as advocate. For other matters,
they should use designation ‘CA’ but they should not use designation ‘CA’ & ‘Advocate’
simultaneously

• Practice as CS/CMA – CAiP may practice as CS/CMA. However, shall not use such designations
simultaneously with “CA”. If permission is granted to CAiP to also hold COP of Sister Institute
(CS,CMA)/Bar Council, such member be treated as member in full-time practice

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• Mention of Firm name except on Professional Docs - Not Permitted for Firm to use designation ‘CA’
except on professional docs, visiting cards, letter heads or sign boards & under Clause (6)

• Notice in Press relating to Success in Examination - Candidate’s name & address, school & local
background, examination passed with details of any prize, name of principal, firm & town in which
principal practices may be published

• Reports & Certificates - Ensure that extent & manner of publication of certificates are limited. He
should use letterhead of his Firm for issuing reports & certificates

• Appearance of CAs on Electronic Media (including Internet) - CAs may appear on TV, films, internet
& radio or give lectures & may give their name & Firm name & describe themselves as CAs. Special
qualifications or knowledge directly relevant to subject matter of programme may also be given.
However exaggerated claim or any kind of comparison is not permitted

• Publicity is permitted for positions of local or national importance. Mention of Membership of ICAI
is desirable. CA should aim to achieve publicity for ICAI. Members giving talks or lectures or
attending conference shall describe themselves as CAs only when they are acting in their capacity
as CAs. However, reference to firm should not be given (allowed in above point)

• Organising Training, Seminars for his staff- CAiP may also invite staff of other CAs & clients to
attend same. However, undue importance should not be given to name of CA in any booklet issued

• Writing Articles or Letters to Press - On subjects connected with profession, may give names &
use description CAs

• Size of Sign Board for Office - Use of glow signs or lights on large-sized boards as is used by
traders or shop-keepers is not permitted

• Prospectus/Public Announcement with detail of Director - CA should ensure that such

announcements do not advertise his professional attainments & do not amount to solicitation of
professional work. Use of ‘CA’ is permitted. However, his expertise, specialisation & knowledge in
any particular field are not published with his name. Particulars about directorships held by him in
other Co. can be given, but name of firm in which he is partner, should not be given

• Use of Logo - Logos unconnected with first letter of name of firm or its partners or proprietors
would not be permitted. Use of logo/monogram of any kind/form/style/design/colour etc. on any
display material or media is prohibited

• QR Code on Visting Card – Permitted if it only contains info allowed on a visiting card

• Member is allowed to print names of all firms on personal letter head in which he is a partner

Clause (8) Accepts position as auditor previously held by another CA without first communicating
with him in writing

When inquiring retiring auditor, proposed auditor should find out if there are any reasons why he should
not accept appointment -
Valid Reasons - Change of venue of business & local CA is preferred or where partner retires or dies or
where temperaments clash or client has some good reasons to feel dissatisfied

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Invalid Reason - Professional reasons for not accepting audit would be -

• Non-compliance of Sections 139 & 140 of Co. Act as mentioned in Clause (9)
• Non-payment of undisputed Audit Fees (except Sick Units) - Provision for audit fee in FS signed
by both auditee & auditor along with other expenses incurred by auditor, shall be considered as
“undisputed audit fee” & “sick unit” shall mean unit registered for atleast 5 years, which has at
end of any FY accumulated losses =/> net worth (Assume existence for 5 years if not given in Ques)
• Issuance of qualified report
In 1st 2 cases, auditor who accepts audit would be guilty of professional misconduct
In 3rd case, he may accept audit if he is satisfied that attitude of retiring auditor was not proper &
justified. However, if he feels that retiring auditor had qualified report for good & valid reasons, he
should refuse to accept audit

Note -
• If Previous Auditor is unavailable to accept payment of undisputed audit fees & it is not possible
to transfer payment electronically, Incoming Auditor may advise client to purchase Demand Draft
for undisputed Audit Fees & may accept Audit after verifying same. It will be duty of Incoming
auditor to ensure payment of undisputed Audit Fees to retiring auditor at earliest possibility

• Correct procedure when prospective client wants to change his auditor to you – Ask client if retiring
auditor is informed of intention to change. If yes, then communication should be addressed to
retiring auditor. If no as client is not willing to make 1st move, then ask him reason for proposed
change. If not a valid reason, don’t accept audit. If decided to accept audit then address
communication to retiring auditor

• If retiring auditor fails to respond to communication of incoming auditor, then incoming auditor can
accept appointment after waiting for reasonable time

• Mere posting of letter “under certificate of posting” is not sufficient as Member has no positive
evidence of delivery of communication. Following are permitted –
o Communication by letter sent through “Registered Post Acknowledgement due” or
o By hand against written acknowledgement or
o Acknowledgement of communication from retiring auditor’s vide email registered with ICAI or
his last known official email or
o UDIN generated on UDIN portal

• Premises found Locked - Written on Acknowledgement Due shall be deemed as been delivered to
retiring auditor

