Icai code of ethics - deep dive

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 February 2016 Hi, One of my friends needs guidance on following issues pertaining to prevailing ICAI Code of Conduct. Would appreciate your kind guidance please:

1- As per Section Sec. 2(2)(iv) of Chartered Accountants Act 1949, A Member of the Institute would be Deemed to be in Practice if incl. others inter-alia, he renders Management Consultancy Services.

Question -
(a) If that member is not in full time practice & is not performing any attest function, will he still be still be deemed to be in Practice.

(b) If Yes, getting deemed to be in practice - will he be bound by all the provisions for Code of Ethics for members in Practice including restriction relating to advertising his consultancy business.

What is seeked as clarification is that, if a Member of Institute, although not holding COP, forms a company only for Management Consultancy - Would he still be restricted by Clause 6 & 7 of First Schedule to Code of Ethics & other clauses thereof....?

2- Is there a distinguishing difference apparent on face of COP - identifying the same as either Full time COP or Part Time COP ...?

To my understanding - It's only in the form for applying the COP & institute's records, else there is no way of distinguishing between the same. Hence, in case, if any member still goes on to perform attest function with part time COP as applied & issued by ICAI - he can be caught only if the breach comes to notice of ICAI , otherwise not ...? Pls Confrm..

3 - Clause 11 - First Schedule to ICAI COC, 2009 read with Appendix 10 under CA Regulation 190A:-

(A) A Member in Practice is permitted to engage in following generally :

...(2) Private Tutorship

(B) A Member in Practice may engage in following occupations after obtaining Specific Permission from Council:-

...(7) Part time of Full time tutorship under ANY educational institution other than Coaching Organisation of the institute

Since, word used in ANY for specific permission,

Question:
1- how is private tutorship permitted generally in Part (A) different from specific - both are subject to 25 hrs condition ..?
2- As per my knowledge, a member in practice can not start his own coaching centre - else, he will not be entitled to perform any attest function ..? Pls confirm
3- If yes, for Ques. 2 above, how are so many senior Members showing themselves being into practice & actually doing both the activities.

4- Clause 6 & 7 to First Schedule :

(i) - CA Coaching Centres -
(a) Can Members of ICAI advertise their coaching classes any which as CA with their names in pre-fix. There advertising is so aggressive with such adjectives like No. 1 Classes, Best Classes showing their attainments with detailed descriptions ....Is there no conduct applicable to them...?

If the CA concerned in not in full time practice - is he not bound by Clause 6 & 7 for Coaching Centers.

(ii)- Similarly, If a CA is not in full practice & is carrying Management Consultancy Business...two questions:-

a) Can he advertise & seek business any which way ..? Does Clause 6 & 7 not apply to him ...?
b) Will he not automatically be treated as CA Deemed to be in practice & thus whole Code of Ethics would apply to him ...?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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21 February 2016 I am providing answer only to your first question. You are right if a member is rendering Management Consultancy Service, he is deemed to be in Practice and ought to have a COP.

However, if he sets up a company, not a proprietorship, for rendering Management Consultancy Services, and is engaged as an full time director / manager, then he would not be deemed to be a member in practice, because the business is being rendered by a different entity.

Since the member is not in practice there is no requirement for COP and in response to your query 4(ii) Clauses 6 & 7 will not apply to him and the new entity can advertise and canvass business.

A CAVEAT: If the business entity is a partnership / LLP then one or more partners should be a non-member, else the Code of Ethics would apply to the firm / LLP as well.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 The Indian Chartered Accountants Act, 1949, and the ICAI Code of Ethics contain specific guidelines regarding members in practice, including their responsibilities, restrictions, and the applicability of various rules. Here’s a deep dive into the issues you’ve raised, with a focus on the ICAI Code of Ethics:

### **1. Deemed to be in Practice**

#### **(a) Deemed to be in Practice without Attest Function**

**Sec. 2(2)(iv) of the Chartered Accountants Act, 1949**:
- This section defines a member in practice, which includes those who render management consultancy services.
- **If a member is not in full-time practice and is not performing any attest function**, but still engages in management consultancy, he/she would still be deemed to be in practice according to the Act.

