ICAI Code of Ethics - Compliance Guidelines & Standards for CAs

ICAIs Code of Ethics ICAI s Code of Ethics CA. CA. Jomon Jomon K George Former Chairman Former Chairman - - SIRC K George SIRC

Introduction The The revised revised Code on on the the 2018 2018 edition International International Accountants Accountants (IESBA) Code of of Ethics edition of of Code Ethics Ethics (IESBA) of of IFAC Ethics (COE) (COE) of of ICAI Code of of Ethics Standards Standards IFAC. . ICAI is is based Ethics issued issued by Board Board based by for for 1 from 1 1st st July It It is is effective effective from July 2020 2020. .

Requirements & Application The The Code Code uses uses a a prefix prefix R R & & for for Requirements Requirements A A for for Application Application Material Material

Compliance Code of Ethics, 2019 is issued as a Guideline of the Council. Further, there is change in from should to shall , with more mandatory force and the requirements are clearly demarcated Hence, non-compliance of provisions of the Code will be deemed as violation of Clause (1) of Part-II of Second Schedule of the CA Act, 1949:-

Compliance A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he contravenes any of the provisions of this Act or the regulations

Contents at a Glance - Volume I Part Description To whom applicable Sections Part -1 Complying with the code, fundamental principles and conceptual framework All professional Accountants 100 to 199 Part-2 Professional Accountants in Service CA in Service 200 to 299 Part 3 Professional Accountants in Public Practice CA in Practice 300 to 399 Part-4A Independence for Audit & Review engagements CA in Practice 400 to 899 Part-4B Independence for Assurance Engagement other than Audit and Review Engagements CA in Practice 900 to 999

Contents at a Glance - Volume II Chapter Chapter Description Description Chapter 1 Chapter 1 Accounting & Auditing Standards Chapter Chapter 2 2 The Chartered Accountants Act 1949 (First & Second Schedule) Chapter 3 Chapter 3 Council Guidelines for Advertisement 2008 Chapter 4 Chapter 4 Council General Guidelines 2008 Chapter 5 Chapter 5 Self Regulatory Measures (Recommendatory)

Contents at a Glance - Volume III It is a case law It is a case law referencer referencer It It has has incorporated incorporated all all the the decided decided and and published published case case laws laws of of both both the the schedules schedules. .

Major Changes Responding to Non-Compliance of Laws and Regulations (NOCLAR) Restrictions on Taxation services to Audit clients Prohibition on Management Responsibilities to the audit clients 15 % restriction on Fees from single client If it is consecutively for 2 years Duty to communicate to TCWG

Volume I Elaborated Part I - Fundamental Principles Integrity Integrity Objectivity Objectivity Professional Competence & Due care Professional Competence & Due care Confidentiality Confidentiality 7 Professional Professional Behaviour Behaviour

Volume I Elaborated Part I Part I Conceptual Framework Conceptual Framework The The professional professional accountant accountant shall shall apply apply the the conceptual conceptual framework framework to to identify, identify, evaluate evaluate and and address address threats threats to to compliance compliance with with the the fundamental fundamental principles principles. . Thrust Thrust on (Para on PROFESSIONAL PROFESSIONAL SKEPTICISM SKEPTICISM (Para 120 120. .13 13. .A A1 1) )

Volume I Elaborated Type of Threats Type of Threats Self Self Interest Threats Interest Threats Self Review Threats Self Review Threats Advocacy Threats Advocacy Threats Familiarity Familiarity Threats Threats Intimidation Threats Intimidation Threats

Non-Compliance with Laws and Regulations (NOCLAR) - Sections 260 and 360 - New provision Refers to any act of omission or commission, committed by a client or employer contrary to prevailing laws or regulations. Recognizing that such a situation can often be a difficult and stressful one for the PA, and accepting that he has a prima facie ethical responsibility not to turn a blind eye to the matter, NOCLAR was introduced to help guide the PA in dealing with the situation and in deciding how best to serve the public interest in these circumstances.

NOCLAR Applicability Applicable only to listed entities. Applicable to only audit assignments. In case of PAs in service, applicable to employees of listed entities

Scope of Laws and Regulations Laws and regulations that have a nexus to PAs professional training and expertise, ie : Laws and regulations determination financial statements that have a direct effect on the of material amounts and disclosures in the Other laws and regulations, compliance with which may be fundamental to the entity s business and operations or to avoid material penalties.