• Firm not found at given Registered address – If address of communication is same as registered
with ICAI on date of dispatch, letter will be deemed to be delivered, unless retiring auditor proves
that it was not really served & that he was not responsible for such non-service

• Communication required for all kinds of audit - Requirement for communicating with previous
auditor being CAiP would apply to all types of Audits viz., Statutory Audit, Tax Audit, GST Audit,
Internal Audit, Concurrent Audit etc. This clause is applicable for replacement positions and not
parallel positions, so Internal Auditor is not required to communicate to Statutory Auditor

• Communication in case of Assignments done by other professionals (Non-CA) - It would be healthy

practice to communicate

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• Lack of time in acceptance of Govt Audits - If there is no time to wait for reply from outgoing
auditor, incoming auditor may give conditional acceptance of appointment & commence work
immediately after he has sent communication to previous auditor. In his acceptance letter, he
should state that his acceptance is subject to professional objections from previous auditors &
that he will decide about his final acceptance after receiving info received from previous auditor

• Joint auditor with earlier auditor - It is necessary for new auditor appointed to act jointly with
earlier auditor to communicate with such earlier auditor

• Special Audit under Income Tax Act, 1961 - It would be healthy practice if Tax Auditor conducting
special audit under Income Tax Act communicates with Statutory Auditor

Clause (9) Accepts appointment as auditor of Co. without first ascertaining whether requirements
of Section 139 & 140 of Co. Act for appointment is complied with

It is not sufficient to accept certificate from Mgt of Co. that above sections are complied. Incoming
auditor should verify records of Co. & ascertain as to whether Co. has complied with above sections. If
Co. is not willing to allow incoming auditor to verify records, he should not accept audit

• First auditor of Co. is appointed by BOD within 30 days of date of registration of Co.
• If BOD unable to appoint as above – Appointed by Members in meeting
• Casual vacancy is filled by BOD. However, non-acceptance of appointment by CA does not constitute
casual vacancy to be filled by BOD. In such case, it will be deemed that no auditor was appointed in
AGM & hence existing auditor shall continue to be auditor of Co.
• Resignation of auditor – Appointed by Members in General Meeting of Co.
• Removal of auditor before expiry of his term - Special resolution at General Meeting after obtaining
previous approval of CG by Co.
• If AGM is adjourned - Retiring auditor will continue to hold office till adjourned meeting is held &
business listed in agenda of meeting is concluded. If new auditor is appointed at original meeting
(which is adjourned) such auditor can assume office only after conclusion of such adjourned meeting
• If AGM is adjourned without appointing auditor - no special notice for removal of retiring auditor
received after adjournment can be acted upon by Co., since special notice should be given to Co.
before meeting

Guidelines for Ethical Standards Board for looking into cases of Removal of Auditors -
• If auditor resigns - Send communication to BOD & ICAI giving reasons. Incoming auditor shall,
before accepting appointment, obtain copy of such communication from BOD
• If auditor willing but not reappointed - File with ICAI copy of statement sent to Mgt for
circulation among members. Incoming auditor shall, before accepting appointment, obtain copy of
such communication from Co.
• Ethical Standards Board may call for further info as it may require
• Above procedure is also followed in case of Govt & other statutory authorities

Clause (10) Charges or offers to charge for any professional employment, fees based on % of
profits or contingent upon findings or results of employment, except as permitted under regulations

Exemption - Regulation 192

• Receiver or Liquidator - % of realization or disbursement of assets
• Auditor of co-operative society - % of paid-up capital or working capital or gross or net income
• Valuer for direct taxes & duties - % of value of property valued

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• Fund raising services - % of fund raised (getting loan sanctioned is not fund raising)
• Debt recovery services - % of debt recovered
• Cost optimisation - % of benefit derived
• Insolvency Professional & Non-Assurance Services to Non-Audit Clients

Clause (11) Engages in business or occupation other than CA profession unless permitted by Council
Permitted to be Director Simplicitor (Non-Executive) of Co. (Not being MD or WTD & is required
only in Board Meetings & not paid any remuneration except for attending meetings) unless he or
his partners are auditor of co.

Regulation 190A - Permission granted generally

• Employment under CAiP or firms
• Private tutorship
• Authorship of books & articles (not necessarily Professional)
• Editorship of professional journals. E.g. Company Audit Journal
• Holding of Life Insurance Agency License for limited purpose of getting renewal commission
• Attending classes & appearing for any examination
• Holding of public elective offices such as M.P., M.L.A. & M.L.C.
• Honorary office leadership of charitable-educational or other non-commercial orgs
• Acting as Notary Public, Justice of Peace, Special Executive Magistrate & like
• Part-time tutorship under coaching org of ICAI
• Valuation of papers, acting as paper-setter, head-examiner or moderator, for any examination
• Acting as Surveyor & Loss Assessor under Insurance Act
• Acting as recovery consultant in banking sector
• Owning agricultural land & carrying out agricultural activity

