In India, the profession of chartered accountancy is regulated by the Institute of Chartered

Accountants of India which was founded under the Chartered Accountants Act of 1949. The
ICAI is self-regulatory and is both, an examining as well as a licensing body.

Members are awarded the C.A. (Chartered Accountants) designation.

The Chartered Accountants Act, 1949 was passed on May 1. The term Chartered Accountant
came to be used in place of Indian Registered Accountants. So the term "Chartered" does not
relate to Royal Charter as in case in UK or Australia as there is no Royal Charter in the Republic
of India.

Schedules to the act

Acts or omissions which compromise professional misconduct within the meaning of

section 22 of the CHARTERED ACCOUNTANTS ACT are defined in two schedules viz.

The first schedule and the second schedule. The first schedule is divided into three

parts. Part I of the first schedule deals with the misconduct of a member in practice

which would have the effect generally of compromising his position as an

independent person. Part II deals with the misconduct of members in service and

Part III deals with misconduct of members generally. The Second schedule is divided

into two parts. Part I deals with misconduct in relation to a member in practice and

Part II deals with misconduct of members generally. The implications of the different

clauses in the schedules are discussed below.

THE FIRST SCHEDULE:

If a member is found guilty of any of the acts or omissions stated in any of the parts

of this schedule , the Council shall pass appropriate orders except in case in which

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the name of the member ought , in the view of the Council, to be removed from the

Register for a period exceeding five years of permanently.

PART I

Professional misconduct in relation to Chartered Accountants in practice.

A Chartered Accountant in practice is deemed to be guilty of professional

misconduct if he:

CLAUSE (1) “Allows any person to practice in his name as a Chartered Accountant in

practice and is in partnership with or employed by himself.”

The above clause is intended to safeguard the public against unqualified accountant

practicing under the cover of qualified accountant. It ensures that the work of the

accountant will be carried out by a Chartered Accountant who may be his partner or

his employee and who would work under his control and supervision.

CLAUSE (2): “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.”

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It is in order for a member to share his fees or profits with another member of the

Institute and/ or a firm of Chartered Accountants. However, it would not be

permissible for a member to share his fees or profits with a person who is not a

member of the Institute say an Advocate or an Estate Agent

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 (a) In respect of cases where the death of the proprietor concerned occurred on

or after 30.8.1998

(b) in respect of cases where the death of the proprietor concerned occurred on

or after 30.8.1998 and there existed a dispute as to the legal heir of the

deceased proprietor

(c) In respect of cases where the death of the proprietor concerned had occurred

on or before 29th august1998, (irrespective of the time lag between the date

of the proprietor concerned and the date of sale/transfer of goodwill

completed/ to be completed)

CLAUSE (3): accepts or agrees to accept any part of the profits of the professional

work of a lawyer, auctioneer, broker or other agent who is not a member of the

institute

Just as a member cannot share his fees with a non-member, he is also not

permitted to receive and share the fees of others such as lawyers, engineers,

brokers etc. such a restriction is necessary so that a chartered accountant

who is often required to engage or to recommend for engagement by his

clients, the services of the members of the other professions, such as

lawyers, engineers, etc., may not share the fees received by other

professional persons.

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 As already mentioned under clause (2) above, members are now required to

work in close association with engineering, legal and professional on specified

projects. In such cases care should be taken by members to ensure that there

is no sharing of fees for profits in such assignments.

CLAUSE (4) : enters into a partnership with a person other than a chartered

accountant in practice or a person resident without India who but for his residence

in abroad would be entitled to be registered as a member under clause (5) of

subsection (1) of section 4 or whose qualifications are recognized by the central

government or the council for the purpose of permitting such partnerships, provided

that the chartered accountants share in the fees or profits of the business of the

partnership both within and without India

It refers to a chartered accountant entering into a partnership with the said people:

 Another CA in practice

 A resident outside India who for being a resident abroad is entitled to be

registered as a member having passed such examinations and completed

such training outside India as is recognized by central government or the

council of ICAI

 A person whose qualifications are recognized by the central government or

the council of ICAI for the purpose of permitting such partnerships. In such

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 case of partnerships within or outside India, the fees or profits of the

partnership business both within and outside India have to be shared.

