Professional Ethics
(1) Overview of Code of Ethics:
(a) Relevant Sections of (b) Schedules of (c) Miscellaneous CA Act, 1949 CA Act, 1949
Sec. 2(2)
First Schedule - Fundamental Principles & NOCLAR
Sec. 6,7,8 and 20 and
Sec. 21 and 22
Sec. 24,25 and 26
Sec. 27
- Council General Guidelines, 2008
Second Schedule - KYC Norms
- Self Regulatory Measures
- Decisions of ESB
- Guidelines for Networking
- Guidelines for Advertisement
(2) Schedules to Chartered Accountants Act, 1949:
(a) First 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)
(b) Second 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)
Part IV: Other Misconduct (Members Generally – 2 Clauses)
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(3) Relevant Sections of Chartered Accountants Act, 1949:
(i) Sec. 2(2): Members Deemed to be in Practice: 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 other Persons (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
NOTES:
- Sec. 2(2)(iv) provides that a member will be deemed to be in practice if he renders such other services, as in the opinion of the Council of ICAI, can be rendered by CA in practice.
- Council of ICAI, 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; and
(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.
(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
DO Practice – Questions on Sec. 2(2)
Professional Ethics Chapter 5 5.2
(ii) Sec. 6: Certificate of Practice:
No member of ICAI, whether in India or Outside India, shall be entitled to practice
unless he has obtained Certificate of Practice
NOTES:
- A member of ICAI, cannot accept any work prescribed for practicing CA in his 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 any 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:
(i) the name is removed from the Register; or
(ii) the Council is satisfied, that such certificate was issued on basis of incorrect, misleading or false information, or by mistake or inadvertence; or
(iii) a member has ceased to practice; or
(iv) a member has not paid annual fee for COP till 30th day of September of the 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 for CoP & whose application, complete in all respects, together with the fee, is received by the Secretary before the expiry of the relevant year.
DO Practice – Questions on Sec. 6
(iii) Sec. 7: Members to be known as “Chartered Accountants”
- 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.)
Chapter 5 Professional Ethics 5.3
- Members who are not in practice may use the designation “Chartered Accountant”.
- Recognised degrees or 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 act as Advisor or Consultant to an issue. In client Companies’ offer documents, name and address of the CA or firm of CAs acting as Advisor or Consultant could be indicated under caption “Advisor/Consultant to the Issue”. However, name and address of such CA /firm of CAs should not appear prominently.
(iv) Sec. 8: Disability to become a member:
A person shall not be entitled to have his name entered in or borne on 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 the 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 professional/other misconduct.
(v)
Sec.
20: Removal of Name from Register of Members: Council may remove from the Register the name of any member of the Institute:
(a) who is dead; or
(b) from whom a request has been received; or
(c) who has not paid any prescribed fee required to be paid by him; or
(d) who is found to have been subject to any of the disabilities mentioned in Sec. 8.
Restoration of Membership (Regulation 19):
(1) Council may, 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, entrance fee and additional fee.
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(2) Restoration shall be with effect from the date on which application & fee are received: Provided that where such application is received within the same year in which name was removed, Council may restore name on his paying annual membership fee for that year, entrance fee and additional fee, w.e.f. date on which it was removed from the Register: Provided further that the restoration of a member’s name which was removed under the orders of the Board of Discipline or the Disciplinary Committee or Appellate Authority or the High Court shall be affected only in accordance with such orders.
(vi) Sec. 21: Disciplinary Mechanism:
Complaint against member of ICAI of allege misconduct along with prescribed fee.
Disciplinary Directorate
The 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
Board of Discipline Disciplinary Committee
If found guilty, it can
(i) reprimand the member
(ii) remove name of the member
If found guilty, it can
(i) reprimand 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 the case to the Board of Discipline or Disciplinary Committee for reconsideration; or
(iv) Pass such order as the Authority thinks fit.
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5.5
Chapter
Professional Ethics
Place the matter before Place the matter before
First Schedule Second schedule or Both Schedule
(vii) Sec. 22: Professional & other Misconduct:
-shall be deemed to include any act or omission provided in any of the Schedules.
-However, 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.
(viii)Sec. 24: Penalty for falsely claiming to be a member:
(a)Circumstances imposing penalty: Any person who:
(i)Not being member of ICAIrepresents that he is a member of Institute, or uses the designation Chartered Accountant, or
(ii)Being member of ICAI but not having COPrepresents that he is in practice, or practices as a CA.
