Code of Ethics for Members Recent Decisions of the Ethical Standards Board

CA K.Raghu
Vice Chairman-
Ethical Standards Board
Issue
Whether an auditor of a Subsidiary Company can be a Director of its Holding Company
Decision
The auditor of a Subsidiary Company cannot be a Director of its Holding Company, as it
will affect the independence of an auditor
Issue
Whether a practicing member can print ISO mark in his professional letterheads and
other papers.
Decision
A member can get ISO 9001:2000 certification, but he cannot use the expression ISO
certified on his professional documents.
Issue
Whether a practicing member can form an HUF.
Decision
A practicing member cannot form an HUF to carry out business activities.
Issue
What is the meaning of expression Director Simplicitor?
Decision
Director Simplicitor shall be constructed as ordinary / non-executive Director.
Issue
Whether members of ICAI practicing as an Advocate, can use CA Logo on his
professional stationary.
Decision
It is not permissible, as it appears to be unethical.
Issue
Whether a member in industry can print his letterhead for communication with ICAI or
any other person.
Decision
It is permissible, however such member using the designation of Chartered Accountant
cannot use any other designation, whether in addition or in substitution thereof.
Issue
Whether a CA Director of a Company should participate in a Board Meeting when the
item relating to his client(s) is being considered by the Board.
Decision
Based on an ethical point of view, the member should withdraw himself from such a
meeting.
Issue
Whether a member holding Certificate of Practice can own Agricultural Land and
continue agricultural activity.
Decision
Owning Agricultural Land and carrying out Agricultural activities by a member holding
Certificate of Practice is covered under activities Permission Generally Granted under
Appendix (9) of the Chartered Accountants Regulations, 1988, and is, therefore
permitted.
Issue
Whether a Chartered Accountant firm can accept Branch Audit of a Bank when a partner
has taken a loan from any other Branch of the same bank.
Decision
Independence of Auditors can neither be diluted nor any scope be left for dilution in the
perception of stakeholders. The term indebtedness must continue to be a qua an entity
and not qua branch.
Issue
Whether a firm of Chartered Accountant can print special words celebrating 75 years in
profession on the letter heads and envelopes.
Decision
No, as it will lead to the solicitation of professional work and result in violation of clause
(6) & (7) of Part 1 of First Schedule to the CA Act, 1949.
Issue
Whether the CA Logo can be used on professional letter head as header for the
presentation material put before the prospective investors.
Decision
It is not permissible as it amounts to solicitation of professional work.
Issue
Printing of Rotary visiting card and the use of the designation (District Governor)
therein.
Decision
The member who is in practice cannot use the designation of District Governor in his
Rotary visiting card along with the term Chartered Accountant.
Issue
Whether a member can take up the membership of Association of Mutual Funds in India
(AMFI).
Decision
The member may pursue such course and become a member of the Association but he
cannot register with it. This restriction will be applicable to the members who are
holding COP, whether part-time or full- time.
Issue
Whether a Member or firm is allowed to design its own Logo? If not, can the name of
the firm/ 1
st
initial of the name of the firm be written in a different style.
Decision
This kind of stylish Initials is prohibitive as it will deem to be a logo, since the logos have
already been prohibited by the Council.
Issue
Whether a Member can get his firm listed with a telephonic service provider, if the
service provider is not charging anything for the listing.
Decision
Members may avail the Just Dial services within the guidelines laid down by the
Council.
Issue
Whether a member while conducting an Internal Audit of a client can also do accounting
for the same client.
Decision
It is prohibitive to undertake the assignments of Internal Audit of a client and accounting
simultaneously, being violative of the provisions of the Guidance Note on Independence
of Auditors.
Issue
Whether concurrent auditor of a bank can also undertake quarterly review of the same
Bank.
Decision
The Concurrent Audit and the assignment of Quarterly review of the same entity cannot
be taken simultaneously, since Concurrent Audit is in the nature of an internal audit and
the Quarterly review is in the nature of a Statutory Audit. A member cannot undertake
simultaneously since it is prohibited under the provisions of Guidance Note on
Independence of Auditors.
Issue
What role can a Statutory auditor and Internal auditor undertake from amongst:- Tax
Audit, Tax representation, Consulting, Advisory, IFRS conversion, Sox Certification,
designing of system, resource raising, day to day support to sourced business processes.
Decision
Tax Audit and Sox Certification can be done only by the Statutory auditor
Designing of internal control systems and day to day support to outsourced
business processes can be done only by internal auditor.
Tax Representation, Consultancy, Advisory, IFRS Conversion and resource
raising can be done by both.
Issue
Can the Institute ban the Quotations/Bids invited from Chartered Accountants regarding
empanelment for Audit work by Govt. Companies/Organizations/ PSUs/ Corporations.
Decision
Institute cannot interfere as the C A Amendment Act, 2006, has specifically allowed
Chartered Accountants in practice to respond to the tenders vide proviso(ii) to clause 6
of Part I of schedule to the Chartered Accountants Act, 1949.
Issue
Whether Concurrent audit of one of the branches of a nationalized bank can be accepted
by an auditor who has conducted statutory audit of 3 different branches of the same bank.
Decision
In line with the principle of strict independence as adopted in the earlier decisions, it is
not permissible to accept Concurrent audit of one of the branches of a nationalized bank
who has conducted Statutory audit of 3 different branches of the same bank.
Issue
Whether internal auditor of an entity can be appointed as Tax Consultant of the same
entity for a particular year.
Decision
An internal auditor of an entity may be appointed as Tax Consultant of the same entity
for a particular year.