In accordance with section 22 of the Chartered Accountants Act, 1949 the expression “professional or other misconduct” shall be deemed to include any act or omission provided in any of the Schedules. There are two schedules under the CA Act, 1949 viz. First Schedule and Second Schedule.
The First Schedule has four parts whereas the Second Schedule has only three parts. However, the act or omission mentioned in second schedule pertains to graver misconduct and higher punishment in compare to the first schedule.
If a CA in practice found guilty of professional misconduct mentioned in the Part I of First Schedule, the Board of Discipline shall after giving an opportunity of being heard may take any one or more of the following actions, namely:
(a) reprimand the member;
(b) remove the name of the member from the Register up to a period of 3 months;
(c) impose such fine as it may think fit, which may extend to ₹1,00,000.
Whereas, if a CA in practice found guilty of professional misconduct mentioned in the Part I of Second Schedule or both the First Schedule and the Second Schedule, the Disciplinary Committee shall after giving an opportunity of being heard may take any one or more of the following actions, namely:
(a) reprimand the member;
(b) remove the name of the member from the Register permanently or for such period, as it thinks fit;
(c) impose such fine as it may think fit, which may extend to ₹5,00,000.
Part I of both schedule deals with the Professional Misconduct in relation to Chartered Accountants in practice. Accordingly, there are total 22 clauses (12+10) which are specifically related to Professional misconduct applicable for CA in practice.
| Part I of First Schedule (12 Clauses) | Part I of Second Schedule (10 Clauses) |
|---|---|
| Clause 1: Allow Name | Clause 1: Client’s Information |
| Clause 2: Share Profits | Clause 2: Report without Examination |
| Clause 3: Accepts Profits | Clause 3: Accuracy of Forecast |
| Clause 4: Enters into Partnership | Clause 4: Substantial Interest |
| Clause 5: Secure Professional Business | Clause 5: Material Facts |
| Clause 6: Solicits Clients or Professional Work | Clause 6: Material Misstatement |
| Clause 7: Advertises Attainments or use Designation | Clause 7: Due Diligence |
| Clause 8: Communicate with Previous Auditor | Clause 8: Sufficient Information |
| Clause 9: Comply Sections 139-142 | Clause 9: SA and Guidance Note |
| Clause 10: Percentage of Profits | Clause 10: Money of Clients |
| Clause 11: Engages in other Business | |
| Clause 12: Allow to Sign |
List of CAs removed from Register of Members of ICAI
Following are the list of Chartered Accountants whose name has been removed w.e.f. 26th November, 2021 for the respective period from the removed from the Register of Members of the ICAI:
CA Vikas Kumar Khaitan
No. PR-219/2014-DD/236/2014-DC/569/2017: In terms of the provisions of Section 21B(3) of the Chartered Accountants Act, 1949 read with Rules 18(17) and 19(1) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committee has held CA. Vikas Kumar Khaitan (Membership No. 063352), 2296, 24th Main, 16th Cross, HSR Layout, Sector 1, BENGALURU -560 102. (Karnataka), guilty of Professional Misconduct falling within the meaning of Clause (7) of Part I of the Second Schedule to the aforesaid Act and consequently ordered for removal of the name of aforesaid CA. Vikas Kumar Khaitan (Membership No. 063352) from the Register of Members for a period of 01(One) year and also imposed a fine of Rs. 10,000/-(Rupees Ten Thousand) only.
In pursuance thereof and in exercise of the powers conferred by sub-section (2) of Section 20 of the aforesaid Act, read with Regulation 18 of the Chartered Accountants Regulations, 1988, it is hereby notified that the name of said CA. Vikas Kumar Khaitan (Membership No. 063352), shall stand removed from the Register of Members for a period of 01(One) year with effect from 26th November, 2021.
