Know Your Ethics-CA

BALASUBRAMANYA B N (CCI STUDENT....) (44679 Points)

26 January 2010

(Published in November, 2009 issue of the CA Journal)

Q. Can a Chartered Accountant in practice accept original professional work emanating from the client introduced to him by another member?
A. No, a Chartered Accountant in practice should not accept the original professional work emanating from a client introduced to him by another member. 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.

Q. Can a member in practice solicit clients or professional work by advertisement?
A. No. The CA Act prohibits a member in practice from soliciting clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means.
However, there are following exceptions to it:-

A member can respond to tenders or enquiries issued by various users of professional services or organizations from time to time and securing professional work as a consequence.
A member may advertise changes in partnerships or dissolution of a firm, or of any change in the address of practice and telephone numbers, the advertisement being limited to a bare statement of facts and consideration given to the appropriateness of the area of distribution of the newspaper or magazine and number of insertions.
A member is permitted to issue a classified advertisement in the Journal/Newsletter of the Institute intended to give information for sharing professional work on assignment basis or for seeking professional work on partnership basis or salaried employment in the field of accounting profession provided it only contains the accountant's name, address, telephone, fax number and E-mail address.

Q.Whether sponsorship or prizes can be instituted in the name of Chartered Accountants firm ?
A. Yes, as per the CA Act it is not objectionable to institute prizes in the name of the individual Chartered Accountant and also in the firm’s name provided the designation “Chartered Accountant’ , is not indicated in the prize and the clause relating to advertisements and publicity are complied with.

Q. Can a Chartered Accountant in practice/firm of Chartered Accountants post the particulars of himself/itself on a website?
A. Yes, the Council has approved the detailed guidelines for posting the particulars on Website by Chartered Accountants in practice and firm(s) of Chartered Accountants in practice. For Guidelines, please refer pages 140-144 of Code of Ethics, 2009.

Q. Whether a Chartered Accountant in practice can give public interviews and also whether he can furnish details about himself or his firm in such interviews?
A. Chartered accountant in practice can give public interviews. While doing so, due care should be taken to ensure that such interviews or details about the members or their firms are not given in a manner highlighting their professional attainments, which may hit clauses (6) and (7) of the First Schedule of the CA Act.

Q. Whether the information contained in the website of the Chartered Accountants and/or Chartered Accountants’ firms can be circulated on their own or through E-mail or by any other mode or technique?
A. The Code of Ethics provides that the Chartered Accountants and/or Chartered Accountants' firms should ensure that none of the information contained in the website be circulated on their own or through E-mail or by any other mode or technique except on a specific “pull” request. The Chartered Accountants and/or Chartered Accountants' Firms would ensure that their Websites are run on a “pull” model and not a “push” model of the technology to ensure that any person who wishes to locate the Chartered Accountants or Chartered Accountants' firms would only have access to the information and the information should be provided only on the basis of specific “pull” request.

Q. Can a member put up his photograph on the website?
A. Yes, as per the website guidelines , display of Passport size photograph by a member on the website is permitted.

(Published in October, 2009 issue of the CA Journal)

Q. Can a chartered accountant in practice agree to select and recruit personnel , conduct training programmes and work studies for and on behalf of client?
A. Yes, the ‘ Management Consultancy and other Services’ as specified by the Council includes both, personnel recruitment and conduct of training programmes and work studies. As such, the same are permitted for a chartered accountant in practice.

Q. Whether a member can act as insurance agent and arrange business for the Insurance Companies?
A. No, a member in practice is permitted to render Insurance Financial Advisory Services only. It is not permissible to a member to do any kind of marketing and business procurement for any insurance company. Their services are limited to professional services in the form of advisory and consultancy services.

Q. Whether Code of Ethics is applicable outside India?
A. The Code of Ethics of the Institute is applicable to all the members , even outside India.

Q. Can a chartered accountant in practice allow any person to practice in his name as a chartered accountant ?
A. No, a chartered accountant in practice is prohibited to allow 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.

Q. Can a chartered accountant in practice secure any professional business through the services of a person who is not his employee or partner?
A. No, the CA Act , 1949 does not permit a practicing chartered accountant from securing, either through the services of a person who is not an employee of such chartered accountant or who is not his partner, any professional business.

Q. Whether a member in practice is permitted to respond to announcement for empanelment for allotment of audit and other professional work and quote fees on enquiries being received?
A. It has been clarified by the Council that if announcements are made for empanelment by Government, Corporations, Courts, Cooperative Societies, Banks and other similar Institutions, the members may respond to such announcements provided the existence of panel is within their knowledge. The Council has further clarified that the quotations of fees can be sent if enquiries are received by the members in this regard.

