Mastering Ethical Standards: FAQs for Chartered Accountants
Welcome to the ethical hub of taxgv.com! As a Chartered Accountant, upholding the Code of Ethics is essential for maintaining professionalism and integrity. Below, we’ve compiled a detailed FAQ based on the ICAI’s "Frequently Asked Questions on Ethical Issues" (Second Edition, February 2012). These FAQs are illustrative and not exhaustive—always refer to the Code of Ethics and relevant Council decisions for full guidance. Let’s dive into each section!
1. Introduction
1.1 What is the Code of Ethics?
The Code of Ethics governs the profession of Chartered Accountants under the Chartered Accountants Act, 1949. It includes the First Schedule (four parts: Professional misconduct in practice, in service, generally, and other misconduct) and the Second Schedule (three parts: Professional misconduct in practice, generally, and other misconduct), along with Court/Council decisions, guidelines, clarifications, and interpretations. Part A of the Code of Ethics (2009), aligned with the IFAC Code, establishes a conceptual framework based on five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behavior, applicable to all CAs.
1.2 What is considered professional or other misconduct?
Section 22 of the Act defines professional or other misconduct as acts or omissions in the Schedules, plus case-specific misconduct. Examples include conviction for offenses involving moral turpitude, retaining client books without cause, material misrepresentation (e.g., falsifying work experience), malicious advertising, or using abusive language. Misconduct “under other circumstances” depends on case facts, like fraud or public harm.
1.3 What is the distinction between the First and Second Schedules?
The First Schedule addresses less severe misconduct with lighter punishments, while the Second Schedule covers graver misconduct with higher penalties, reflecting the severity and punishment quantum.
1.4 What is the procedure followed against a member for misconduct under disciplinary proceedings of the Institute?
The disciplinary process is detailed in Appendix-1, involving steps like complaint filing, investigation by the Director (Discipline), and adjudication by the Board of Discipline or Disciplinary Committee.
1.5 What will be the procedure where a member is guilty of charges both under the First Schedule and Second Schedule to the Act?
The procedure follows that for Second Schedule misconduct due to its higher severity, ensuring a uniform approach.
1.6 Can a member in practice render Management Consultancy and other services?
Yes, in areas summarized by the Council (Appendix-3), excluding statutory audit, tax representation, or roles like liquidator, trustee, executor, administrator, arbitrator, or receiver.
1.7 Whether a member in practice is permitted to undertake the management of NRI funds?
No, managing NRI funds is not included in permitted Management Consultancy and Other Services (Appendix-3).
1.8 Can a Chartered Accountant provide ‘Portfolio Management Services’ (PMS) as part of CA practice?
No, Clause (xix) of Appendix-3 expressly bars broking, underwriting, and portfolio management.
1.9 Whether a Chartered Accountant in practice is required to obtain any trade license for practicing?
No, a Certificate of Practice from the Institute is the only requirement.
1.10 Can a Chartered Accountant in practice work as a ‘Collection Agent/Recovery Agent’?
No, working as a Collection Agent is prohibited, but acting as a Recovery Consultant is permitted under Clause (xxv) of Appendix-3.
1.11 Whether a practicing Chartered Accountant can agree to select and recruit personnel, conduct training programmes and work-studies for and on behalf of a client?
Yes, these are included in Management Consultancy and Other Services, so no misconduct applies.
1.12 Can a member in practice have a branch office/additional office/temporary office?
Yes, per Section 27, each office needs a member in charge. Temporary offices in hill areas are allowed for up to three months annually, with conditions: the regular office remains open, no permanent name board, no mention on letterheads, and ICAI notification before and after use. Offices beyond 50 km from municipal limits follow similar rules, requiring 182 days’ annual association by the member in charge, who may be a partner or paid assistant.
2. Questions Relating to the First Schedule
2.1 Can a Chartered Accountant in practice allow any person to practice in his name as a Chartered Accountant?
No, unless the person is a Chartered Accountant in practice and a partner or employee (Clause 1, Part I).
2.2 Can a Chartered Accountant in practice pay to any person any share, commission or brokerage in the fees or profits of his professional business?
No, except to Institute members, partners, retired partners, legal representatives, or prescribed professionals for services (Clause 2, Part I).
2.3 Can a Chartered Accountant in practice share his fees with the Government in respect of Government Audit?
Yes, if the Government deducts a percentage for administrative expenses, as the Council finds no Code violation.