Specific & Prior (before engaging) approval of Council -

• Full-time or part-time employment in business provided that he/his relatives do not hold
“substantial interest” in such business (20% or more)
• Full-time or part-time employment in non-business concern
• Office of MD/WTD provided that he/his relatives do not hold substantial interest in such concern
(substantial interest condition is not to be complied for being ‘Director Simplicitor’) - even if person
is not designated as MD/WTD, he can be deemed to be MD/WTD if he is entrusted with whole or
substantially whole of Mgt of affairs of Co.
• Interest in family business & is not actively managed by him
• Interest in educational institution
• Part-time or full-time lectureship for courses other than ICAI’s examinations conducted under
ICAI or Regional councils or their branches
• Part-time or full-time tutorship under educational institution other than coaching org of ICAI
• Editorship of journals other than professional journals
• Other business for which Executive Committee may grant permission

Note
• Trading in Commodity (not equity/currency) Derivatives requires Special Permission
• “Relative” means husband, wife, brother or sister or any lineal ascendant or descendant of
member
• Substantial Interest –
o In case of Co., if => 20% voting power is owned by member or by any of following persons –
▪ 1 or more relatives of member
▪ Any concerns in which any persons referred above has substantial interest

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o In other cases, if member or persons referred above are entitled to => 20% of profits
• Auditor of Subsidiary Co. cannot be Director of its Holding Co.
• Member is permitted to be promoter/signatory to MOA & AOA
• Such promoter/signatory is permitted to be Director Simplicitor of that Co.
• Teaching hours should not exceed 25 hours per week to be able to undertake attest functions
• Receiving Royalty from Website – Requires Special Permission
• CA was partner in 2 business firms & MD in 2 Co. & holding COP without permission of ICAI - Guilty
under Clauses (4) and (11)

CAiP in HUF doing business - CA can acquire interest in family business in any manner - as proprietary
firm, as partnership firm or HUF as its Karta or member
• He needs to provide evidence that interest in family business was due to inheritance/succession/
partition of family business &
• Also, that he was not actively engaged in business & that business concern was not created by him
• CAiP engaged as Karta, will be within limit if he makes investments from funds of HUF only,
provided, he is not actively engaged in Mgt of said business

Part II - Professional misconduct in relation to CA in service

Intro line – CA in service shall be deemed to be guilty of professional misconduct, if he being employee
of any Co., firm or person –

Clause (1) Pays or agrees to pay directly or indirectly to any person any share in emoluments of
employment undertaken by him

Permitted - Sharing among relatives, dependents, friends etc., if payment is not consideration for job
procurement or retainership

Clause (2) Accepts or agrees to accept any part of fees or profits from lawyer, CA or broker
engaged by Co., firm or person or agent or customer of such Co., firm or person by way of
commission or gratification

Note – In Clause 1&2, he will be guilty of misconduct irrespective whether he was in whole-time or part-
time employment or holding COP along with employment

Part III - Professional misconduct in relation to CA generally

Intro Line - CA, whether in practice or not, shall be deemed to be guilty of professional misconduct, if
he -
Clause (1) Not being fellow of Institute, acts as fellow of Institute

Clause (2) Does not supply info called, or does not comply with requirements asked, by Institute,
Council or Committee, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality
Review Board or Appellate Authority

E.g. of Misconduct under this clause

• While applying for COP, did not fill in info about his engagement in other business
• Failure to furnish info of relationship with multi-national accounting firm in India

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• Failed to reply to letters of ICAI asking him to confirm date of leaving service

Clause (3) While inviting professional work from another CA or while responding to tenders or
enquiries or while advertising through write up, or anything provided in Clauses (6) & (7) of Part I
of 1st Schedule, gives info knowing it to be false

Part IV - Other misconduct for CAs generally

Intro Line - CA is expected to maintain highest standards of integrity even in his personal affairs &
any deviation from these standards calls for disciplinary action. CA, whether in practice or not, shall
be deemed to be guilty of other misconduct, if he –

Clause (1) is held guilty by any civil or criminal court for offence which is punishable with
imprisonment for term not exceeding 6 months

Clause (2) in opinion of Council, brings disrepute to profession or ICAI through his action whether
or not related to his professional work

E.g. of Misconduct under this clause

• Concurrent auditor of bank used his influence to get loan & thereafter failed to repay loan
• Retains books of a/c & docs of client & fails to return without reasonable cause
• Makes material misrepresentation
• Uses services of his article assistant for other than professional practice (election campaigning)
• Conviction by competent court of law for any offence under Sec 8 (v) of CAs Act 1949
• Misappropriation of money by office-bearer of Regional Council of ICAI
• Not replying within reasonable time & without good cause to letter of public authorities
• Assessment records of IT Dept belonging to client were found in almirah of bed-room of CA
• Where CA had adopted coercive methods on a bank for having a loan sanctioned to him
• Offering free service in return to sanction of loan
• Cheque dishonoured due to insufficiency of fund (if other reason like ‘refer to drawee’ – not guilty)
• Withdraw money from bank which does not belong to him
• Advising unethical practice to client

Second Schedule

Part I - Professional Misconduct in relation to CAiP

Intro line - CAiP shall be deemed to be guilty of professional misconduct, if he –