Scope of Laws and Regulations Examples of laws and regulations required to be addressed are : Fraud Corruption and bribery Money laundering Terrorist financing by proceeds of crime Securities markets and insider trading etc..

NOCLAR other salient points PA required to address NOCLAR only when, and if, he encounters the same in the course of providing a professional service Appropriate authority for the purpose of disclosure will depend on the nature of the matter. For example, the appropriate authority would be SEBI in the case of fraudulent financial reporting.

Management Responsibilities A A PA PA shall client client. . shall not not assume assume a a management management responsibility responsibility for for an an audit audit However, However, providing management management of of an is is not not assuming assuming a a management providing advice an audit management responsibility advice and audit client and recommendations recommendations to to assist client in in discharging discharging its its responsibilities responsibility. . assist the the responsibilities

Management Responsibilities Providing administrative services to an audit client does not usually create a threat. Examples : Word processing services. Preparing administrative or statutory forms for client approval. Submitting such forms as instructed by the client. Monitoring statutory filing dates, and advising an audit client of those dates.

Taxation services.. Section 640 Tax Tax Return Return preparation preparation Usually Usually no no threat threat Tax Tax Calculations Calculations for Entries Entries (that (that will Creates Creates a a self self- - review for the will subsequently subsequently be review threat threat the Purpose Purpose of of Preparing be audited Preparing Accounting Accounting audited by by the the Firm) Firm) - -

Taxation services.. Section 640 Tax Tax Planning Planning /Other /Other Tax Tax Advisory Advisory Services Services Might Might create create S Self elf- -R Review/advocacy eview/advocacy threat threat Ap Appropriate propriate safeguards safeguards to to be be adopted adopted Using Using professionals professionals who perform perform the the service in in providing providing the the service, who are having an service, review are not an appropriate appropriate reviewer, review the the audit audit work, not audit audit team reviewer, not work, etc etc. . team members members to to not involved service; ; having involved

Taxation Services (Section 640) Assistance Assistance in in the a a self self- - review review or or advocacy to to be be adopted adopted the Resolution Resolution of of Tax advocacy threat Tax Disputes Disputes - -Might threat appropriate appropriate safeguards Might create safeguards create Not Not to to provide provide if if involves client client OR OR amounts amounts involved statements statements on on which involves acting involved are which the the firm acting as as advocate are material material to to the firm will will express express an advocate for for the the financial financial an opinion opinion the audit audit

Sponsoring Activities Revised Code Member Member or may may sponsor Unit Unit (PoU) (PoU) of or Firm Firm not permitted not permitted to sponsor an an event event conducted of ICAI ICAI , , provided to sponsor sponsor an by a a Programme Programme Organizing provided it it has has prior prior approval an event. However, event. However, Organizing approval of of CPE conducted by CPE Members Members sponsoring individual individual name Firm Firm name name or or CA sponsoring activities name with with the CA Logo Logo is is not activities relating the prefix prefix CA . not permitted. permitted. relating to CA . However, However, the to CSR CSR may mention may mention their the mention mention of of their

Size / illumination of Sign Board Existing Existing provision provision With With regard member member can should should exercise glow signs glow signs or traders traders or or shop regard to can put exercise their or neon neon lights shop- -keepers to the the size put up, up, it it is is a a matter their own own discretion lights on keepers would would not size of of sign sign board matter in discretion and good on large large- -sized sized boards not be be proper. board for in which the which the members and good taste. boards as as is is used proper. for his his office office that members taste. Use that a a Use of used by of by Added Added in in Revised while while keeping illumination illumination of of the Revised Code keeping in in mind Code : :- - mind the the sign sign Board the appropriate appropriate visibility Board visibility and and

Duty of Previous Auditor On the request of the Incoming Auditor to the retiring auditor for providing known information regarding any information of which, in the retiring auditors opinion, the Incoming auditor needs to be aware before deciding whether to accept the engagement, the retiring auditor shall provide the information diligently.

