CA Kamal Garg
Code of Ethics:
Ready Reckoner
New Disciplinary Mechanism at a glance
Disciplinary Directorate
Opinion on alleged professional or
other misconduct
First Schedule
Misconduct
First Schedule and/ or
Second Schedule
Misconduct
Case referred to Board
of Discipline
Case referred to Disciplinary
Committee
Order Issued
u/s 21(A) or (21B)
If aggrieved with the order,
appeal to Appellate Authority u/s 22G
within 90 days
CA Kamal Garg
SCHEDULES TO THE CHARTERED ACCOUNTANTS ACT, 1949
There are two schedules to the Chartered Accountants Act, 1949 (as amended by the Chartered
Accountants (Amendment) Act, 2006) viz.
1. the First Schedule; and
2. the Second Schedule
THE FIRST SCHEDULE - The First Schedule has four parts [Including part IV inserted by
Chartered Accountants (Amendment) Act, 2006].
Part I of First Schedule deals with the professional misconduct in relation to Chartered
Accountant in practice.
Part II deals with the professional misconduct in relation to members of the Institute in
service.
Part III deals with the professional misconduct in relation to members of the Institute
generally.
Part IV deals with other misconduct in relation to members of the institute generally.
THE SECOND SCHEDULE - The Second Schedule has three parts [Including Part III inserted
by Chartered Accountants (Amendment) Act, 2006].
Part I of Second Schedule deals with the professional misconduct in relation to
Chartered Accountants in practice.
Part II deals with the professional misconduct in relation to member of the Institute
generally.
Part III deals with the other misconduct in relation to members of the Institute
generally.
CA Kamal Garg
Note: Clause 5 should be read along with Clause 6 & Clause 7
Clause 1
Misconduct
Allowing any other
person to practice in his
own name
Exceptions
1. Other person CA in
practice, and
2. Is in partnership, or
3. Is in his employment
Clause 5
Misconduct Open/Authorized Means
Securing professional business
through unauthorized Means
1. Employee,
2. His partner,
3. Other means under Clause 6 & 7
First Schedule
Part I
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Clause 6
Misconduct
Exceptions
Solicitation of clients
or professional work
Work from
other CA in
practice
Responding
to tenders
or enquiries
Solicitation can be
direct or indirect
through:
1. Circular;
2. Advertisement
3. Personal
communication
4. Interview, etc.
ICAI Guidelines:
1. Advertisements and notes in press;
2. Application for empanelment;
3. Publication of firm name in telephone directory etc;
4. Issuing hand bills;
5. Publication of books, etc.
6. Issuing greeting cards, invitations, etc;
7. Roving enquiries;
8. Sec. 225(3) representation;
9. Acceptance of original professional work;
10. Public interviews
CA Kamal Garg
Clause 7
Misconduct Exceptions
Advertising
attainments
or services
Using unapproved
or wrong
designations
Advertising through write up
permitted
Q: ICAI Guidelines for write-up??
CA Kamal Garg
Clause 8
Misconduct Exceptions
If no written communication with previous auditor
before accepting the position as an auditor
Nil
Q: ICAI Clarifications??
CA Kamal Garg
Clause 9
Misconduct
If does not ascertain the compliance of Sec. 224 & 225 in
respect of his appointment
Clause 10
Misconduct Exceptions under
Reg. 192
Fees on
1. % of profits; or
2. Contingent findings
1. Liquidator/ Receiver;
2. Audit of cooperative society;
3. D.T. valuation
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Clause 11
Misconduct
Exceptions
Engaging in other business/
occupation
1. ICAI permission;
2. Director simplicitor;
3. Employment in CA firm
4. Sec. 2(2) (iv) & Reg. 190A
Full time COP (+) salary
Clause 12
Misconduct Exceptions
Allowing non-members to
sign F.S.
Signing documents not
containing expression
of opinion
Sec. 26 also states so
CA Kamal Garg
Clause 1
Misconduct
Paying/allowing to any person share in employment
emoluments
Clause 2
Misconduct
Accepting any remuneration/ commission/ gratification from
counsels/ customers of the company/ firm
Clauses
Misconduct
First Schedule
Part II
First Schedule
Part III
Clause 1
Clause 2
Clause 3
Not FCA but acts as
FCA
Does not supply info
to ICAI/ comply
requirements asked
for by ICAI
Violation of Clause 6/ 7
CA Kamal Garg
Second Schedule
Part I
Clause 1
Misconduct
Exceptions
1. Clients consent;
2. Law Requirement
Disclosure of
information acquired
during professional
engagement
Same principle also in
SA 200
Clause 2
Misconduct Exceptions
Certification/
submission of report
on F.S. without
examination
1. Examination under his
supervision;
2. Examination by other CA in
practice.
CA Kamal Garg
Clause 3
Misconduct
Vouching
the accuracy
of forecasts
Exception
Follow AAS35/
SAE 3400
Clause 4
Misconduct Substantial
Interest
Expression of opinion on F.S. of an
entity with presence of substantial
Interest (either himself/ his firm/
his partner)
1. Company > 20%
voting power
2. Others > 20%
profits
Relatives of CA also to be covered for adjudging substantial interest
(w.r.t. Guidance Note on Independence of Auditors)
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Clause 8
Misconduct
Fails to obtain information for
expression of opinion
In a way, its about violation
of SA 500/ SA 501
Clause 9
Misconduct
Failure to invite attention to any material
departure to generally accepted audit procedure
Clause 10
Misconduct
Exceptions
1. Failure to keep clients money in
separate bank a/c; or
2. Use such money within
reasonable time
1. Fees/ remuneration
(even advance)
2. Reasonable time usage
Even money recd in capacity as
trustee/ liquidator etc. also
covered under this clause
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Clauses
Clause 5
Misconduct
Clause 6
Failure to disclose
Material Fact
Failure to report
Material Mis-stmt
Follow SA 320
for Materiality
Clause 7
Misconduct
Grossly negligent of his duties
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Misconducts
Clause 1
Clause 2
Clause 3 Clause 4
Contravention of
Act/its provisions
Being employee discloses
confidential information without
consent/ legal requirement
Submits false
info to ICAI/ its
constituents
Defalcates or
Embezzles
money recd in
professional
capacity
Second Schedule Part II
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First Schedule Part IV Second Schedule Part III
Clause 1 Guilty oI oIIence by civil
or criminal court
involving imprisonment
Ior 6 months
Guilty oI oIIence by civil or
criminal court involving
imprisonment Ior ~ 6 months
Clause 2 Brings disrepute to the
proIession or the Institute
as a result oI his action
whether or not related to
his proIessional work
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