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Code of Ethics – Practical Issues. Presentation by: CA R. A. Sharma, Jaipur. Code of Ethics- Set of Rules to regulate the activity of professional in a disciplined manner Do’s and don’ts provided Fundamental Principles required to follow. FUNDAMENTAL PRINCIPLES. INTEGRITY

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code of ethics practical issues

Code of Ethics – Practical Issues

Presentation by:

CA R. A. Sharma, Jaipur

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Code of Ethics-Set of Rules to regulate the activity of professional in a disciplined manner Do’s and don’ts providedFundamental Principles required to follow

ICAI,JaipuICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

fundamental principles
FUNDAMENTAL PRINCIPLES
  • INTEGRITY

-Straight forward and honest

  • OBJECTIVITY

-Should not allow bias, conflict of interest

-Undue influence on professional judgment

  • PROFESSIONAL COMPETENCE AND DUE CARE

-Professional knowledge, skill

-Current development in practice

-Legislation of techniques

-Professional standards

Contd….

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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CONFIDENTIALITY

-Respect the confidentiality

-Professional and employment

-Should not be used for personal advantage

  • PROFESSIONAL BEHAVIOUR

-Compliance of law of regulation

-Discredits to profession

-Professional Manner

-Reputation, conduct

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Study DividesPractical Issues A :-Procurement of Professional Work i.e. Introducing with clients B:- Execution of WorkC:- Others

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

a procurement of professional work introducing with clients

A :-Procurement of Professional WorkIntroducing with clients

Advertisement :Member should not advertise for soliciting work. However on 14.05.2008 Council has issued guidelines for advertisements in which certain limited information with regard to the identity, introduction of firm and partners and nature of services provided are to be given in the write up issued, circulated and published. The write up should not contain false information and claim superiority over others, should not be indecent, should not contain testimonials concerning members, should not have name of the clients, font size should not be exceeding 14, should not have information about achievements, awards or any other position held.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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A :-Procurement of Professional WorkIntroducing with clients 1. Telephone Directory: Should not have entries made with a special request or additional payment. 2. The entry should appear under category of chartered accountants3. Should be of normal type of letters ( not bold)4. Order of entry should be alphabetical and logical5. Entry should not have prominence as compared to other entries6. The payment for entry should not be unreasonable7. Can give entry in trade directories etc. on internet, telephone- ask me service, etc.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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A :-Procurement of Professional WorkIntroducing with clients Responding to Tenders: There is no prohibition to respond to tenders and requests made by users of professional work.Application for empanelment for allotment of audit to Govt. dept. , Govt. Co. , Corporations, Courts, Cooperative Societies and Banks is permitted. However it would not be proper to make roving enquiries by writing to such organisations.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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A :-Procurement of Professional WorkIntroducing with clients Greeting Cards: Designation “Chartered Accountant” as well as the name of the firm may be used in greeting cards, invitation for marriage, etc. provided such cards are sent only to clients, relatives, and friendsRoving Enquiries: It is not permissible for members to address letters/circulars to persons who are likely to require services of Chartered Accountants.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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A :-Procurement of Professional WorkIntroducing with clients Websites: 1. Should run on a “Pull” model and not a “push” model2. The CA would also not issue circular, advertisement or other material soliciting people to visit their website. However mentioning web address on professional stationary is permitted. 3. Name, year of establishment, address, telephone no., E-mail address, nature of services rendered on specific pull request, details of partners, details of employees, no. of articled clerks, job vacancies, nature of assignment handled (name of the client and fee charged can not be given)

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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A :-Procurement of Professional WorkIntroducing with clientsWebsites continued…4. Display of passport size of photograph is permitted.5. Articles, professional information, updation may be added.6. Bulletin Boards can be provided.7. Chat Rooms can be provided with confidentiality protocol.8. Can provide online advice to their clients.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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A :-Procurement of Professional WorkIntroducing with clients Websites continued…9. Listing on suitable search engine should be permitted subject to restriction on the search field of “Chartered Accountants” or “CA” or “Indian CA” or “Indian CPA” or “Indian Chartered Accountant”.10. The website should be befitting the profession of chartered accountants and should not contain any information or material which is unbecoming of a chartered accountant.11. The address of the website should not amount to soliciting client .

