CODE OF ETHICS Cases & Issues of Unjustified Removal of Auditors: • Independence of Auditors
Unjustified Removal of Auditors • Section 224 – Appointment & Remuneration of Auditor • Section 224A – Auditor not to appointed except with the approval of the company by special resolution in certain cases. • Section 225 – Provisions as to resolutions for appointing or removing auditors • Clause (8)&(9) Part I of Schedule I of CA Act,1949
Relationship with Other Members in Practice • Communication with outgoing Auditor in case of change of auditor • Compliance with the requirement of section 224, 224A & 225 of the Companies Act, 1956
Communication with outgoing Auditor in case of change of auditor • Non-compliance of the Provisions of Section 224, 224A & 225 of the Companies act, 1956 • Undercutting of Fees • Non-payment of undisputed audit fees • Issuance of a qualified report
Compliance with the requirement of Sec. 224, 224A & 225 of the Companies Act • To ensure that the outgoing is properly removed • That the guidelines prescribed by the Institute have been complied with • To ensure that the incoming auditor is properly appointed.
INDEPENDENCE Independence of Mind Independence in Appearance
Independence Should be Exhibited in • Objectivity • Integrity • Professional Services
Threats of Independence • Self - Interest Threat • Advocacy Threat • Familiarity Threat • Intimidation Threat • Self Review Threat
Safeguards • Safeguards Created by the Profession, Legislation or Regulation • Safeguards within the Assurance Client • Safeguards within the Firm/s own Systems & Procedures
Safeguards Created by the Profession, Legislation or Regulation • Education, Training & Experience • Continuing Education Requirements • Professional Standards & Disciplinary Processes. • External Review of Firms Quality Control System. • Legislation Governing Independence
Safeguards within the Assurance Client • Competent Employees to make Managerial Decisions. • Policies and Procedures for fair Financial Reporting. • Internal Procedures • Corporate Governance Structure
Safeguards within the Firms own Systems & Procedures • Firm Leadership • Policies & Procedures for Quality Control • Documented Independence regarding Identification of threats and Application of Safeguards. • Disciplinary Mechanism
Objective & Structure • Identifying Threats to Independence • Evaluating the Threats • Applying appropriate Safeguards to eliminate or reduce the threats.
Clients Credit Granters Government Employers Employees Investors Business Financial Community Public InterestPublic Consists of
Objectives • Credibility • Professionalism • Quality of Services • Confidence
Fundamental Principles • Integrity • Objectivity • Professional Competence and Due Care • Confidentiality • Professional Behavior • Technical Standards.
THANKING YOU Dr. Alok Ray Dy. Secretary/ Secretary, Committee on Ethical Standards & Unjustified Removal of Auditors ICAI