Clause (1) Discloses Info acquired in professional engagement to any person other than his client
without consent of his client or otherwise than as required by law

• SA 200 also state that auditor should respect confidentiality of info acquired
• CA’s duty not to disclose continues even after completion of his assignment
• Disclosure is allowed if required as performance of professional duty. E.g. submitting info to
exchange control authorities

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• In other disclosures, Consent of client should be given by competent person. E.g. In sole
proprietorship – By Proprietor or his attorney, In Partnership – By Any partner. In Co. – By MD if
such powers of BOD are delegated to him, but if not delegated, by means of Board resolution
• Disclosure allowed to CG within 60 days of fraud knowledge as per section 143(12)

Clause (2) Certifies or submits in his name or firm name, report on examination of FS unless such
examination is made by him or by partner or employee in his firm or by another CAiP

Clause (3) Permits his name or firm name to be used with estimate of earnings contingent upon
future transactions in manner which may lead to belief that he vouches for accuracy of forecast

CA can participate in preparation & review of financial forecasts, provided he indicates in his report
sources of info, basis of forecasts & major assumptions made & so long as he does not vouch for
accuracy of forecasts. Same opinion would also apply to projections. (Refer SAE 3400 for details)

Clause (4) Expresses his opinion on FS of enterprise in which he, his firm, or partner in his firm
has substantial interest (20%)

• Applicable to all Attest Functions (not on Mgt consultancy services like cost evaluations)
• “FS” in ethics include reports & certificates & attest function but not include statements prepared
purely for info of their employers & not meant to be submitted to any outside authority
• CA should maintain same independence as auditor in all spheres of his work
• Members not to write BOA for auditee clients
• Statutory auditor not to be Internal Auditor simultaneously
• Internal auditor not to be Tax auditor simultaneously
• Internal Auditor not to be GST Auditor simultaneously
• Cooling off period - CA shall not accept audit of Co. for period of 2 years from date of completion
of his tenure or resignation as Director
• Members should satisfy if his appointment is as per statute/deed/instrument constituting entity
• If appointment is to be authorised by regulatory authorities, then member must satisfy whether
such authorities have authorised appointment of auditor

Not Permitted
• Certify FS of employer or of concern under same Mgt, even holding COP unless permitted by law
• By himself or in his firm name –
o Accept Auditor ship of college, if he is working as part-time lecturer in college
o Accept Auditor ship of Trust where his partner is either employee or trustee of Trust
• To audit where relative has substantial interest
• To audit where member is Director, officer or employee of Co.
• To audit where member is not holding above position in Co., but holding security/interest in Co. or
its subsidiary/holding/associate/subsidiary of such holding Co.
• To audit where partner of member is officer or employee of Co.
• To audit where partner of member is holding any security or interest in Co. or its subsidiary or
holding or associate Co. or subsidiary of such holding Co.
• To audit where relative of member is director or KMP
• To audit where relative of member is holding any security or interest in Co., or its subsidiary, or
holding or associate Co. or subsidiary of such holding Co., if face value exceeds Rs 1 Lakh
• To audit if client is relative of member

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Clause (5) Fails to disclose material fact known to him which is not disclosed in FS, but disclosure
is necessary in FS where he is concerned with FS in professional capacity

E.g. of Misconduct under this clause –

• CA failed to report about non-creation of sinking fund as per Debenture Trust Deed & didn't make
clear that amounts shown towards sinking fund were borrowed from managing agents of Co.
• CA ignored non-disclosure of loan from EPF
• Auditor of EPF disclosed contraventions to Trustees of fund but not to members of fund
• Auditor commented upon irregularities in Trust in confidential report given to trustees, but did not
mention about irregularities in his audit report to members

Clause (6) Fails to report MM known to him to appear in FS with which he is concerned in
professional capacity

• CA represented Co. before tax authorities & submitted info to authorities on behalf of client, which
were false & misleading - These statements are based on data provided by Co. CA had only
submitted them acting on instructions of his client - Not Guilty

Clause (7) Does not exercise due diligence or is grossly negligent in conduct of his professional
duties

It is a vital clause which gets attracted whenever it is necessary to judge whether accountant has
honestly discharged his duties. The expression negligence covers a wide field & extends from frontiers
of fraud to collateral minor negligence

E.g. of Misconduct under this clause

• Not completing audit work & not submitting audit report in due time
• Fail to indicate mode of valuation of investments in shares required by Co. Act
• Conducted Stock audit without visiting site, relied on Mgt reports
• Wrongly certified increase in Paid up share capital of Pvt ltd Co (Clause 7,8 & 9)
• Issued turnover certificate without checking books & docs but relying on article clerk
• Issued certificate of consumption of Raw material based on minutes of BOD (clause 2 & 7)
• Issued incorrect certificate of export of Onions
• Issued report subject to separate notes (No audit report is issued with Notes)
• Failure to examine cash balance & passbook i.e. basic audit procedure
• Wrong audit report issued to School, claimed correction slip sent but couldn't prove
• Issued 2 certificates of circulation for 1 daily newspaper (clause 7 & 8)
• Material prior period adjustment made to a/c – auditor didn't exercise due diligence + wrong opinion
insufficient info + didn't follow SA - Clause 7,8 & 9
• Failed to check a forged signature which he could have checked
• Shared password of his digital signature certificate with client
• CA failing to give disclosure about Contingent Liabilities in FS (clauses 6 & 7)
• Issuing clean reports on balance sheet without examining accounts
• Failed to confirm value of investments & simply relied on Mgt representation
• Digitally signed form without verifying genuineness
• Certified circulation figures based on MIS Report without examining BOA
• Did not exercise reasonable skill & care & performed work in casual & haphazard manner