CLAUSE (5): secures either through the services of a person not qualified to be his

partner or by means which are not open to a chartered accountant, any professional

business

“A man must stand erect and not to be kept erect by others” is a dictum by

Marcus Aurelius which though applicable for a man in every walk of life is

more so in the case of a professional life. He must see work not through any

agency, but by the respect that he is able to command for his professional

talent and skill and by the confidence he is able to inspire by his reputation.

All forms of canvassing on that account are regarded unethical and are

prohibited.

CLAUSE (6): “solicits client or professional work either directly or indirectly, by

circular, advertisement, personal communication or interview or by any other

means”

(a) Advertisement and note in the press

(b) Application for the empanelment for allotment of audit and other

professional work

(c) Publication of name or firm name by chartered accountants in the

telephone or other directories published by telephone authorities or

private bodies

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 (d) Responding to tenders, advertisements and circulars

(e) Issuing hand bills

(f) Publication of books or articles

(g) Issue of greeting cards or invitations

(h) Soliciting professional work by making roving inquiries

(i) Seeking work from professional colleagues

(j) Scope of representations which an auditor is make under section 225(3) of

the companies act, 1956

(k) Acceptance of original professional work by a member emanating from

the client introduced to him by other member

(l) Giving public interviews

(m) Members and/or firms who publish advertisements under box numbers

The above clause bans all forms of canvassing (advertising) for professional work,

including issue of circulars, advertisements or personal communication or through

interviews. Canvassing in any way and form compromises the independence of the

profession and degrades it in the eyes of the public.

The council of ICAI has considered various modes of canvassing and has framed

certain rules in this regard: -

 Public press: - a chartered accountant in practice can intimate changes in the

partnership or dissolution of his firm or any change, in the address or

telephone numbers of his place of practice through public press provided

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 such announcements are limited to bare statement of facts and consideration

is given to the appropriations.

 Empanelment: - a chartered accountant in practice cannot make roving

enquiries by applying to various institutions for allotment of work. But he can

write to an organization for being enrolled on a specific and known panel

maintained by it for allotment of audit work, provided, such empanelment

does not require payment of any registration or other fee or deposit.

 Public interviews: - while giving an interview to the press or making speech to

any public forum, a chartered accountant in practice should ensure that the

interview/speech does not result in the publicity of a member or his firm.

 Website: - a chartered accountant in practice or a firm of chartered

accountants can create his/ its website using any format. However, the

website should be so designed that it does not solicit clients or professional

work.

 Indirect publicity: - the practice of seeking indirect publicity through issuance

of handbills to persons other than his regular clients bearing the name of

chartered accountant in practice and containing legal provisions or changes

therein, etc. is not permitted.

CLAUSE (7):”Advertises his professional attainments or services, or uses any

designation or expressions other than the chartered accountant on professionals

documents, visiting cards, letter heads or sign boards unless it be a degree of a

university established by law in India or recognized by the central government or a

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title indicating membership of the institute of chartered accountants or of any other

institution that has been recognized by the central government or may be

recognized by the council.’

This clause prohibits advertising of professional attainments or

services of a member. It also restrains a member for using any designation or

expression other than that of a chartered accountant in documents through which

the professional attainments of members would come to the notice of the public. It

is improper for a chartered accountant to state on his professional documents that h

is an income-tax consultant or a cost consultant or a management consultant.

CLAUSE(8):”Accept a position as a auditor previously held by another chartered

accountant or a restricted state auditor without first communicating with him in

writing.”

More than being a matter of professional courtesy, communication with the

previous auditor enables the prospect auditor to find out whether there exist any

legitimate reasons why he should not accept the appointment, something, which is

crucial to his own interest and to the interest of the profession. However, the

previous auditor is accepted to co-operate with the change and not raise frivolous

issues. The council of ICAI has stated that the “existence of dispute as regard to the

fees, may be the root cause of an auditor being changed.”