(b)Amount of Penalty
For First Conviction: Fine upto ₹ 1,000
For subsequent conviction: Fine upto ₹ 5,000 or imprisonment upto 6Months or both.
(ix) Sec. 27: Maintenance of Branch Office: 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 number of branches in India, provided every such branch has a separate incharge, who is a CA & Partner/ Employee (may or 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.
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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.
(1) Name board of firm to be displayed at temporary office only during these 3 months.
(2) Temporary office should not be mentioned as place of Business on office documents.
(3) Regular office need not be closed & all correspondence may continue at permanent office.
(4) Before commencement of every winter and at the close of such temporary office, it shall be obligatory on member to inform ICAI.
Exception 2: Second Office:
2nd Office can be opened without having separate in-charge provided it is 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.
Separate In-charge not Required
Separate Incharge Required
Note: As per Regulation 189, intimation is to be given to Council, within one month of opening or closing of branch office.
Do Practice – Questions on Sec. 27
5.7
Chapter 5 Professional Ethics
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
City A (MC Limits)
City B (Second Office):
Kms.
from
to
45
Situation
II: Distance
City A (First Office)
City B (Second
Kms.
–
from
to
Office): 70
Distance from City A (MC Limits) to City B (Second Office): 55 Kms.
(4) 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 shall be deemed to be guilty of professional misconduct
if he allows a person to practice as a CA in his name or firm’s name
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
Other than Either Partner or Partner/Employee Employee
Mr. A – Guilty of Guilty of Guilty of No Misconduct Misconduct Misconduct Misconduct
Do Practice – Questions on Clause 1
Clause 2: Sharing of profits with others: A CA in practice shall be 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
Except with
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i.e. Mr. A
a CA CA
Holding COP
Not
Not holding CoP
(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 of ICAI resolved that sale of Goodwill is permitted in case ofdeath of a proprietor.
However, ICAI permission to practice in the 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 firmof 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 keepname 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 inlumpsumthough 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 the same time, above council decision would also be applicable.
(iv)Accepting the assignments wherein a percentage of professional fee is deducted by the Govtto meet admn& other expenditure will not amount to professional misconduct.
DO Practice –Questions on Clause 2
Chapter 5 Professional Ethics 5.9
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.
DO Practice – Questions on Clause 3
Clause 4: Restriction on Partnership: A CA in practice shall be 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]
DO Practice – Question of Clause 4
Clause 5: Restriction on securing work through services of others: CA in practice shall be deemed to be guilty of professional misconduct, if he secured professional work:
(a) through the 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).
Professional Ethics Chapter 5 5.10
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
(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. Internal Audit, Stock verification, Minimum fees Minimum fees Computerisation of prescribed in not prescribed Records) etc.) tenders in tenders
(e.q. Statutory Audit)
Response to Response to Response to tenders tenders permitted tenders not permitted permitted
Note: Earnest Money deposit (caution money/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 from such organisations, maintains such panel.
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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 minimum fee is prescribed in the tender document itself.
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 the member or the firm of CAs, with which he is associated. Designation “Chartered Accountant” as well as the name of the firm may be indicated.
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 the events is not permitted, provided advertisement for such celebrations may be published in newspaper or newsletter.
6. Sponsoring Activities
Sponsoring an event is not permitted except an event conducted by a Programme
Organizing Unit (PoU) of the ICAI, provided such event has the prior approval of Continuing Professional Education (CPE) Directorate of the ICAI.
Members sponsoring activities relating to CSR may mention their individual name with the prefix “CA”. However, the 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 Chartered Accountant since it would tantamount to advertisement.
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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.
(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, the members should not
(10) solicit people to visit or like their respective page(s) on such social Networking site.
(11) Details should be so designed that it does not amount to soliciting client/professional work.
(12) Website may provide a link to the website of ICAI, its regional councils and branches and also to the websites of Government/Government departments/Regulatory Authorities only.
Chapter 5 Professional Ethics 5.13
(13) Address of the website should be as near as possible to the individual name/trade name, firm name of the CA.
(14) Name of clients and fees charged is not permitted to be given on website, except when required by any regulator.
DO Practice – Question of Clause 6
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 or 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.
(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.
Do Practice – Questions on Clause 7
Professional Ethics Chapter 5 5.14