Clause (8) Fails to obtain sufficient info which is necessary for expression of opinion or its
exceptions are sufficiently material to negate expression of opinion (disclaimer of opinion)

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E.g. of Misconduct under this clause

• Issued certificate of circulation of periodical without going into details - Clause (7) & (8)
• CA not stated his limitations/assumptions in his certificates - Clause (7) & (8)
• Transaction b/w ABC Firm & B developers reported in books of ABC Construction - Clause 6, 7 & 8
• Issued false certificates for exports for consideration without verifying docs - Clauses 2, 7 & 8
• Audited BOA with investment of Rs 10L but real value was 25k - Clauses 2, 7, 8

Clause (9) Fails to invite attention to any material departure from generally accepted procedure
of audit applicable to circumstances

• If auditor fails to verify cash when it is material, it is not sufficient for him to merely state in his
report giving qualifications that he did not verify cash. He should indicate clearly reasons why he
was unable to perform audit as per generally accepted procedures
• Audit of Listed Co. - Auditors should hold valid certificate issued by Peer Review Board
• FRN & Membership No. - Mention in all reports & certificates
• UDIN - UDIN is mandatory on all Corporate/Non-Corporate Audit, Attest & Assurance Functions.
E.g. all kinds of certification, GST & Tax Audit Reports

E.g. of Misconduct under this clause

• CA didn't conduct sample checking of bank a/c of Co & didn't do vouching & depended on work of
Article Assistant - Clause 7,8 & 9
• CA didn't check bank column totals, didn't verify contra entries, test checked when no internal
check present, didn't check Bank reconciliations - Clause 7,8 & 9

Clause (10) Fails, to keep moneys of his client, other than fees or remuneration or money meant
to be expended, in separate banking account immediately or, to use such moneys for intended
purposes within reasonable time

• Advance received by CA against services to be rendered does not fall under this Clause
• Money intended to be spent within reasonably short time need not be put in separate bank account
• Moneys received by CA, in his capacity as trustee, executor, liquidator, etc. must be put in
separate bank account immediately

E.g. of Misconduct under this clause

• Refund voucher issued by Income Tax dept in name of client credited to CA’s a/c - Clause 7 & 10
• CA acting as financial advisor to client converted his own a/c to joint a/c with client without his
consent & fraudulently discharged 3 FDs in client's name - Clause 10 & Other Misconduct

Part II - Professional misconduct for CAs generally

Intro line - CA, whether in practice or not, shall be deemed to be guilty of professional misconduct, if
he -
Clause (1) Contravenes any provisions of this Act or regulations or guidelines issued by Council

E.g. of Misconduct under this clause

• All misconducts in relation to Articles of Firm
• CA not having COP issued certificate
• Described himself as Investment Consultant Public Accountant in private circular to clients
• Took loan from firm where article & his father were interested

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• Having agreement to pay stipend to articles annually

• Accepted audit even when undisputed audit fees not paid to earlier auditor
• Conducted more tax/statutory audits than prescribed limit

Clause (2) Being employee of any Co., firm or person, discloses confidential info acquired during
employment except as & when required by law or except as permitted by employer

Applicable whether whole/part-time employment or carrying on practice along with employment

Clause (3) Includes in any info, statement, return or form to be submitted to Institute, Council
or Committee, Director (Discipline), Board of Discipline. Disciplinary Committee, Quality Review
Board or Appellate Authority any particulars knowing them to be false

E.g. of Misconduct under this clause

• CA manager in firm applied for admission as fellow to ICAI saying he's partner in firm
• CA in full time employment in Co, while filling bank empanelment form, gave declaration that he was
not in any occupation/business/vocation etc
• CA being manager of Co devoting 30 hours per week showed himself as CA in full time practice for
employment for Bank branch Audit
• In application for empanelment as auditor of banks submitted to ICAI, included another CA name
as partner in firm (who was not actually a partner on date application)

Clause (4) Defalcates or embezzles money received in his professional capacity (SA 240)

Part III - Other misconduct for CAs generally

Clause (1) CA, whether in practice or not, shall be deemed to be guilty of other misconduct, if he
is held guilty by any civil or criminal court for offence which is punishable with imprisonment for
term exceeding 6 months

Disciplinary Procedure
Disciplinary Directorate (DD) on receipt of complaint along with fee against CA – Prima Facie Opinion