CA Deba Prasad Misra
No. PR-167/2015-DD/154/2015-DC/754/2018: In terms of the provisions of Section 21B(3) of the Chartered Accountants Act, 1949 read with Rules 18(17) and 19(1) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committee has held CA. Deba Prasad Misra (Membership No. 062771), Plot No. 478/812, AIGSNIA, Near Alugadi, Khandagiri, BHUBANESWAR 751 019), guilty of Professional and/or Other Misconduct falling within the meaning of Clause (10) of Part I of Second Schedule and Clause (2) of Part IV of First Scedule to the aforesaid Act and consequently ordered for removal of the name of aforesaid CA. Deba Prasad Misra (Membership No. 062771) from the Register of Members for a period of 10(Ten) years and also imposed a fine of Rs. 1,00,000/-(Rupees One Lakh) only and in the event of non-payment of said fine, his name be removed for a further period of 6(six) months.
Since the Respondent failed to pay the imposed fine, in pursuance of the aforesaid decision of the Disciplinary Committee and in exercise of the powers conferred by sub-section (2) of Section 20 of the aforesaid Act, read with Regulation 18 of the Chartered Accountants Regulations, 1988, it is hereby notified that the name of CA. Deba Prasad Misra (Membership No. 062771), shall stand removed from the Register of Members for a consolidated period of 126 (one hundred and twenty six) months [10(ten) years plus additional 6(six) months] with effect from 26th November, 2021.
CA Shamit Tridash Majmudar
Notification No. PR/184/14-DD/217/2014/DC/778/2018: In terms of the provisions of Section 21B(3) of the Chartered Accountants Act, 1949 read with Rules 18(17) and 19(1) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committee has held CA. Shamit Tridash Majmudar (Membership No. 010595), M/s. Shamit Majmudar Associates, Chartered Accountants, 206, Janki Centre, Off Veera Desai Road, Andheri(West), MUMBAI 400 053, guilty of Professional Misconduct falling within the meaning of Item (4) of Part II of the Second Schedule to the aforesaid Act and consequently ordered for removal of the name of aforesaid CA. Shamit Tridash Majmudar (Membership No. 010595) from the Register of Members for a period of 03(three) years and also imposed a fine of Rs. 1,00,000/-(One Lakh) only.
In pursuance thereof and in exercise of the powers conferred by sub-section (2) of Section 20 of the aforesaid Act, read with Regulation 18 of the Chartered Accountants Regulations, 1988, it is hereby notified that the name of said CA. Shamit Tridash Majmudar (Membership No. 010595), shall stand removed from the Register of Members for a period of 03(three) years with effect from 3rd September, 2021.
Advisory on Mentioning Fees in Advertisements issued by Members
….. the mandate of posting any particular(s) on Firm’s own website or advertisement through write -up cannot exceed the authority granted respectively vide the Website Guidelines and Advertisement Guidelines of the Institute under any circumstances.
Accordingly, it is clarified that the quantum of Fees (including free of charge), whatsoever, should not be mentioned by members in any Advertisement of services or posting of particulars.
ICAI Advisory dated 28th April, 2020
Question: Whether a member in practice, engaged in Coaching/teaching activities in accordance with general and specific permission of the Council, may advertise such Coaching /teaching activities?
Answer: A member in practice, engaged in Coaching/teaching activities in accordance with general and specific permission of the Council should abstain from advertisement of such Coaching /teaching activities, as it may amount to indirect solicitation, as well as solicitation by any other means, and may therefore be violative of the provisions of Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949. The Announcement dated. 18.5.2017 issued by ICAI may be referred in this regard.
Part I of First Schedule (Professional Misconduct applicable for CA in Practice)
In Part I of First Schedule, there are 12 clauses containing acts or omissions which may make CA in practice to be guilty of professional misconduct under the Chartered Accountants Act, 1949.
Clause 1 (Allow Name):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he allows any person to practice in his name as a chartered accountant unless such person is also a chartered accountant in practice and is in partnership with or employed by him;
Therefore, a CA in practice may allow any person to practice in his name if and only if such person is also holding COP (Certificate of Practice) and is either a partner or employee of such CA. The provisions of this clause prevent any unqualified accountant to misuse the name or shelter under the cover of a qualified member of ICAI.
Clause 2 (Share Fees or Profits):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he pays or allows or agrees to pay or allow, directly or indirectly, any share, commission or brokerage in the fees or profits of his professional business, to any person other than a member of the Institute or a partner or a retired partner or the legal representative of a deceased partner, or a member of any other professional body or with such other persons having such qualifications as may be prescribed, for the purpose of rendering such professional services from time to time in or outside India.