Communication Factor Factor Premises Premises are 2009 2009 Code Silent Silent Code Revised Revised Communication Communication received Incoming Incoming Auditor Auditor with Locked Locked written written on deemed deemed as as delivered delivered If If Communication Communication sent such such office exists office exists at this address , and at this address , and address is is registered with Institute registered with Institute - - deemed delivered, unless the delivered, unless the retiring retiring auditor proves that that it it was was not not really really served and that he served and that he was not not responsible responsible for for such such non Dispensed Dispensed with with are locked locked received back with Office Office found on the theAD AD shall back by by the the found shall be be Firm Firm not the the given given Registered Registered address address not found found at at Silent Silent sent by by with with remarks remarks No No address to be be deemed to auditor proves was non- -service. service. Communication Communicationin in case case of of certification certification Healthy Healthy p pr ra ac ct ti ic ce e

Definition Definition of Director Simplicitor (Clause 1 Part - I , First Schedule) 1 of New Definition New Definition Director Director Simplicitor Simplicitor Director Director, , who who is is not time time Director Director and Meetings Meetings of of remuneration remuneration except means means an Managing Director and is is required required only the the company company except for for attending attending such an ordinary/simple ordinary/simple Director or or Whole only in in the the Board and and not not such meetings meetings. . not a a Managing Whole Board paid paid any any

Ceiling of Fees If the fees of a client is If the fees of a client is more consecutively consecutively for for two TCWG. TCWG. more than years, would would require than 15% 15% of the Total Fees of the Total Fees require disclosure disclosure to two years, to Exempt Exempt - - If If, , Annual Annual Fees Fees does not exceed does not exceed is is Rs. Rs. 5 5 lakhs lakhs

Contents at a Glance - Volume II Chapter Chapter Description Description Chapter 1 Chapter 1 Accounting & Auditing Standards Chapter Chapter 2 2 The Chartered Accountants Act 1949 (First & Second Schedule) Chapter 3 Chapter 3 Council Guidelines for Advertisement 2008 Chapter 4 Chapter 4 Council General Guidelines 2008 Chapter 5 Chapter 5 Self Regulatory Measures (Recommendatory)

Authority of Pronouncements Statements are mandatory Statements are mandatory ASs & S ASs & SA As s are mandatory to the extent prescribed by the statute/ICAI. are mandatory to the extent prescribed by the statute/ICAI. Guidance Notes are recommendatory Guidance Notes are recommendatory. .

The CA Act 1949 - First Schedule A Chartered Accountant A Chartered Accountant in practice to be guilty of to be guilty of professional misconduct, if he: professional misconduct, if he:- - in practice shall be deemed shall be deemed

The CA Act 1949 - First Schedule Clause (1): Clause (1): allows allows any chartered chartered accountant chartered chartered accountant accountant in in practice with with or or employed employed by any person person to to practice accountant unless practice in in his unless such such person practice and and is is in in partnership by him him; ; his name name as as a a person is is also partnership also a a

The CA Act 1949 - First Schedule pays pays or or allows share, share, commission commission or or brokerage professional professional business, business, to to any Institute Institute or or a a partner partner or or a a retired a a deceased deceased partner, partner, or or a a member with with such such other other persons prescribed, prescribed, for for the the purpose from from time time to to time time in in or or outside allows or or agrees agrees to to pay brokerage in in the any person person other retired partner member of of any persons having having such purpose of of rendering outside India India. . pay or or allow, allow, directly directly or or indirectly, the fees fees or or profits other than than a a member partner or or the the legal legal representative any other other professional professional body such qualifications qualifications as as may rendering such such professional professional services indirectly, any profits of of his member of of the representative of of body or or may be any his the be services

The CA Act 1949 - First Schedule accepts accepts or or agrees agrees to to accept accept any any part part of of the the profits profits of of the the professional professional work work of of a a person person who who is is not not a a member member of of the the Institute Institute; ;

The CA Act 1949 - First Schedule enters enters into than than a a chartered chartered accountant is is a a member member of of any qualifications qualifications as as may for for his his residence residence abroad member member or or whose Government Government or or the partnerships partnerships. . into partnership, partnership, in in or or outside accountant in in practice any other may be be prescribed, abroad would whose qualifications qualifications are the Council Council for outside India, practice or or such other professional professional body prescribed, including including a a resident would be be entitled entitled to to be are recognised recognised by for the the purpose purpose of of permitting India, with such other with any other person body having resident who be registered registered as as a a by the permitting such any person person other person who having such other who such but who but the Central Central such

The CA Act 1949 - First Schedule secures, secures, either either through through the the services services of of a a person person who who is is not not an an employee employee of of such such chartered chartered accountant accountant or or who who is is not not his his partner partner or or by by means means which which are are not not open open to to a a chartered chartered accountant, accountant, any any professional professional business business: :

The CA Act 1949 - First Schedule solicits solicits clients clients or or professional professional work work either either directly directly or or indirectly indirectly by by circular, circular, advertisement, advertisement, personal personal communication communication or or interview interview or or by by any any other other means means; ;