Guilty Not Guilty

First Schedule Second Schedule or Both Board of Discipline

Board of Discipline Disciplinary Committee Accept Reject

If Guilty – If Guilty –
Close • Advice DD to further
• Reprimand • Reprimand Matter investigate
• Remove name • Remove name • May proceed if matter of
upto 3 months permanently
1st Schedule
• Fine upto 1 Lakh • Fine upto 5 Lakh
• Refer to Disciplinary
If Not Guilty – Close If Not Guilty – Close Committee, if matter of
the matter the matter 2nd Schedule or Both

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Appeal - Any member or Director (Discipline) aggrieved by order of Board or Disciplinary Committee
can prefer an appeal within 90 days. Appellate Authority can –
• Confirm, modify or set aside order
• Impose, set aside, Reduce or enhance penalty
• Remit case to Board of Discipline or Disciplinary Committee for reconsideration
• Pass such order as it thinks fit

Council Guidelines, 2008

Chapter II - Conduct of Member being employee

CA who is employee shall exercise due diligence & shall not be grossly negligent in conduct of his duties

Chapter V - Maintenance of BOA

CAiP or firm shall maintain for his/its professional practice, proper BOA including –
• Cash Book
• Ledger

Chapter VI - Tax Audit assignments u/s 44 AB of Income-tax Act

• CAiP shall not accept, in FY, more than 60 tax audits, provided that in case of firm, 60 tax audits
shall be considered for each partner
• If any partner is also partner of other firms, number of his tax audits taken for all firms together
& also in his individual capacity for such partner shall not exceed 60 in aggregate
• Audits u/s 44AD, 44ADA & 44AE of Income Tax Act shall not be counted for 60 tax audits
• Limit of tax audit may be distributed b/w partners in firm in any manner. E.g. 1 partner can
individually sign 600 tax audit reports in case remaining 9 partners are not signing any report
• Joint Tax audit is also counted in 60 tax audits
• Audit of head office & branch offices is regarded as 1 tax audit
• Audit of 1 or more branches of same concern by 1 CAiP is regarded as only 1 tax audit

Chapter VII - Appointment of Auditor in case of non-payment of undisputed fees – Already

discussed

Chapter VIII - Specified number of audit assignments

• CAiP shall not hold, at any time, appointment of more than 30 audits whether for Private Co. or
Other Co., with exception of One Person Co. & Dormant Co
• In case of firm, 30 audits is regarded for each partner of firm - CAiP, whether in full-time or part
time employment elsewhere, or being part time practicing partner of firm shall not be counted
• If any partner of firm of CAiP is also partner of any other firms, number of audits taken for all
firms together & also in his individual capacity shall not exceed 30 audits in aggregate
• In computing 30 audits –
o Joint Audit shall be counted
o Audit of head office & branch offices of Co. by 1 CA or firm is regarded as 1 audit
o Audit of 1 or more branches of same Co. by 1 CAiP or by firm is regarded as 1 audit only
o Number of partners of firm on date of acceptance of audit shall be considered

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Chapter IX - Appointment as Statutory auditor

CAiP shall not accept appointment as statutory auditor of Public Sector Undertaking/Govt Co./Listed
Co. & other Public Co. having turnover of Rs 50 crores or more in year if he accepts any other
assignment for same Co. on remuneration, payable to statutory auditors & their associate concern put
together, in total exceeds fee payable for statutory audit of same Co.
Provided that in case appointing authority/regulatory body specify more stringent condition/
restriction, same shall apply

• “Other assignment” include Mgt Consultancy & all other services permitted but shall not include –
o Audit under other statute
o Certification work required to be done by statutory auditors &
o Any representation before authority
• “Associate concern” means any corporate/firm which renders Mgt Consultancy & all other services
permitted by Council wherein proprietor/partner of statutory auditor firm/their relative is
Director/partner/jointly hold substantial interest in said corporate or partnership

Chapter X - Appointment of auditor when he is indebted to concern

• CAiP/Partner/Firm/relative of such CAiP or partner shall not accept appointment as auditor while
indebted to concern or given any guarantee or provided any security for indebtedness of any 3rd
person to concern, for limits fixed in statute & in other cases for amount exceeding Rs 1 Lakh
• If auditor recovers his fees on progressive basis – Not Guilty
• Limits as per Co. Act for indebtedness is 5 Lakhs & for guarantee & security is 1 Lakh

Chapter XI - Directions in case of unjustified removal of auditors

Incoming auditor not to accept appointment as auditor

Chapter XIII - Guidelines on Tenders – Discussed Earlier

Chapter XIV – UDIN – Discussed Earlier

Chapter XV - Guidelines for Networking

• Judgment as to network shall be made as to whether reasonable & informed 3rd party would
conclude that entities are associated in a network
• If larger structure is aimed only at facilitating referral of work - Not network
• If larger structure is aimed at co-operation & sharing common brand name, common system of QC
or significant professional resources – Network
• If larger structure is aimed at co-operation & profit or cost sharing among entities – Network
• Sharing of immaterial costs - Not network
• If sharing of costs is limited to development of audit manuals or training - Not network
• Association b/w firm & unrelated entity to jointly provide service or develop product - Not network
• If larger structure is aimed at cooperation & entities share common ownership, control or Mgt or
QCS or business strategy or brand name (For E.g. using common brand name along with, its firm
name, when partner signs audit report) – Network
• Even though firm does not belong to network & does not use common brand name as part of its firm
name, it may belong to network if it makes reference in its stationery or promotional materials as
being member of association of firms