2.4 Can goodwill of a Chartered Accountant firm be purchased?
Yes, the Council permits selling/transferring goodwill of a proprietary firm to an eligible member after the proprietor’s death.
2.5 Can a Chartered Accountant in practice enter into partnership with a practicing Chartered Accountant of a recognized foreign professional body for sharing fee of their partnership within India?
Yes, if recognized under Section 29(2) or Regulation 53B(2) (Clause 4, Part I).
2.6 Can a practicing Chartered Accountant secure any professional business through the services of a person who is not his employee or partner?
No, except through permitted arrangements (Clause 5, Part I).
2.7 Can a practicing Chartered Accountant solicit clients or professional work by advertisement?
No, except for responding to tenders, announcing partnership changes, or classified ads in the Institute’s Journal (Clause 6, Part I).
2.8 Whether a member in practice is permitted to respond to announcement for empanelment for allotment of audit and other professional work and quote fees on enquiries being received?
Yes, per proviso (ii) to Clause 6, for government, corporate, or institutional empanelments, with fee quotes allowed on enquiry.
2.9 Whether a member in practice is permitted to have his name published in Telephone Directory?
Yes, in the “Chartered Accountants” section, with normal type, no special payment, and no promotional appearance (Clause 6).
2.10 Whether a member in practice can respond to Tenders, Advertisements and Circulars?
Yes, per proviso (ii) to Clause 6.
2.11 Can a member in practice indicate in a book or an article, authored/contributed/published by him, his association with any firm of Chartered Accountants?
No, per Clause 6, Part I, except in the Institute’s Journal with “Chartered Accountant” and city name.
2.12 Whether the word “Chartered Accountants” and name of city after the name of the members of the Institute be mentioned in the articles contributed by such members and published in the Institute’s Journal?
Yes, no restriction applies (Clause 6).
2.13 Can a Chartered Accountant in practice solicit professional work by making roving enquiries?
No, this is advertising (Clause 6).
2.14 Can a Chartered Accountant in practice seek professional work from his professional colleagues?
Yes, via direct requests or classified ads in the Institute’s Journal (Clause 6).
2.15 Whether sponsorship or prizes can be instituted in the name of Chartered Accountants or a firm of Chartered Accountants?
Yes, if “Chartered Accountant” isn’t appended and Clause 6 is followed.
2.16 Can a Chartered Accountants firm give advertisement in relation to Silver, Diamond, Platinum or Centenary celebration of the firm?
Yes, in newspapers or newsletters, per Clauses 6 and 7.
2.17 A Chartered Accountants firm issued circulars to the non-clients that a Chartered Accountant who was the former partner in-charge of Taxation of one of the largest accounting firms of the world, had joined them as partner. Can they do it? (Case Study)
No, this violates Clause 6 (solicitation) and Clause 7 (advertising attainments).
2.18 In a representation submitted to a company under Section 225(3) of the Companies Act, 1956, the auditors of the company included the contribution made by the firm in strengthening the control procedures of the company during their association with the company. Is it misconduct (Case Study)?
Yes, highlighting contributions may seek publicity, violating Clause 6.
2.19 Can a Chartered Accountant in practice accept original professional work emanating from the client introduced to him by another member?
No, unless routed through the introducing CA (Clause 6).
2.20 Whether a Chartered Accountant in practice can give public interviews and also whether he can furnish details about himself or his firm in such interviews?
Yes, but without highlighting attainments to avoid Clauses 6/7 violations.
2.21 A Chartered Accountant in practice during a TV interview, handed over a bio-data of his firm to the Chairperson. Such bio-data detailed the standing of the international firm with which the firm was associated. It also detailed the achievements of the concerned partner and his recognition as an expert in the field of taxation in the country. The chairperson read out the said bio-data during the interview. Is it a professional misconduct? (Case Study)
Yes, this violates Clause 6 (solicitation via interview).
2.22 Can a Chartered Accountant in practice/firm of Chartered Accountants post the particulars of himself/itself on a website?
Yes, per Council guidelines (Clause 6).
2.23 Whether website of any Chartered Accountant can provide a link to the website of ICAI, its Regional Councils and Branches and also to the websites of Govt./Govt. Departments/Regulatory authorities?
Yes, per Code of Ethics, 2009.
2.24 Whether the information contained in the website of the Chartered Accountants and/or Chartered Accountants’ firms can be circulated on their own or through e-mail or by any other mode or technique?