The CA Act 1949 - First Schedule advertises advertises his designation designation or or expressions professional professional documents, documents, visiting unless unless it it be be a a degree degree of of a a University recognised recognised by by the the Central membership membership of of the the Institute any any other other institution institution that Government Government or or may may be his professional professional attainments expressions other visiting cards, University established Central Government Institute of of Chartered that has be recognised recognised by attainments or or services, other than than chartered cards, letter letter heads established by Government or or a a title Chartered Accountants Accountants of of India has been been recognised recognised by by the the Council Council; ; services, or or uses chartered accountant heads or or sign by law law in in India title indicating uses any any on accountant on sign boards, India or or indicating India or or of of by the the Central boards, Central

The CA Act 1949 - First Schedule accepts accepts a a position position as as auditor auditor previously previously held held by by another another CA CA or or a a certified certified auditor auditor who who has has been been issued issued certificate certificate under under the the Restricted Restricted Certificate Certificate Rules, Rules, 1932 1932 without without first first communicating communicating with with him him in in writing writing

The CA Act 1949 - First Schedule accepts an appointment as auditor of a company without first accepts an appointment as auditor of a company without first ascertaining from it whether the requirements of ascertaining from it whether the requirements of Section 225 Section 225 of the Companies Act, 1956 (1 of 1956), of the Companies Act, 1956 (1 of 1956), in respect of such in respect of such appointment have appointment have been duly complied with; been duly complied with;

The CA Act 1949 - First Schedule charges charges or or offers offers to to charge, charge, accepts accepts or or offers offers to to accept accept in in respect respect of of any any professional professional employment, employment, fees fees which which are are based based on on a a percentage percentage of of profits profits or or which which are are contingent contingent upon upon the the findings, findings, or or results results of of such such employment, employment, except except as as permitted permitted under under any any regulation regulation

The CA Act 1949 - First Schedule engages in any business or occupation other than the engages in any business or occupation other than the profession of chartered accountants unless permitted profession of chartered accountants unless permitted by the Council so to engage. by the Council so to engage.

The CA Act 1949 - First Schedule allows a person not being a member of the Institute in allows a person not being a member of the Institute in practice, or a member not being his partner to sign on his practice, or a member not being his partner to sign on his behalf or on behalf of his firm, any balance behalf or on behalf of his firm, any balance- -sheet, profit sheet, profit and loss account, report or financial statements. and loss account, report or financial statements.

The CA Act 1949 - First Schedule A Chartered Accountant A Chartered Accountant in service to be guilty of to be guilty of professional misconduct, if he: professional misconduct, if he:- - in service shall be deemed shall be deemed

The CA Act 1949 - First Schedule pays or allows or agrees to pay directly or indirectly pays or allows or agrees to pay directly or indirectly to any person any share in the emoluments of the to any person any share in the emoluments of the employment undertaken by him; employment undertaken by him;

The CA Act 1949 - First Schedule accepts or agrees to accept any part of fees, profits or accepts or agrees to accept any part of fees, profits or gains from a lawyer, a chartered accountant or broker gains from a lawyer, a chartered accountant or broker engaged by such Company, firm or person or agent or engaged by such Company, firm or person or agent or customer of such Company, firm or person by way of customer of such Company, firm or person by way of commission or gratification commission or gratification

General not not being being a a fellow Institute Institute. . fellow of of the the Institute, Institute, acts acts as as a a fellow fellow of of the the

General does does not comply comply with Council Council or or any Board Board of of Discipline, Discipline, Disciplinary Board Board. . not supply supply the with the any of of its its Committees, Disciplinary Committee, the information information called the requirements requirements asked Committees, Director called for, asked for, for, by Director (Discipline), Committee, Quality Quality Review for, or or does by the the Institute, (Discipline), does not Institute, not Review

General While While inviting inviting professional accountant accountant or or while while while advertising advertising through knowing knowing it it to to be be false professional work while responding responding to to tenders through a a write false. . work from from another another chartered tenders or or enquiries enquiries or or write up, up, gives gives information chartered information

Other misconduct I Is held guilty by any civil or criminal court for an offence which is s held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term punishable with imprisonment for a term exceeding six months ; exceeding six months ; i in the opinion of the Council, brings disrepute to the profession or n the opinion of the Council, brings disrepute to the profession or the Institute as a result of his action whether or not related to his the Institute as a result of his action whether or not related to his professional work. professional work.