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Change of AuditorsClause (8) of Part I of First Schedule-Communication with previous auditor-apply to all types of audits: staturory, Tax,Concurrent and any other kind of auditin writing , through Registered A D Letter (NO UPC) or by hand, wait for reasonable length of time for reply, if no time is there-give conditional acceptance.-Payment of undisputed fees-Provision of Audit Fees in accounts signed by Auditee shall be treated as undisputed feesClause (9) of Part I of First Schedule

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Change of Auditors…Contd.-Ascertain compliance of section 225 of Companies ActDetailed guidelines have been issued by the Council: Ensure Compliance of Procedure as per section 224 and 224A in following cases 1. First Auditor, 2. appointed in place of resigned, removed or ceased due to other reasons, 3. Out of joint auditors one is not reappointed4. One or more joint auditor is appointed newly

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Change of Auditors:Contd….Ascertaining the compliance of sec 225: Verify the records for following matters: 1. Whether any Member has given special notice as required u/s 225(1) at least 14 days before the AGM-Obtain a true copy 2. Whether this special notice has been sent to all the members as required u/s 190(2) at least 7 days before the date of AGM 3. Whether special notice has been sent to retiring auditor forthwith as required u/s 225(2) 4. Whether the representation received from the retiring auditor has been sent to the members of the company as required u/s 225(3) 5. Whether the representation has been considered in GM and resolution of special notice has been passed

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Change of Auditors:Contd….6. Mode of sending notice of the resolution to members- can be sent by ordinary post, or publish in news paper also.7. Auditor should ascertain the sufficient evidence with the company to indicate that the above notice has been sent. Dispatch register, postage register, postal certificate, should be verified .8. Mode of sending notice to the retiring Auditor Deptt of Company Affairs Circular dated 17.10.1981-should be sent by Regd AD.9. A copy of the relevant resolution passed appointing the auditor, duly verified by chairman of the meeting should be obtained by incoming auditor for his records.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Change of Auditors: Contd...Cases of unjustified removal of auditors are being dealt by Ethical Standard Board.-Undercutting is possible.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Directorship-Not whole time director, only director simplicitor and not paid any remuneration except sitting fees.Yes in corporate form of practice may become Director, WTD and MD also.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Other permitted Business- Private Tutorship, Authorship of Books, LIC agencies for renewal only, MP, MLA, MLC, Surveyor, Recovery Consultant, Teaching assignment up to 25 hours a week

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Recovery Agent/Enforcement Agent in Banking SectorAs per ICAI guidelines:1. Recovery Consultants are permitted, not recovery agent/enforcing agentDifference between agent and consultant is that the agent is remunerated on happening of positive result whereas the consultant has no concern on the results.2. The remuneration is not permitted on %age basis whereas the Banks are giving the payment on the basis of %age of recovery made

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Restriction of Feesi) Should not be in % except receiver or a liquidator, cooperative society audit, valuer for direct taxesii) Other fees should not exceed Audit fees in case of Public sector company Govt company and listed companies and other public companies having turnover of 50 Crores or moreiii) Audit Fees should not be less than (except Trust audit, VAT audit etc.) Firm having 5 to 9 partners Firm having 10 +partnersCities with Population above 3 Millions 6000/- pa 12000/- paCities having less than 3Million 3500/- Pa 8000/- paiv) Self regulatory measures have also been prescribed by council: 40 % of Gross Annual receipt from one clientv) Recommended Scale of Fees prescribedvi) No Ban on receiving fees in advance

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Certifying ForecastsUnder Clause (3) of Part I of Second Schedule a member should not permit his name to be used for estimate or financial forecast which may lead to the belief that he vouches the accuracy of the forecast. However Council has decided that CA can participate in preparation of financial forecast and can review them, provided he indicates clearly in his report the sources of information, the basis of forecasts and also major assumptions made in arriving at the forecasts and so long as he does not vouch for accuracy of the forecasts.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Substantial Interest in auditeeClause (4) Part I of the Second Schedule CA can not express opinion on FS of any business in which he, his relative, his firm or a partner in his firm has substantial InterestRelative means Section 6 of the Old Companies Act i.e. Husband, wife, brother or sister or any lineal ascendant or descendant of that member.Substantial Interest means owned by himself, relatives or any concern shares carrying not less than 20% Voting power or profit participationCouncil issued Guidelines that CA should not certify FS if concerns where he is in employment Or a concern under the same management. Even Ca should not accept the auditorship of College where he is part time lecturer and of Trust where his partner is either an employee or a trustee of the trustStatutory Auditor should not write Books of auditeeIn case of company u/s 226(3)(e) he can not do audit even holds single share

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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CA in practice is required to maintain Books of account such as ledger and cash book: Council prescribed under clause (1) of Part II of Second schedule , if not maintained books it is Misconduct.

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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Other Issues:1. Access to Working Papers:Working papers are property of an auditor. CA is not required to provide access to client, Main Auditor, Joint Auditor.2. Disclosure of information to others3. Act to disrepute the profession

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014

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THANK YOU

ICAI, Jaipur Study Circle Meeting CA R. A. Sharma, Jaipur 15/03/2014