**Code of Ethics Implications**:
- Yes, a member deemed to be in practice will be bound by the provisions of the Code of Ethics for members in practice, including restrictions on advertising their consultancy business.
- The Code of Ethics applies to all members deemed to be in practice, irrespective of whether they are actively performing attest functions or not.

#### **(b) Restrictions on Advertising and Conduct**

**Code of Ethics Clauses**:
- **Clause 6 & 7 of the First Schedule**: These clauses outline restrictions on advertising, including the prohibition of misleading statements and the requirement for professional conduct in advertisements.
- Even if a member does not hold a Certificate of Practice (COP) and operates through a company solely for management consultancy, he/she is still bound by these ethical guidelines.

### **2. Certificate of Practice (COP)**

#### **Distinguishing Between Full-Time and Part-Time COP**

- **COP Application**: The application forms for COP and the records maintained by ICAI do not explicitly distinguish between full-time and part-time practice. The differentiation mainly comes from the nature of work being performed.
- **Performing Attest Functions**: A member with a part-time COP is allowed to perform attest functions, but if they engage in activities prohibited for part-time practitioners, they could be subject to scrutiny. Any breach typically comes to notice through ICAI’s monitoring processes or audits.

### **3. Private Tutorship and Coaching**

#### **(A) Private Tutorship vs. Coaching**

1. **Private Tutorship Permitted Generally**:
- **Clause 11(A) of the First Schedule** permits private tutorship without specific permission from the ICAI, subject to the 25-hour condition.

2. **Specific Permission for Tutorship**:
- **Clause 11(B)(7)** requires specific permission for part-time or full-time tutorship under any educational institution other than a coaching organization. This implies a broader scope and potentially more regulated environment compared to private tutorship.

3. **Starting a Coaching Centre**:
- A member in practice cannot start their own coaching center if they are to retain the right to perform attest functions. This restriction ensures that members do not conflict their professional responsibilities with their tutoring activities.

4. **Members Engaging in Both Activities**:
- If a member is involved in both activities, they must be cautious to ensure compliance with all applicable regulations. ICAI monitoring ensures adherence to these rules.

### **4. Advertising and Coaching Centers**

#### **(i) Advertising by CA Coaching Centers**

1. **Advertising by ICAI Members**:
- Members of ICAI are subject to Clause 6 & 7 regarding advertising. Aggressive advertising with terms like "No. 1" or "Best" may be considered misleading and is not in line with ICAI's ethical guidelines.

2. **Non-Full-Time Practitioners**:
- Even if a CA is not in full-time practice, they are still bound by the ethical guidelines, including restrictions on advertising.

#### **(ii) Management Consultancy and Advertising**

1. **Advertising Management Consultancy**:
- A CA engaged in management consultancy (even if deemed to be in practice) must adhere to the advertising restrictions outlined in Clause 6 & 7. They cannot advertise aggressively or misleadingly.

2. **Application of the Code of Ethics**:
- Yes, a CA deemed to be in practice (including those solely engaged in management consultancy) is bound by the entire Code of Ethics.

### **Summary**

- **Deemed to be in Practice**: Even without performing attest functions, a member deemed to be in practice must adhere to the ICAI Code of Ethics, including restrictions on advertising.
- **COP Distinctions**: The difference between full-time and part-time COPs is not explicitly marked but affects the scope of permissible activities.
- **Tutorship and Coaching**: Private tutorship is generally permitted, but setting up a coaching center requires careful adherence to regulations.
- **Advertising**: All members, regardless of their practice status, must follow ethical guidelines for advertising.

Ensure you review the specific ICAI regulations and possibly consult with ICAI or a professional advisor for tailored advice based on your situation.

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