CLAUSE(9): “Accepts an appointment as auditor of a company without first

ascertaining from it whether the requirements of section 225 of the

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 companies act , 1956, in respect of such appointment have been duly

complied with.”

This clause specifies the need for an incoming auditor of a company to ensure that

his appointment has been appropriately made and is valid in all respects

CLAUSE (10): “Engages in any business or occupation other than the profession of

chartered accountants unless permitted by the council so to engage:

Provided that nothing contained herein shall disentitle a chartered accountants from

being a director of a company, unless he or any of his partner is interested in such

company as an auditor.”

This is a provision introduced to restrain a member in practice from engaging

himself in any business or occupation other than that of chartered accountant

except when permitted by the council to be engaged. The objective is to restrain

members from carrying on any other business in conjunction with the profession of

accountancy and combining such work with any business, which is not in keeping

with the dignity of the profession. Another reason for the introduction of such

prohibition is that a chartered accountant, if permitted to enter into all kinds of

business, would be able to advertise for his other business and thereby secure an

unfair advantage in his professional practice.

CLAUSE (11)

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This is a provision introduced to restrain a member in practice from engaging

himself in any business or occupation other than that of chartered accountant

except when permitted by the council to be so engaged. The objective is to restrain

members from carrying on any other business in conjunction with the profession of

accountancy and combining such work with any business, which is not in keeping

with the dignity of the profession. Another reason for the introduction of such a

prohibition is that a chartered accountant if permitted, to enter into all kinds of

business, would be able to advertise for his other business and thereby secure an

unfair advantage in his professional practice.

CLAUSE (12): “Accept a position as auditor previously held by some other chartered

accountant or a restricted state auditor in such conditions as to constitute

undercutting;

Although it is open to every member of the profession to determine the fee

that he may charge for each type of professional work, if great diversity in the

amount of fees is permitted, it might lead to varying standards of work performed

by different members of the profession. This would redound to the discredit of the

profession. On this account basically, a member is restrained from offering to

render professional service for a fee lower than that charged by his predecessor.

CLAUSE (13): “Allows a person not being a member of the institute 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.”

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The above clause prohibits a member for allowing another ember who is not his

partner to sign any balance sheet, p & l account or financial statements on his

behalf or on behalf of his firm.

This clause is to be read in conjunction with section 26 of the chartered accountant

act, 1949 which stipulates 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.

The term “financial statement” for the purpose of this clause would cover an

examination of the accounts or of financial statements given under a statutory

enactment or otherwise.

PART II

PROFESSIONAL MISCONDUCT IN RELATION TO MEMBERS OF THE INSTITUTE

IN SERVICE.

The three clauses reproduced below included in this part of the schedule

define different types of conduct of a member who is not in practice but is an

employee of a firm, company, or an individual which would make his guilty of

professional misconduct.

(a) If he pays or allows or agrees to pay directly or indirectly to any person

any share in the emoluments of the employment undertaken by the member.

(b) If he accepts or agrees to accept any part of fees, profits or loss from a

lawyer, chartered accountant, or broker engaged by such company, firm or

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 person or agent or customer of such company, firm or person by way of

commission or gratification.

(c) If he discloses confidential information acquired in the course of his

employment except as and when required by law or excepts as permitted by

the employer.

A member in the foregoing circumstances would be guilty o misconduct

regardless of the fact hat he was in whole-time or part time employment or

that he was carrying on practice of accountancy along with his

employment.

PART III

Professional misconduct in relation of members of the institute generally

A member of the institute, whether in practice or not, shall be deemed to be guilty

of professional misconduct.

 If he includes in any statement, return or form to be submitted to the council

any particulars knowing them to be false.

 If he, not being a Fellow styles himself as a Fellow

 If he does not supply the information called for, or does not comply with the

requirements asked for, by the council or any of its committees.

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The foregoing clauses are intended to empower the Council to enforce the discipline

over the members, and obtaining information from the members or requiring any

compliance with any directions issued by the council.

Roll number Name Signature

10702 Madhura Bakre

10718 Pratima Hajare

10728 Abhishek Mehta

10730 Bijal Nagda

10745 Maukunti Shah

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10753 Vidhi Thakkar

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