The Council of ICAI has prescribed (Regulation 53-A) the following professional bodies:
- ICSI (The Institute of Company Secretaries of India)
- ICAI (The Institute of Cost Accountants of India)
- Bar Council of India
- The Indian Institute of Architects
- The Institute of Actuaries of India
In the explanation given under this clause it has been stated that the item, “partner” includes a person residing outside India with whom a CA in practice has entered into partnership which is not in contravention of clause 4 of Part I of First Schedule.
Additionally, CA Institute has issued a clarification on sharing of fees with Government that as such there is no bar in the Code of Ethics to accept any assignment wherein a percentage of professional fees is deducted by the Govt. to meet the administrative and other expenditure. Thus, a Chartered Accountant in practice can share his fees with the Government in respect of Government Audit.
Clause 3 (Accepts Profits):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he accepts or agrees to accept any part of the profits of the professional work of a person who is not a member of the Institute. Therefore, this clause prevents CA in practice from accepting any profits of professional work from non-member of CA Institute.
However, this clause shall not prohibit a member from entering into profit sharing or other similar arrangements, including receiving any share commission or brokerage in the fees, with a member of such professional body or other person having qualifications, as is referred to in Clause 2 of Part I of First Schedule.
Clause 4 (Enters into Partnership):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he enters into partnership, in or outside India, with any person other than a chartered accountant in practice or such other person who is a member of any other professional body having such qualifications as may be prescribed, including a resident who but for his residence abroad would be entitled to be registered as a member under clause (v) of sub-section (1) of section 4 or whose qualifications are recognised by the Central Government or the Council for the purpose of permitting such partnerships.
Therefore, a CA in practice may enters into partnership with:
- A chartered accountant in practice; or
- A member of any other recognised professional body; or
- A person registered as a member u/s 4(1)(v) of CA Act, 1949; or
- A person whose qualifications are recognised by CG or Council.
You should also note that this Clause permits partnership between members of ICAI and the members of the recognized foreign professional bodies by virtue of either u/s 29(2) of the CA Act, 1949 or under Regulation 53B(2) of the CA Regulations, 1988 provided they share fees of the partnership business both within India and outside India.
Clause 5 (Secures Professional Business):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he secures, either through the services of a person who is not an employee of such chartered accountant or who is not his partner or by means which are not open to a chartered accountant, any professional business.
Hence, a CA in practice shall secure his professional business through the services of a person who is:
- a partner of such CA; or
- an employee of such CA.
Note that this clause shall not prohibits a practicing Chartered Accountant from any arrangement permitted in terms of clauses 2, 3 and 4 (as discussed above) of Part I of CA Act, 1949.
Clause 6 (Solicits Clients or Professional Work):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means.
However, a CA in practice may:
i) Apply, request, invite or secure professional work from another chartered accountant in practice.
ii) Secure professional work by responding to tenders or enquiries issued by users of professional services.
The Council of ICAI has clarified that if announcements are made for empanelment by the Government, Corporations, Courts, Cooperative Societies, Banks and other similar institutions, a CA in practice may respond to such announcements.
However, such respond shall be made only if the existence of panel is within his knowledge. The Council of CA Institute has also clarified that the quotations of fees can be sent, if enquiries are received by the members in this regard.
iii) Issue a classified advertisement in the Journal/Newspaper of CA Institute intended to give information for:
a) Sharing professional work on assignment basis; or
b) Seeking professional work on partnership basis; or
c) Salaried employment in the field of accounting profession provided it only contains the accountant’s name, address, telephone, fax number and e-mail address.
iv) Advertise changes in partnerships or dissolution of a firm, or of any change in the address of practice and telephone numbers.
However, such advertisement shall be limited to a bare statement of facts and consideration given to the appropriateness of the area of distribution of newspaper or magazine and number of insertions.
Note that the issuance of circular to persons who are not clients but may likely requires services of a chartered accountant would tantamount to advertisement since it is solicitation of professional work by making roving enquiries.
