PART I : Professional misconduct in relation to
chartered accountants in practice
A chartered accountant in practice shall be deemed
to be guilty of professional misconduct, if he−
(1) discloses information acquired in the course of
his professional engagement to any person
other than his client so engaging him, without
the consent of his client or otherwise than as
required by any law for the time being in
force;
(2) certifies or submits in his name, or in the
name of his firm, a report of an examination
of financial statements unless the examination
of such statements and the related records
has been made by him or by a partner or an
employee in his firm or by another chartered
accountant in practice;
(3) permits his name or the name of his firm to
be used in connection with an estimate of
earnings contingent upon future transactions
in a manner which may lead to the belief that
he vouches for the accuracy of the forecast;
(4) expresses his opinion on financial statements
of any business or enterprise in which he, his
firm, or a partner in his firm has a substantial
interest;
(5) fails to disclose a material fact known to him
which is not disclosed in a financial statement,
but disclosure of which is necessary in
making such financial statement where he is
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concerned with that financial statement in a
professional capacity;
(6) fails to report a material misstatement known
to him to appear in a financial statement with
which he is concerned in a professional
capacity;
(7) does not exercise due diligence, or is grossly
negligent in the conduct of his professional
duties;
(8) fails to obtain sufficient information which is
necessary for expression of an opinion or its
exceptions are sufficiently material to negate
the expression of an opinion;
(9) fails to invite attention to any material
departure from the generally accepted
procedure of audit applicable to the
circumstances;
(10) fails to keep moneys of his client other than
fees or remuneration or money meant to be
expended in a separate banking account or to
use such moneys for purposes for which they
are intended within a reasonable time.
PART II : Professional misconduct in relation to
members of the Institute generally
A member of the Institute, whether in practice or
not, shall be deemed to be guilty of professional
misconduct, if he−
(1) contravenes any of the provisions of this Act or
the regulations made thereunder or any
guidelines3 issued by the Council;
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(2) being an employee of any company, firm or
person, discloses confidential information
acquired in the course of his employment
except as and when required by any law for
the time being in force or except as permitted
by the employer;
(3) includes in any information, statement, return
or form to be submitted to the Institute,
Council or any of its Committees, Director
(Discipline), Board of Discipline, Disciplinary
Committee, Quality Review Board or the
Appellate Authority any particulars knowing
them to be false;
(4) defalcates or embezzles moneys received in
his professional capacity.
PART III : Other misconduct in relation to members
of the Institute generally
A member of the Institute, whether in practice or
not, shall be deemed to be guilty of other misconduct, if he
is held guilty by any civil or criminal court for an offence
which is punishable with imprisonment for a term
exceeding six months.]
____________________
1 Substituted, for the following, by the Chartered Accountants
(Amendment) Act, 2006 and came into force w.e.f. 17th
November, 2006 :−
A“[THE FIRST SCHEDULE
(See Sections 21(4) and 22)
PART I : Professional misconduct in relation to chartered
accountants in practice
A chartered accountant in practice shall be deemed to be guilty
of professional misconduct, if he−
(1) allows any person to practise in his name as a
chartered accountant unless such person is also a chartered
83
accountant in practice and is in partnership with or employed by
himself;
(2) pays or allows or agrees to pay or allow, directly or
indirectly, any share, commission or brokerage in the fees or
profits of his professional business, to any person other than a
member of the Institute or a partner or a retired partner or the
legal representative of a deceased partner;
Explanation − In this item “partner” includes a person residing
outside India with whom a chartered accountant in practice has
entered into partnership which is not in contravention of item
(4) of this Part.