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• Entity is not deemed to be network firm merely because it co-operates with another entity solely
to respond jointly to request for proposal for provision
• If larger structure is aimed at co-operation & entities within structure share significant part of
professional resources – Network
• If shared resources are limited to common audit manuals, with no exchange of personnel or client
or market info, shared resources are not significant – Not Network

Forms of Network - Network can be constituted as

• Mutual entity which will act as facilitator for constituents of Network. Network itself will not carry
out any professional practice
• Partnership firm with maximum 20 partners
• LLP
• Co. (for Mgt consultancy services Co.)
• Firm is allowed to join only 1 network
• Firms having common partners shall join only 1 Network

Approval of Name of Network -

• Network name should be approved by ICAI. To distinguish “Network” from “firm”, words “&
Affiliates” shall be used after name of network & words “& Co.” / “& Associates” shall not be used
• Format of application for approval of Name for Network is at Form ‘A’
• Even after name is approved, it is found to be undesirable then, said name may be withdrawn at any
time by ICAI. Provisions for names of Co. in Co. Act shall be applicable in spirit
• ICAI shall approve or reject name of Network within 30 days from date of receipt of Form
• Mere approval of name shall not entitle Network to carry on practice in its own name

Registration of Network with entities in India -

• ICAI shall reserve name of network for 3 months from date of approval
• Network shall get itself registered with ICAI by applying in Form B within 3 months, failing which
name assigned shall stand cancelled
• Registration of Network with ICAI is mandatory
• If diff Indian firms are networked with common Multinational A/cing Firm, they shall be considered
as part of network

Listing of Network with entities outside India -

• Authorized representative of Indian firm/Member shall file declaration with ICAI in Form `D’
for Listing of such Network within 30 days from date of entering into Network arrangement
• CAs are permitted to join network with entities outside India provided that they join only 1 network
& firms having common partners shall join only 1 such network

Change in constitution of registered Network -

• Due to entry or exit from Network, network shall communicate to ICAI by filing Form ‘C’ within
30 days from date of change in constitution

Ethical Compliance -
• If 1 firm of network is statutory auditor of entity then associate [including networked firm] or
said firm directly/indirectly shall not accept Section 144 services
• Guidelines of ceiling on Non-audit fees –
o For Network firm who is doing statutory audit (including its associate concern/firm having
common partnership) it shall be same as discussed previously &

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o For other firms of same Network collectively, it shall be 3 times of fee payable for carrying
out statutory audit of same Co.
• If rotation of firms is prescribed by law, no network firm can accept appointment as auditor
• Network may advertise itself to extent permitted by Ad Guidelines. Firms constituting network are
permitted to use words “Network Firms” on their professional stationery

Consent of Client -
Effect of registration of network with ICAI will be deemed to be public notice of network & therefore
consent of client will be deemed to be obtained

Framework of Internal Byelaws of Network - Bye-laws may contain following -

• Appointment of Managing Committee, from managing partners of member firms. Minimum &
maximum number of members of Managing Committee
• Administration of network
• Contribution of membership fees to meet cost
• Identifying partner of member firms to be responsible for assignment (EP)
• Dispute settlement procedures through arbitration & conciliation
• Development of training materials for members of network
• Issue of News-letters for staff & clients
• Development of software for diff types of assignments
• Development & maintenance of data bases
• Library
• Appointment of technical director
• Determining methodology for drawing resources
• Determining compensation to member firms for resources
• Peer review of member firms

Chapter XVI - Logo Guidelines

• Logo consists of letter ‘CA’ with tick mark inside rounded rectangle with white background
• Letters CA have been put in blue, corporate colour which not only stands out on background but
also denotes creativity, innovativeness, knowledge, integrity, trust, truth, stability & depth
• Upside down tick mark typically used by CAs, symbolize wisdom & value of professional
• Green colour in tick mark signifies growth, prosperity, harmony & freshness.
• Use logo as it is. Do not change design & colours. Refrain from rotating or tilting logo

Chapter XVII - Guidelines for Corporate Form of Practice

• CAiP are allowed to hold office of MD, WTD or Manager (while retaining full time COP) of
corporate provided that it is engaged exclusively in rendering Mgt Consultancy & Other Services
• There is no restriction on quantum of equity holding of members, either individually/with relatives,
in such Co. Such members are regarded as in full- time practice & can continue to do attest
function either in individual capacity or in Proprietorship/Partnership firm & can also train article
assistants
• Name of Mgt Consultancy Co. should be approved by ICAI & Co. has to be registered with ICAI

Ethical Compliance -
• If individual/firm is statutory auditor of entity then Mgt Consultancy Co. shall not accept Section
144 services
• Ceiling on Non-audit fees is applicable for Mgt Consultancy Co.