In accordance with Para (c) under Clause 6 of Part I of the First Schedule to the CA Act, 1949, appearing in the Code of Ethics, 2009 provides for publication of Name or Firm Name by CAs in the Telephone or other Directories published by Telephone Authorities or Private Bodies. However, such entries shall not be made either by making a special request or by means of an additional payment.
A CA in practice is also not permitted to indicate in a book or an article, authored/contributed/published by him, the association with any firm of Chartered Accountants.
Sponsorship or prizes can be instituted in the name of CAs or a firm of CAs provided that the designation “Chartered Accountant”, is not appended to the prize.
A CA in practice should not accept the original professional work emanating from a client introduced to him by another Chartered Accountant. 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.
Advertising by members in practice engaged in Coaching/Teaching activities:
ICAI Announcement dated 18th May, 2017: Keeping in view the broad purview of Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949, an advertisement of Coaching /teaching activities by a member in practice may amount to indirect solicitation, as well as solicitation by any other means, and may therefore be violative of the provisions of Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949.
In view of the above, such members are advised to abstain from advertising their association with Coaching /teaching activities through hoardings, posters, banners and by any other means, failing which they may be liable for disciplinary action, as per the provisions of Chartered Accountants Act, 1949 and Rules /Regulations framed thereunder.
Subject to the above prohibition, such members may put, outside their Coaching /teaching premises, sign board mentioning the name of Coaching/teaching Institute, contact details and subjects taught therein only. As regards the size and type of sign board, the Council Guidelines as applicable to Firms of Chartered Accountants would apply.
Clause 7 (Advertises Attainments or use Designation):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he advertises his professional attainments or services, or uses any designation or expressions other than chartered accountant on professional documents, visiting cards, letter heads or sign boards, unless it be a degree of a University established by law in India or recognised by the Central Government or a title indicating membership of the Institute of Chartered Accountants of India or of any other institution that has been recognised by the Central Government or may be recognised by the Council.
Provided that a member in practice may advertise through a write up setting out the services provided by him or his firm and particulars of his firm subject to such guidelines as may be issued by the Council. But, a Chartered Accountant in practice/firm can’t give advertisement in press.
You should also note that a Chartered Accountant is not allowed to use the designation or state on his professional documents that he is an Information System Auditor, Income-tax Consultant, a Cost Consultant, Management Consultant, Cost Accountant, Company Secretary or Corporate Lawyer.
Additionally, the usage of the words “one of the largest accounting firms of the World” and the specification of specialization in “taxation” or “Auditing” would amount to advertisement and, thus, constitute professional misconduct.
In terms of the Council Guidelines, the public notice published in the newspaper by a Chartered Accountant individually or jointly with an Advocate in respect of acquirement of land by their client is permissible.
If a CA in practice is appointed as a Director of any company then he should ensure that any prospectus or public announcement/ communication does not advertise his professional achievements and the provisions of Clause 6 as well as Clause 7 of Part I of the First Schedule to the Act, 1949 are complied with both in letter and spirit.
Accordingly, CA Institute has advised that as soon as a Chartered Accounted in practice is appointed as a director on the Board of a company, he should specifically invite the attention of the management of that company to the aforesaid provisions (Clause 6 and Clause 7) and should request that before any such prospectus or public announcements or public communication mentioning the name of the member concerned, is issued, the material pertaining to the member concerned should, as far as practicable be got approved by him.
Except, a common CA logo in the correct manner within terms of the Council guidelines, a member of CA Institute or a firm of Chartered Accountants is not allowed to use any logo/monogram of any kind/form/style/design/color etc. whatsoever on any display material or media e.g. visiting cards, paper stationery, documents, magnetic devices, internet or even on signboard.
You should also note that a CA in practice is prohibited to use/fix a monogram of ICAI on any column/wall located inside the office or on any professional documents.
Clause 8 (Communicate with Previous Auditor):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he accepts a position as auditor previously held by another chartered accountant or a certified auditor who has been issued certificate under the Restricted Certificate Rules, 1932 without first communicating with him in writing.
The Council of ICAI has directed that it would be a healthy practice if a Tax Auditor appointed for conducting special audit under the Income-tax Act, communicates with the members who has conducted the statutory/tax audit.