(3) accepts or agrees to accept any part of the profits of
the professional work of a lawyer, auctioneer, broker, or other
agent who is not a member of the Institute;
(4) enters into partnership with any person other than a
chartered accountant in practice or a person resident without
India who but for his residence abroad would be entitled to be
registered as a member under clause (v) of sub-section (1) of
Section 4 or whose qualifications are recognised by the Central
Government or the CouncilB for the purpose of permitting
such partnerships, provided that the chartered accountant
shares in the fees or profits of the business of the partnership
both within and without India;
(5) secures, either through the services of a person not
qualified to be his partner or by means which are not open to a
chartered accountant, any professional business;
(6) solicits clients or professional work either directly or
indirectly by circular, advertisement, personal communication or
interview or by any other means;
(7) advertises his professional attainments or services, or
uses any designation or expressions other than chartered
accountant on professional documents, visiting cards, letter
heads or sign boards, unless it be a degree of a University
established by law in India or recognised by the Central
Government or a title indicating membership of the Institute of
Chartered Accountants or of any other institution that has
been recognised by the Central Government or may be
recognised by the Council;
(8) accepts a position as auditor previously held by another
chartered accountant or a C
restricted state auditor without first
communicating with him in writing;
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(9) accepts an appointment as auditor of a company
without first ascertaining from it whether the requirements of
Section 225 of the Companies Act, 1956, in respect of such
appointment have been duly complied with;
(10) charges or offers to charge, accepts or offers to
accept in respect of any professional employment fees which
are based on a percentage of profits or which are contingent
upon the findings, or results of such employment, except in
cases which are permitted under any regulations made under
this Act;
(11) engages in any business or occupation other than the
profession of chartered accountants unless permitted by the
Council so to engage:
Provided that nothing contained herein shall disentitle a
chartered accountant from being a director of a company,
unless he or any of his partners is interested in such company
as an auditor;
(12) accepts a position as auditor previously held by some
other chartered accountant or a Crestricted state auditor in
such conditions as to constitute undercutting;
(13) allows a person not being a member of the Institute or
a member not being his partner to sign on his behalf or on
behalf of his firm, any balance-sheet, profit and loss account,
report or financial statements.
PART II : Professional misconduct in relation to members of the
Institute in service
A member of the Institute (other than a member in practice)
shall be deemed to be guilty of professional misconduct, if he
being an employee of any company, firm or person−
(a) pays or allows or agrees to pay directly or indirectly to any
person any share in the emoluments of the employment
undertaken by the member;
(b) accepts or agrees to accept any part of fees, profits or
gains from a lawyer, a chartered accountant or broker engaged
by such company, firm or person or agent or customer of such
company, firm or person by way of commission or gratification;
(c) discloses confidential information acquired in the course
of his employment except as and when required by law or
except as permitted by the employer.
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PART III : Professional misconduct in relation to members of the
Institute generally
A member of the Institute, whether in practice or not, shall be
deemed to be guilty of professional misconduct, if he−
(1) includes in any statement, return or form to be
submitted to the Council any particulars knowing them to be
false;
(2) not being a fellow styles himself as a fellow;
(3) does not supply the information called for, or does not
comply with the requirements asked for, by the Council or any
of its Committees.D
THE SECOND SCHEDULE
(See Sections 21(5) and 22)
PART I : Professional misconduct in relation to chartered
accountants in practice requiring action by a High Court
A chartered accountant in practice shall be deemed to be guilty
of professional misconduct, if he−
(1) discloses information acquired in the course of his
professional engagement to any person other than his client,
without the consent of his client or otherwise than as required
by any law for the time being in force;
(2) certifies or submits in his name or in the name of his
firm a report of an examination of financial statements unless
the examination of such statements and the related records
has been made by him or by a partner or an employee in his firm
or by another chartered accountant in practice;
(3) permits his name or the name of his firm to be used
in connection with an estimate of earnings contingent upon
future transactions in a manner which may lead to the belief
that he vouches for the accuracy of the forecast;
(4) expresses his opinion on financial statements of any
business or any enterprise in which he, his firm or a partner in
his firm has a substantial interest, unless he discloses the
interest also in his report;
(5) fails to disclose a material fact known to him which is not
disclosed in a financial statement, but disclosure of which is
necessary to make the financial statement not misleading;
86
(6) fails to report a material mis-statement known to him to
appear in a financial statement with which he is concerned in a
professional capacity;
(7) is grossly negligent in the conduct of his professional
duties;
(8) fails to obtain sufficient information to warrant the
expression of an opinion or his exceptions are sufficiently
material to negate the expression of an opinion;
(9) fails to invite attention to any material departure from
the generally accepted procedure of audit applicable to the
circumstances;
(10) fails to keep moneys of his client in a separate banking
account or to use such moneys for purposes for which they are
intended.
PART II : Professional misconduct in relation to members of the
Institute generally requiring action by a High Court
A member of the Institute, whether in practice or not, shall be
deemed to be guilty of professional misconduct, if he−
(i) contravenes any of the provisions of this Act or the
regulations made thereunder;
(ii) is guilty of such other act or omission as may be Especified by the Council in this behalf, by notification in the
Gazette of India.”
