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					CODE OF ETHICS -
IMPLICATIONS IN
 DISCIPLINARY
  MECHANISM
         Vandana Nagpal
     Assisstant Secretary, ICAI
  ETHICS - MEANING
 In general refers to all standards of
  behaviour

 Specifically refers to a member’s
  behaviour or conduct towards the
  other members of his profession and
  towards the public at large.
Code of Ethics                        2
      CODE - MEANING
 General Collection / Compilation of
  Laws by the Appropriate Authority.

 In our context this refers to the Code
  of Ethics prescribed in this regard by
  the Institute.

Code of Ethics                         3
     CODE OF ETHICS -
       RELEVANCE
     Back bone of any profession

     Ensures high Ethical Standards of
      Chartered Accountants
     Is a self Imposed discipline
     Basis for reliance on the profession
        generally and members specifically
Code of Ethics                               4
 MISCONDUCT

Unethical practices adopted
by members of the Institute
                  MISCONDUCT
 Professional                       Other misconduct
  misconduct                             Any misconduct not
         Any act or omission             specified in any of the
          specified in any of the         Schedules to the Act
          Schedules to the                (even if it does not
          Act(arising out of              arise out of any
          professional                    professional
          assignments)                    assignment).



Code of Ethics                                                      6
PROFESSIONAL MISCONDUCT
 Members in Practice
         Part I First & Second Schedules

 Members in Service
         Part II First Schedule

 Members of the Institute generally
         Part III First Schedule
         Part II Second Schedule
Code of Ethics                              7
                   ENACTMENTS
                   Professional Misconduct
                         Enactments


   First schedule     Second Schedule             Others
Council has power     Council's Power        Council's Power is
to give Punishment          is                recommendatory
  upto five years     recommendatory


                          High court             High court
                        gives the final        gives the final
                         punishment             punishment
  Code of Ethics                                             8
           CODE OF ETHICS
                 IMPLICATIONS


  The Implications of different clauses are
   laid out in the Schedules to the Chartered
   Accountants Act, 1949


Code of Ethics                             9
                 FIRST SCHEDULE
 General Restrictions for a C.A. in Practice
      • Cannot solicit work.
      • Cannot give a client’s balance sheet on his letterhead.
      • Cannot describe on his letterhead or visiting cards association
        with other Indian/Foreign firms.
      • Cannot use a firm name which is not coined out of names or
        initials of the proprietor or partner.
      • Cannot use a logo on visiting cards, letterheads etc.
      • Cannot have his name displayed in yellow pages in bold.
       Cannot Respond to advertisements inviting applications for
        appointment of auditors; tenders or circulars or enquiry (made to
        more than one member) inviting quotations restricted to CA.
       Cannot pay earnest money/security deposit in areas which are
        exclusive to CA as per law
Code of Ethics                                                     10
         The Incoming Auditor should not
          accept the audit without first
          communicating with the Previous
          Auditor.


         A Chartered Accountant should not
          accept appointment as an auditor of
          an entity in case the undisputed audit
          fee of another Chartered Accountant
          for carrying the statutory audit has
          remained unpaid.
Code of Ethics                                 11
 The Incoming auditor of a company
  should, before accepting the audit,
  ensure himself that the provisions of
  sections
                 – 224 (appointment of an auditor)
                 – 224A (appointment of an auditor needing special
                   resolution)
                 – 225 (removal of an auditor)

     of the Companies Act, 1956 have been
       duly complied with.
Code of Ethics                                                   12
 CANNOT       accept contingency   or
  percentage based fees, except in the
  following cases:
                  A liquidator can accept his fee based on percentage of
                   realisation of assets
                  An auditor of a cooperative society can accept fees
                   based on percentage of paid up capital, working
                   capital, gross income/profits, or net income/profits
                  A valuer for direct tax purposes can accept fees based
                   on the value of property valued.

 Can share fees with other practising C.A.
  but not with others.
Code of Ethics                                                        13
 Cannot Engage in any business or
  occupation other than the profession of
  Chartered Accountants unless permitted by
  the Council

      Exceptions:

         • Can be a director simplicitor in a company without
           prior permission of Council.

         • Can be a promoter or promoter director in a
           company without prior permission of Council.
 Code of Ethics                                            14
 Cannot Accept a position as an auditor
  previously held by another CA in such
  conditions    so   as   to   constitute
  undercutting.

 Prohibits a member from allowing
  another member who is not his partner to
  sign any Financial Statement on his
  behalf or on behalf of his firm.

Code of Ethics                           15
           SECOND SCHEDULE
 Disclosure of information by Chartered
  Accountant without the consent of their
  clients

 Expresses opinion on financial statement of
  business in which the Chartered Accountant,
  his firm/partner has substantial interest
  unless disclosed in his reports
 Code of Ethics                           16
 Failure to disclose material fact

 Failure to report a material misstatement

 Gross negligence
        Failure to verify securities
        Failure to reconcile bank balances
        Failure to check cash balances
        Failure to issue false certificate regarding
         maintenance of records
Code of Ethics                                          17
 Failure to obtain sufficient information to
  warrant the expression of the opinion

 Failure to invite attention to material
  departure from the generally accepted
  procedure of audit


 Failure to keep moneys of clients in a
  separate banking account

 Code of Ethics                            18
CONTRAVENTIONS OF ACT
     PROVISIONS /
    REGULATIONS

 Failed to pay stipend as stipulated to his
  articled clerks

 Failure to forward the Articles of
  Agreement for registration as stipulated
Code of Ethics                                 19
                 CONCLUSION
 The Code of Ethics is Resilient and fully
  equipped to handle the present and
  future challenges.

 What is required is awareness amongst
  the members about its importance in the
  Profession.

Code of Ethics                           20

				
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