Q. Whether a member in practice is permitted to have his name published in Telephone Directory?
A. Yes, a member in practice is permitted to have his name published in the Telephone Directory subject to certain conditions :-

The entry should appear in the section/category of “Chartered Accountants“.
The member/firm should belong to the town/city in respect of which the directory is being published.
The entry should be in normal type of letters. Entry in bolder type or abnormal type of letters or in a box is not permissible.
The order of the entries should be alphabetical and logical.
The entry should not appear in a manner giving the impression of publicity/advertisement. Entry should not be given in a manner which gives prominence to it as compared to other entries.
The payment, if any, for the entry should not be unreasonable.
The entries should not be restricted and should be open to all the chartered accountants/firms of chartered accountants in the particular city/town in respect whereof the directory is published.
Subject to the above conditions, the members can also include their names in trade directories which are published and/or otherwise available such as electronic media e.g. Internet, telephone services like “Ask Me Services“ etc.

Q. Can a member in practice indicate in a book or an article, authored /contributed/published by him, his association with any firm of Chartered Accountants?
A. No, as per CA Act, 1949, a member is not permitted to indicate in a book or an article, authored/contributed/published by him, his association with any firm of Chartered Accountants.

Q. Can a Chartered Accountant in practice seek professional work from his professional colleagues?
A. Yes, as per CA Act , 1949 a member is permitted to apply or request for, or to invite, or to secure professional work from another Chartered Accountant in practice.

(Published in September, 2009 issue of the CA Journal)

Based on the ethical point of view the CA Director of a company should not participate in board meeting and therefore withdraw himself when the item relating to his client(s) is considered by the Board.
Members from Industry as well as from Practice can pursue the AMFI (Association of Mutual Funds in India ) Course. However, as to the question whether a member can be registered with it so as to take the role of Financial Intermediary, it has been decided that members in Industry /otherwise not in practice can obtain the membership by registering them with a mutual fund /Association whereas members in practice can not do so whether holding full time COP or Part time COP.
Engagement by a member in practice in the business of buying and selling shares amounts to be ‘any business’ within the meaning of Clause(11) of Part-I of the First Schedule and hence the prior permission of the Council is required.
It is prohibitive to undertake the assignments of Internal Audit of a client and entry of the transaction for Accounting, simultaneously being violative of the provisions of the ‘Guidance Note on Independence of Auditors’.
Concurrent audit and the assignment of Quarterly review of the same entity cannot be taken simultaneously as the concurrent audit being a kind of internal audit and the quarterly review being a kind of Statutory audit undertaken simultaneously are prohibited under the provisions of ‘Guidance Note on Independence of Auditors’.
Publishing a book by a firm containing its history for the purpose of distributing to clients , associates, friends and well wishers and printing of the words ‘ Celebrating 75 years in the profession’ on special letterheads and envelopes will lead to solicitation of professional work, hence not permissible as per the provisions of Clauses(6) and (7) of Part I of the First Schedule to the Chartered Accountants Act, 1949.
Member is not permitted to use his letterhead containing the name and address of his firm for presenting before the public at large , as it contains a promotional element and leads to solicitation of professional work.

Ethical issues in Question- Answer form

Q. What is ‘professional or other misconduct’ ?
A. ‘Professional or other misconduct’ refers to an action or omission listed out in the two schedules of the CA Act, 1949 . However, this does not purport to be a comprehensive definition as the scope of this term is expanding in view of the power conferred under the Act on the Director (Discipline) to enquire into the conduct of members under any other circumstances.

Q. What is the distinction between the two Schedules?
A. The two Schedules are distinguished on the basis of gravity of misconduct described therein. The misconduct listed in the Second Schedule is understood to be grave and serious prescribing higher punishment.

Q. Can a Member in practice render ‘ Management Consultancy and other Services’?
A. Yes, the areas permitted under the ‘ Management Consultancy and other Services’ have been specified by the Council ( appearing at pages 103-104 of the Code of Ethics, 2009 ) pursuant to Section 2 (2)(iv) of the CA Act, 1949.

Q. Whether a member in practice permitted to undertake the management of NRI funds?
A. No, a member in practice is not permitted to undertake such services as it is not covered under ‘ Management Consultancy and other Services’ specified by the Council.

Q. Can a chartered accountant in practice provide ‘Portfolio Management Services’(PMS)?
A. No, as the ‘ Management Consultancy and other Services’ expressly bars the activities of broking, underwriting and portfolio management.

Q. Can a chartered accountant undertake practice after getting the CA final pass certificate?
A. No, a chartered Accountant requires the Certificate of Practice (CoP) issued by the Institute after getting the final pass certificate to practice as a chartered accountant.

Q. Can a chartered accountant in practice work as a ‘ collection agent’?
A. No, a chartered accountant in practice can not work as a ‘ collection agent’ as, the ‘ Management Consultancy and other Services’ specified by the Council , do not permit such engagement.

(Published in August , 2009 issue of the CA Journal)

-By Ethical Standards Board(ESB)

Ethics is the foundation of a civilized society, and is a preliminary requirement of what a civilized person expects from another civilized person. The recent spate of events in the corporate world has highlighted the importance of ethics in business and profession. A business or profession that lacks the compliance of ethics is bound to fail sooner or later.