No, except on specific “pull” requests (Clause 6).
2.25 Can a member put up his photograph on the website?
Yes, a passport-size photo is permitted (Clause 6).
2.26 Can a Chartered Accountant advertise his professional attainments or services, or can he use any designation or expression other than Chartered Accountants on professional documents, visiting cards, letter heads or sign boards, etc.?
No, except University degrees or Institute titles (Clause 7).
2.27 Whether a Chartered Accountant in practice can use expression like Income Tax Consultant, Cost Accountant, Company Secretary, Cost Consultant or a Management Consultant?
No, per Clause 7.
2.28 Can a Chartered Accountant in practice give the date of setting up the practice or date of establishment on the letterheads and other professional documents, etc.?
No, except on websites with “pull” requests (Clause 7).
2.29 Can a Chartered Accountant in practice also practice as an Advocate?
Yes, with Bar Council permission, but not using “Chartered Accountant” for advocacy (Clause 7).
2.30 Whether a Chartered Accountant in practice can use the designation ‘Corporate Lawyer’?
No, per Clause 7.
2.31 Can a Chartered Accountant in practice/firm give advertisement in press?
No, except via a write-up per Council guidelines (Clause 7).
2.32 Whether a member can appear on television/Radio or give lectures at forums?
Yes, objectively, without firm promotion (Clause 7).
2.33 Whether Companies in which Chartered Accountants have been appointed as directors on their Board can publish description about the Chartered Accountant’s expertise, specialization and knowledge in any particular field or add appellations or adjectives to their names in the prospectus or public announcements issued by these companies?
Yes, if it doesn’t advertise attainments or solicit work (Clauses 6/7).
2.34 If a member is a partner in more than one firm, is it permissible to print the names of all the firms on visiting cards, letter-heads, stationery etc.?
Yes, no violation under Clause 7.
2.35 Whether a Chartered Accountant/Firm is permitted to use logo on letter-heads, stationery, etc.?
No, except the common CA logo per Council guidelines (Clause 7).
2.36 Can a Chartered Accountant in practice use/fix a monogram of the Institute on any column/wall located inside the office or on professional documents?
No, per Clause 7.
2.37 Whether the office of a Chartered Accountant is permitted to go in for ISO 9001: 2000 certification or other similar certifications?
Yes, but “ISO Certified” cannot be used on documents (Clause 7).
2.38 If a member has passed any additional course of the ICAI, is he permitted to print such qualification on visiting cards, letter heads and other stationery?
Yes, but not as “Information System Auditor” (Clause 7).
2.39 Whether public notice published in the newspaper by a Chartered Accountant individually or jointly with an Advocate in respect of acquisition of land by their client is permitted?
Yes, per Clause 7 guidelines.
2.40 Whether a Chartered Accountant in practice can accept a position as auditor previously held by another Chartered Accountant without first communicating with him in writing?
No, per Clause 8.
2.41 Whether a Chartered Accountant in practice can accept audit in case the audit fee of the previous auditor remains unpaid?
No, unless undisputed fees are settled (Clause 8).
2.42 Whether posting of a letter under “Certificate of Posting” is sufficient to establish communication with retiring auditor?
No, registered acknowledgment or hand delivery is required (Clause 8).
2.43 Whether a Chartered Accountant who is appointed as tax auditor for conducting special audit under the Income-tax Act by the IT Authorities is required to communicate with statutory auditor?
Yes, it’s a healthy practice (Clause 8).
2.44 Whether it is obligatory for the auditor appointed to conduct a special Audit under Section 233A of the Companies Act, 1956 to communicate with the previous auditor who has conducted the regular audit for the period covered by the Special Audit?
No, per Clause 8.
2.45 Whether communication with previous auditor is necessary in case of appointment as statutory auditor by nationalized and other Banks?
Yes, per Clause 8.
2.46 Whether communication by the Incoming auditor is mandatory with the previous auditor in respect of various audit assignments, like the concurrent audit, revenue audit, tax audit and special audits etc.?
Yes, for all audit types (Clause 8).
2.47 Whether a Chartered Accountant will be deemed to be guilty of professional misconduct if he accepts his appointment as an auditor immediately after intimating his appointment over the phone to the previous auditor?
Yes, if not in writing or without waiting for a reply (Clause 8).