However, it is not obligatory for the auditor appointed to conduct a special Audit u/s 233A of Companies Act, 1956 (No corresponding section under the Companies Act, 2013) to communicate with the previous auditor who has conducted the regular audit for the period covered by the Special Audit.
Clause 9 (Company Comply Sections 139-142):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he accepts an appointment as auditor of a company without first ascertaining from it whether the requirements of section 225 of the Companies Act, 1956 (Corresponding sections 139, 140 and 142 read with section 141 of the Companies Act, 2013) in respect of such appointment have been duly complied with.
Thus, the incoming auditors should find out for certain as to whether company has complied with the provisions of section 139, 140 and 142 read with Section 141 of the Companies Act, 2013.
Note that the provisions of section 140 has come into force on 1st April, 2014 vide Notification No. S.O. 902(E) except second proviso to sub-section (4) and sub-section (5) of the Companies Act, 2013.
In case the incoming auditor has just accepted a certificate from the management of the company that the provisions of the above sections have been complied with but not verified the relevant records, he shall be deemed to be guilty of professional misconduct.
You may refer detailed guidelines issued by the Council of CA Institute and the same are appearing in the Code of Ethics, 2009 Edition.
Clause 10 (Percentage of Profits):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he charges or offers to charge, accepts or offers to accept in respect of any professional employment, fees which are based on a percentage of profits or which are contingent upon the findings, or results of such employment, except as permitted under any regulation made under this Act.
Accordingly, in the following circumstances provided under Regulation 192 of the CA Regulations, 1988, a CA in practice may charge or offer to charge, accept or offer to accept, in respect of any professional work, fees which are based on a percentage of profits, or which are contingent upon the findings, or results of such work:
a) in the case of a receiver or a liquidator, the fees may be based on a percentage of the realization or disbursement of the assets;
b) in the case of an auditor or a co-operative society, the fees may be based on a percentage of the paid up capital or the working capital or the gross or net income or profits; and
c) in the case of a valuer for the purposes of direct taxes and duties, the fees may be based on a percentage of the value of the property valued.
Clause 11 (Engages in other Business):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he engages in any business or occupation other than the profession of chartered accountant unless permitted by the Council so to engage.
Provided that nothing contained herein shall disentitle a chartered accountant from being a director of a company (not being a managing director or a whole time director) unless he or any of his partners is interested in such company as an auditor.
CA in practice be generally permitted to engage in the following categories of occupations:
- Employment under CA in practice or firm of such CA.
- Private tutorship.
- Authorship of books and articles.
- Holding of Life Insurance Agency License for the limited purpose of getting renewal commission.
- Attending classes and appearing for any examination.
- Holding of public elective offices such as M.P., M.L.A. and M.L.C.
- Honorary office leadership of charitable-educational or other non-commercial organisations.
- Acting as Notary Public, Justice of the Peace, Special Executive Magistrate and the like.
- Part-time tutorship under the coaching organisation of the Institute.
- Valuation of papers, acting us paper-setter, head-examiner or a moderator, for any examination.
- Editorship of professional journals.
- Acting as Surveyor and Loss Assessor.
- Owning agricultural land and carrying out agricultural activity.
However, a CA in practice shall require to obtain prior approval of the Council of CA Institute before engage in the following categories of business or occupations:
- Employment in business concerns (Not having his/relatives substantial interest i.e. 20% of voting power) or Interest in family/ relationships business concerns or non-business concern.
- Office of MD or a WD.
- Interest in agricultural and allied activities carried on with the help, if required, of hired labour.
- Interest in an educational institution.
- Lectureship for courses other than offered by CA Institute.
- Tutorship under any educational institution other than the coaching organization of ICAI.
- Editorship of journals other than professional journals.
- Any other business or occupation for which the Executive Committee considers that permission may be granted.
Clause 12 (Allow to Sign on Financial Statements):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he allows a person not being a member of the Institute in practice, or a member not being his partner to sign on his behalf or on behalf of his firm, any balance-sheet, profit and loss account, report or financial statements.