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• Such Co. shall give undertaking that it complies with clauses (6) & (7) of Part-I of 1st Schedule &
that it shall render only Mgt Consultancy & Other Services

Recommended Self-Regulatory Measures

Branch Audits
Branch audits should not be conducted by statutory auditors consisting of 10 or more members, but
by local firms consisting of less than 10 members. This restriction not apply -
• Where a/cing records of branches are maintained at head office &
• Where significant operations of Co. are carried out at its branch office

Joint Audit
In case of large Co., practice of associating firm with less than 5 members as Joint auditors should be
encouraged. If client desires to appoint such firm as joint auditor, senior firm should not object to same

Ratio B/w Qualified & Unqualified Staff

Firm engaged in audit should have at least 1 member for every 5 non-qualified members of staff,
excluding article assistants, typist, peon & other person not engaged directly in such professional work

Disclosure of Interest by Auditors in other Firms

Auditors should make disclosure of payments received by them for other services through medium of
diff firms in which said auditor may be either partner or proprietor

Recommended Minimum Scale of Fees - Relative Size

• For non-Public Interest Entities (E.g. Unlisted Co., Pvt Co.) - Disclosure to ICAI is required if for
2 consecutive years, gross annual professional fees from audit represent more than 40% of total
fees of firm
• For public-interest entities (E.g. Listed Co., Bank, Insurance Co.) - Disclosure to ICAI is required
if for 2 consecutive years, gross annual professional fees from audit represent more than 20%
of total fees of firm
• Charging excessive or low fees does not constitute any misconduct

Exemption from above applicability -

• Where Total Fees received by Firm does not exceed Rs. 20 lacs
• Audit of Govt Co., public undertakings, nationalised banks, public financial institutions, regulators
or where appointments are made by Govt

Recent Decisions of Ethical Standards Board

• CAiP holding COP is permitted to become member of 'Board of Mgt' in Primary (Urban) Co-operative
Banks
• CAiP cannot act as Trademark or Patent Attorney. Professional advice for Intellectual Property
Rights is a routine professional work for CAiP and is permitted
• CAiP is not permitted to accept statutory audit of society wherein immediate family member i.e.,
spouse or dependent, of member hold honorary position of managing committee
• Provision relating to limit of indebtedness to Co. shall apply only to statutory audits
• Firm may register itself on Udyog Aadhar, a web portal of MSME

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• There is no prohibition for internal auditor of Co. to purchase shares of said Co.
• CA is not permitted to use Messaging Applications to send messages to make people aware about
his practice & mention services provided
• CAiP being Director Simplicitor in a Co. cannot sign ROC Forms of Co. as it is direct conflict of role
• CAiP can act as Authorized Representative of Foreign Co., provided he is not auditor of said Co.
• 2 or more CAiP are permitted to have joint training session for their clients on GST, & share fees
collected from clients
• CAiP can provide services through kiosk only if professional services provided are permitted
• CA in service is allowed to take e-return registration if it does not conflict with employment
obligation. However, he cannot certify return
• If CAiP is non-executive director in Co., he or Firm in which he is partner, should not accept
appointment as statutory auditor of Co. which is joint venture of original Co.
• CAiP may be equity research adviser, but he cannot publish retail report, as it will be other business
– advising people is permitted
• There is no conflict of interest in CA, who is member of Trust, being auditor of said trust
• CAiP may be Registration Authority for obtaining digital signatures for clients
• CA can hold credit card of bank when he is also auditor of bank, provided outstanding balance on
does not exceed Rs 1 Lakh beyond prescribed credit period limit on credit card given to him
• CAiP can act as mediator in Court
• CAiP is not permitted to audit bank if he has taken loan against FD held by him in that bank
• Statutory auditor/tax auditor cannot be valuer of unquoted equity shares of same entity where law
prohibits same, but it is permitted if there is no specific restriction under any law
• CAiP cannot become Financial Advisors and receive fees/commission from Financial Institutions
such as Mutual Funds, Insurance Companies, NBFCs etc.
• CA cannot exercise lien over client records for non- payment of his fees
• Firm is not permitted to print its vision & values behind visiting cards
• CAiP is not permitted to take agencies of UTI, GIC or NSDL
• CAiP can be settlor of trust
• CAiP cannot hold Customs Brokers Licence
• CA in service may appear as tax representative before tax authorities on behalf of his employer,
but not on behalf of other employees of employer
• CA who is statutory auditor of bank cannot for same FY accept stock audit/inspection audit of any
branches of same bank or sister concern of bank, for same FY
• Firm appointed as internal auditor of PF Trust by Govt Co. cannot be appointed as Statutory Auditor
• Concurrent auditor of bank ‘X’ cannot be appointed as statutory auditor of bank ‘Y’, which is
sponsored by ‘X’
• CA/CA Firm can act as internal auditor of Co. & statutory auditor of its employees PF Fund

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