Cas can't form company

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Querist : Anonymous (Querist)

21 January 2016 Why CAs are not allowed to form company for practise purposes....?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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22 January 2016 ICAI rules prohibit CA's from carrying on Chartered Accountancy profession in corporate form.

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22 January 2016 Yes but why prohibition...?

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Asha Kanta Sharma online

Asha Kanta Sharma

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18 July 2024 The Institute of Chartered Accountants of India (ICAI) has established rules and regulations that govern the practice of Chartered Accountancy (CA) in India. One of the key regulations is the restriction on forming companies for the purpose of practicing as a CA. This prohibition stems from several reasons and regulatory considerations:

1. **Independence and Integrity**: The primary concern is to ensure the independence and integrity of the profession. Chartered Accountants are entrusted with responsibilities that require impartiality and adherence to ethical standards. By prohibiting the formation of companies for practice, ICAI aims to prevent potential conflicts of interest and maintain the profession's integrity.

2. **Risk Management**: Allowing CAs to practice in corporate form could introduce complexities related to governance, liability, and transparency. The regulatory framework governing individual practitioners is designed to mitigate risks associated with financial reporting, auditing, and advisory services.

3. **Regulatory Compliance**: The formation of a corporate entity involves compliance with corporate laws, such as those under the Companies Act. These laws may not align entirely with the professional standards and regulations set by ICAI, potentially leading to regulatory conflicts.

4. **Professional Standards**: ICAI sets stringent standards for professional conduct, audit quality, and ethical behavior. The rules and guidelines ensure that CAs uphold these standards consistently. Allowing CAs to operate in corporate form might dilute these standards or lead to divergent practices.

5. **Public Interest**: Ultimately, the restrictions are aimed at safeguarding public interest. Clients and stakeholders rely on CAs to provide unbiased and reliable financial information. Limiting the practice to individual professionals or partnerships under a unified regulatory framework helps maintain public trust in the profession.

These reasons collectively contribute to the prohibition on CAs forming companies for the purpose of practicing Chartered Accountancy. The intention is to preserve the profession's core values of independence, integrity, and adherence to professional standards, while also ensuring effective regulatory oversight and risk management.