You may also refer section 26 of CA Act, 1949 which states that no person other than a member of the Institute shall sign any document on behalf of a Chartered Accountant in practice or a firm of Chartered Accountants in his or its professional capacity.
Part I of Second Schedule (Professional Misconduct applicable for CA in Practice)
In Part I of Second Schedule, there are 10 clauses containing acts or omissions which may make CA in practice to be guilty of professional misconduct under the Chartered Accountants Act, 1949.
Clause 1 (Disclosure of Client’s Information):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he discloses information acquired in the course of his professional engagement to any person other than his client so engaging him, without the consent of his client or otherwise than as required by any law for the time being in force.
Therefore, a chartered accountant shall be deemed to be guilty under this clause even if he discloses any acquired information in the course of his professional engagement to the Income tax Officer without the consent of his clients.
Clause 2 (Report without Examination):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he certifies or submits in his name, or in the name of his firm, a report of an examination of financial statements unless the examination of such statements and the related records has been made by him or by a partner or an employee in his firm or by another chartered accountant in practice.
The Council of CA Institute has directed that in respect of audit work divided among the joint auditors, each joint auditor is responsible only for the work allocated to him, whether or not he has prepared a separate report on the work performed by him.
However, on the other hand, all the joint auditors are jointly and severally responsible for the work which is not inter-se divided among the auditors.
Clause 3 (Accuracy of Forecast):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he permits his name or the name of his firm to be used in connection with an estimate of earnings contingent upon future transactions in a manner which may lead to the belief that he vouches for the accuracy of the forecast.
The Council of ICAI has decided that a Chartered Accountant can participate in the preparation of profit or financial forecasts and can review them, provided he indicates clearly in his report the:
i) Sources of information;
ii) Basis of forecasts; and
iii) Major assumptions made in arriving at the forecasts and so long as he does not vouch for the accuracy of the forecasts.
Clause 4 (Disclosure of Substantial Interest):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he expresses his opinion on financial statements of any business or enterprise in which he, his firm, or a partner in his firm has a substantial interest.
You should note that the term “financial statements” would cover both reports as well as certificates usually given after an examination of the accounts or of financial statements under any statutory enactment, or/for purposes of income tax assessments.
Clause 5 (Disclosure of Material Facts):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity.
The most common misstatements are found with regard to depreciation to be charge as per section 123(2) read with Schedule II of the Companies Act, 2013. CA should also check whether the opening balance of all items has been taken into account while preparing financial statements of the company.
Clause 6 (Material Misstatement):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity.
Thus, if CA founds that something is going wrong in the company in which he has appointed as auditor then he must disclose that fact.
Clause 7 (Exercise Due Diligence):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he does not exercise due diligence, or is grossly negligent in the conduct of his professional duties.
There is a famous quote about CA that Chartered Accountant is a watchdog but not a bloodhound. Hence, a CA who is appointed as an auditor of a company is not bound to be a detective or to approach his work with suspicion or with a foregone conclusion that there is something wrong.
But, CA should not take it lightly as because this clause gets attracted whenever it is necessary to judge whether CA has honestly and reasonably discharged his duties.
Clause 8 (Obtain Sufficient Information):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion.
Therefore, a Chartered Accountant in practice is require not merely to verify the arithmetical accuracy of the accounts but he must have to enquire into its substantial accuracy with all the skill, care and caution.
Clause 9 (Audit as per SA and Guidance Note):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances.
Note that the terms “generally accepted audit procedure” has a wider meaning including the Guidance Notes and SAs issued by CA Institute and ISA issued by the International Auditing Practices Committee of IFAC.
Clause 10 (Money of Clients in Separate Bank Account):
A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he fails to keep moneys of his client other than fees or remuneration or money meant to be expended in a separate banking account or to use such moneys for purposes for which they are intended within a reasonable time.
Accordingly, if a CA in practice received any money in his capacity as trustee, executor liquidator, etc. then he must deposit that money in a separate bank account immediately.
However, if a CA in practice received any money for expenses to be incurred e.g. purchase of stamp paper, payment of prescribed statutory fees etc., which are intended to be spent within a reasonably short time he need not require to deposit such money into a separate bank account.