AThese Schedules were earlier substituted, for the following
Schedule, by the Chartered Accountants (Amendment) Act,
1959 :−
“SCHEDULE
(See Section 22)
A chartered accountant shall be deemed to be guilty of
misconduct rendering him unfit to be a member of the Institute,
if he—
(a) allows any person to practise in his name as a chartered
accountant unless such person is also a chartered accountant
and is in partnership with or employed by himself;
(b) pays or allows or agrees to pay or allow, directly or
indirectly, to any person other than a member of the Institute or
a retired partner or a nominee or the legal representative of
87
such partner, any share, commission or brokerage in the fees or
profits of his professional services;
(c) accepts or agrees to accept any part of the profits of the
professional work of a lawyer, auctioneer, broker or other agent
who is not a member of the Institute;
(d) enters into partnership with any person other than a
chartered accountant or secures, either through the services of
a person not qualified to be a chartered accountant or by means
which are not open to a chartered accountant, any professional
business;
(e) solicits clients or professional work either directly or
indirectly, by circular, advertisement, personal communication
or interview or by any other means;
(f) advertises his professional attainments or services, or
uses any designation or expressions other than chartered
accountant on professional documents, visiting cards, letterheads or sign-boards, unless it be a degree of a University
established by law in India or recognised by the Central
Government or a title indicating membership of the Institute of
Chartered Accountants of India or of any other institution that
has been recognised by the Central Government or may be
recognised by the Council;
(g) discloses information acquired in the course of his
professional engagement to any person other than his client,
without the consent of his client, or otherwise than as required
by any law for the time being in force;
(h) accepts a position as auditor previously held by another
chartered accountant without first communicating with him in
writing;
(i) accepts an appointment as auditor of a company without
first ascertaining from it whether the requirements of Section
144 of the Indian Companies Act, 1913 (VII of 1913) as
respects the appointment of auditors or, if the company is
registered in an Acceding State, the provisions of any similar law
for the time being in force in that State, have been duly
complied with;
(j) certifies or submits in his name or in the name of his
firm a report of an examination of financial statements unless
the examination of such statements and the related records has
been made by him or by a partner or an employee in his firm or
by another chartered accountant;
88
(k) permits his name or the name of his firm to be used in
connection with an estimate of earnings contingent upon future
transactions in a manner which may lead to the belief that he
vouches for the accuracy of the forecast;
(l) expresses his opinion on financial statements of any
business or any enterprise in which he, his firm or a partner in
his firm has a substantial interest, unless he discloses the
interest also in his report;
(m) charges in respect of any professional employment fees
which are based on a percentage of profits or which are
contingent on results;
(n) engages in any business or occupation other than the
profession of chartered accountants unless permitted by the
Council so to engage:
Provided that nothing contained herein shall disentitle a
chartered accountant from being a director of a company, unless
he or any of his partners is interested in such company as an
auditor;
(o) fails to disclose a material fact known to him which is
not disclosed in a financial statement, but disclosure of which is
necessary to make the financial statement not misleading;
(p) fails to report a material mis-statement known to him to
appear in a financial statement with which he is concerned in a
professional capacity;
(q) is grossly negligent in the conduct of his professional
duties;
(r) fails to obtain sufficient information to warrant the
expression of an opinion or his exceptions are sufficiently
material to negate the expression of an opinion;
(s) fails to invite attention to any material departure from
the generally accepted procedure of audit applicable to the
circumstances;
(t) fails to keep moneys of his client in a separate banking
account or to use such moneys for purposes for which they are
intended;
(u) includes in any statement, return or form to be
submitted to the Council any particulars knowing them to be
false;
89
(v) is guilty of such other act or omission in his professional
capacity as may be specified by the Council in this behalf, by
notification in the Gazette of India.”
BFor Resolution of Council, please see Appendix No. (17).
CNow known as “Certified Auditor”.
DFor Notification issued under this clause, please see Appendix
No. (18).
EFor Notifications of the Council, please see Appendices No. (19)
to (32).
2 For Guidelines issued by the Council, please see Appendix No.
(33).
3 For Guidelines issued by the Council, please see Appendix No.
(34).
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