Every institution, be it political, business or professional, must therefore have a system for compliance of ethical standards to the extent as may be acceptable to the public at large. Accordingly, it is imperative for the members of any profession to comply with the ethics in its letter and spirit..

With this vision, the Ethical Standards Board of the Institute was formed , having primary responsibility to formulate principles of Ethics for its members that are stringent enough to guarantee the confidence building in the public. The mission of the Board is "To work towards evolving a dynamic and contemporary Code of Ethics and ethical behaviour for members while retaining the long cherished ideals of `excellence, independence, integrity' as also to protect the dignity and interests of the members".

Besides formulating ethical principles for members, the Board also examines and renders advice on ethical issues referred to it. It reviews the ‘Code of Ethics’ for members from time to time, and publishes the revised editions . The other publications of the Board, namely, ‘FAQ on Ethical Issues’, ‘Guidance Note on Independence of Auditors’ and ‘Guidance Note on Revision of the Audit Report’ are also reviewed and revised from time to time. The Board promotes public awareness and confidence in the integrity, objectivity, competence and professionalism of members . It also examines and deals with the complaints of members against their unjustified removal as auditors of an entity, as per procedure evolved, and takes necessary steps to protect the interest of its members

The Code of Ethics -2009 was released on 4th February, 2009 . The revised Code of Ethics for the first time incorporated the International Federation of Accountants (IFAC) Code of Ethics for professional accountants with variances, wherever required, to make it compatible with Indian laws.
Advertisement Guidelines issued on 14th May,2008 for the members in practice to allow them to advertise in a restricted way through a write-up.
Council General Guidelines, 2008 issued on 8th August, 2008 on various issues e.g. Maintenance of Books of Account, Tax Audit Assignments under I.T.Act, 1961, Specified Number of Audit Assignments etc.
Members in practice are allowed to own agricultural land and carry out agricultural activity under general permission under Appendix (9) of the Chartered Accountants Regulations, 1988 .
Members of the Council, the Chairman/Vice-Chairman of the Committees of the Council, the Members of the of the Regional Councils and Members of the Managing Committees of Branches may print either their residential address or office address including telephone/fax no. without mentioning the firm’s name on the back of the visiting cards.
Management Consultancy Companies floated by Practicing Chartered Accountants can receive remuneration from an employer based on percentage of the annual CTC of the Candidate while providing services relating to recruitment or placement of such candidate as only clauses (6) & (7) of Part I of First Schedule to The Chartered Accountants Act, 1949, are applicable to such companies. Individual practicing Chartered Accountants or their firms are not permitted for the same as per the provisions of Clause (10) of part I of the First Schedule to the CA Act,1949.
Member who is in practice can not use the designation of ‘District Governor’ in his rotary visiting card along with the word ‘Chartered Accountant (In view Section 7 of the Act and Clause (7) of Part I of the First Schedule to the CA Act,1949 ).
It is not permissible for a Member of ICAI who is practicing as an Advocate, to use CA Logo on his professional stationary as the CA Logo is recognized as a symbol of CA Profession in India and it is to promote the brand of Profession of Chartered Accountants.
Based on an ethical point of view the CA Director of a Company should not participate in board meeting and withdraw himself when the item relating to his client(s) is considered by the Board
Members from industry as well as from Practice can pursue the AMFI (Association of Mutual Funds in India) Course . However, as to the question whether a member can be registered with it so as to take the role of Financial Intermediary, the Board decided that , members in Industry/ otherwise not in practice can obtain the membership by registering them with a mutual fund / Association whereas members in practice can not do so whether holding full time COP or Part time COP.
Engagement by a member in practice , in the business of buying and selling shares amounts to be ‘any business’ within the meaning of Clause (11) of Part I of the First Schedule and hence the prior permission of the Council is required.
It is prohibitive to undertake the assignments of Internal Audit of a client and entry of the transaction for Accounting, simultaneously being violative of the provisions of the ‘Guidance Note on Independence of Auditors’
Concurrent audit and the assignment of Quarterly review of the same entity cannot be taken simultaneously as the concurrent audit being a kind of internal audit and the quarterly review being a kind of Statutory audit undertaken simultaneously are prohibited under the provisions of ‘Guidance Note on Independence of Auditors’.
Publishing a book by a firm containing its history for the purpose of distributing to clients, associates, friends and well wishers and printing of the words ‘Celebrating 75 years in the Profession’ on special letterheads and envelopes of the firm will lead to solicitation of professional work, hence not permissible as per the provisions of Clause (6) and (7) of Part I of the First Schedule to the Chartered Accountants Act, 1949.
Member is not permitted to use his letterhead containing the name and address of his firm for presenting before the public at large, as it contains a promotional element and leads to solicitation of professional work.