2.48 Whether a Chartered Accountant can accept an appointment as auditor of a company without first ascertaining from it whether the requirement of Section 225 of the Companies Act, 1956 in respect of such appointment have been duly complied with?
No, per Clause 9.
2.49 Whether a statutory auditor can be appointed in the adjourned meeting in place of existing statutory auditor where no special notice for removal or replacement of the retiring auditor is received at the time of the original meeting?
No, per Section 190(1) of the Companies Act, 1956 (Clause 9).
2.50 Whether a Chartered Accountant or a firm of Chartered Accountants can charge or offer to charge professional fees based on a percentage of turnovers?
No, except per Regulation 192 (e.g., receivers, co-op auditors) (Clause 10).
2.51 Whether a Chartered Accountant in practice can engage in any business or occupation other than the profession of Chartered Accountancy?
No, unless permitted by the Council (Clause 11).
2.52 Whether a member in practice is allowed to become whole-time director of a company?
No, unless under corporate practice guidelines (Clause 11).
2.53 Whether a member in practice can be a director of a company?
Yes, if not managing or whole-time, and not auditing the company (Clause 11).
2.54 Whether a Chartered Accountant in practice is entitled to accept teaching assignment?
Yes, up to 25 hours weekly since 1.4.2005 (Clause 11).
2.55 Can a Chartered Accountant working in a CA firm hold CoP?
Yes, but not perform attest functions since 1.4.2005 (Clause 11).
2.56 Whether a member of the Institute who is a salaried employee of a specified class of bodies corporate can take up part-time employment?
Yes, per Council guidelines, with restrictions on attest functions.
2.57 Whether a member in practice can be a trustee or executor?
Yes, if not in a fiduciary capacity conflicting with CA duties.
2.58 Whether a member in practice can act as a stock-broker?
No, per Clause (xix) of Appendix-3.
2.59 Whether a member in practice can undertake Directorship in a Co-operative Society?
Yes, if not managing or whole-time, and not auditing it.
2.60 Whether a member in practice can undertake Internal Audit of a branch or branches of a Company of which he is the Statutory Auditor?
No, per self-regulatory measures.
2.61 Whether a member in practice can conduct the branch audits of a Company where the Statutory Auditors are his/her close relative(s)?
No, to avoid familiarity threats.
2.62 Whether the Statutory Auditors consisting of ten or more members can conduct the branch audits of the same company?
No, branch audits should go to local firms with less than ten members, except where records are at head office or significant operations occur at branches.
2.63 Is there any ceiling on the fees to be accepted from one company?
Yes, fees from one company or related entities should not exceed 40% of gross annual fees, unless below ₹2 lakhs or for government entities (Clause 11).
2.64 Is there any recommended scale of fees chargeable for the work done by the members of the Institute?
Yes, last revised in January 2006, effective May 2006.
2.65 Whether a member of the Institute in practice is liable for professional misconduct, if he does not follow the direction given, by the Council or an appropriate Committee or on behalf of any of them, to the incoming auditors not to accept the appointment as auditors, in the case of unjustified removal of the earlier auditors?
Yes, per Council General Guidelines, 2008 (Part II, Clause 1).
2.66 Can the auditor revise his Audit Report?
Yes, per the Guidance Note on Revision of the Audit Report.
2.67 Whether a member of the Institute shall be deemed to be guilty of professional misconduct, if he includes in any statement, return or form to be submitted to the Council or any of its committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority any particulars knowing to be false?
Yes, per Clause 3, Part II.
3. Questions Relating to the Second Schedule
3.1 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he 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.
Yes, per Part I, Clause 1.
3.2 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he 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.
Yes, per Part I, Clause 2.
3.3 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he 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.
Yes, per Part I, Clause 3.
3.4 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he 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.
Yes, per Part I, Clause 4.
3.5 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he 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 concerned with that financial statement in a professional capacity.
Yes, per Part I, Clause 5.
3.6 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he 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.
Yes, per Part I, Clause 6.
3.7 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he does not exercise due diligence, or is grossly negligent in the conduct of his professional duties.
Yes, per Part I, Clause 7.
3.8 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he fails to obtain sufficient information which is necessary for expression of an opinion or his exceptions are sufficiently material to negate the expression of an opinion.
Yes, per Part I, Clause 8.
3.9 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances.
Yes, per Part I, Clause 9.
3.10 A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he 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.
Yes, per Part I, Clause 10.
3.11 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 made there under or any guidelines issued by the Council.
Yes, per Part II, Clause 1.
3.12 A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he 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 except as permitted by the employer.
Yes, per Part II, Clause 2.
3.13 A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he 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.
Yes, per Part II, Clause 3.
3.14 A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he defalcates or embezzles money received in his professional capacity.
Yes, per Part II, Clause 4.
3.15 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.
Yes, per Part III.
4. Miscellaneous Issues
4.1 What is the status of a Chartered Accountant who is a salaried employee of a Chartered Accountant in practice or a firm of such Chartered Accountants?
Deemed in practice for training articled assistants but cannot perform attest functions since 1.4.2005, even with a Certificate of Practice.
4.2 Which are the categories of occupation where prior permission is required?
See Appendix-2: General permissions (e.g., employment under CAs, tutorship, authorship) need no approval; specific permissions (e.g., business employment, managing directorship) require Council approval.
4.3 Can a member in practice be Promoter/Promoter Director of the Company?
Yes, with no permission needed for promoter or director simpliciter, and no shareholding limits.
4.4 Can a member in practice be a sleeping partner in family business concern?
Yes, with Council permission (Regulation 190A).
4.5 Can a member who is in part-time/full time employment apply for Certificate of Practice and do attest functions?
Yes, for CoP, but not attest functions (Regulation 190A).
4.6 What should be the size of signboard for the office?
Reasonable, with no glow signs, per good taste; a residence name plate is allowed.
4.7 Can a member share profits with the widow of his deceased partner?
Yes, if the partnership agreement allows.
4.8 Can there be any sharing of fees between the widow or the legal representative of the proprietor of a single member firm and the purchaser of the goodwill of the firm on the death of the sole proprietor of the firm?
No, except as goodwill payment installments.
4.9 Can the goodwill of a proprietary firm of Chartered Accountant, after his death be sold/transferred to another eligible member of the Institute?
Yes, per Council resolution, with conditions (e.g., within one year of death, dispute settlement).
4.10 Can a member publish a change in partnership or change in the address of practice and telephone numbers?
Yes, with a bare statement of facts.
4.11 What is the meantime of communicating with the retiring auditor?
Reasonable time, with written communication to ascertain reasons for change.
4.12 Can a member act as an Insurance Surveyor?
Yes, if eligible, per Appendix-9.
4.13 Whether the members are required to intimate his website address to the Institute?
No, but it must follow guidelines.
4.14 Can a member act as a Tax Auditor and Internal Auditor of an entity?
No, per Council decision.
4.15 Can a Concurrent Auditor of a Bank also undertake the assignment of quarterly review of the same bank?
No, per the Guidance Note on Independence.
4.16 Can a member act as an Insurance Agent and arrange business for Insurance company?
No, but advisory services are allowed.
4.17 Can a member or firm advertise his/its services?
Yes, within Advertisement Guidelines (May 2008).
4.18 Can a member holding Certificate of Practice is entitled to own Agricultural land and continue agricultural activity?
Yes.
5. Questions Relating to Part A of the Code of Ethics
5.1 What are the Fundamental Principles which a Professional Accountant is required to comply?
Integrity, objectivity, professional competence and due care, confidentiality, and professional behavior.
5.2 What is the Conceptual Framework Approach?
A method to identify, evaluate, and address threats to compliance with fundamental principles.
5.3 What are the threats involved while complying with the fundamental principles?
Self-interest, self-review, advocacy, familiarity, and intimidation threats.
5.4 What are the available safeguards that may eliminate or reduce the threats at an acceptable level?
Profession/legislation safeguards and work environment measures.
5.5 What is Ethical Conflict Resolution?
Resolving conflicts in applying fundamental principles.
5.6 What is a Client Acceptance, Engagement Acceptance and Changes in Professional Appointment?
Assessing threats before accepting clients, ensuring competence, and communicating with existing accountants (Section 210).
5.7 What are the measures available to Professional Accountants in case conflict of interest arises?
Identify, evaluate, and apply safeguards (e.g., separate teams, notifications).
5.8 What is required to be done by a Professional Accountant in Public Practice when he is asked to provide a second opinion on the application of accounting, auditing, reporting or other standards etc?
Consider contacting the existing accountant with client permission.
5.9 Whether a Professional Accountant in Public Practice may pay or receive a referral fees or commission?
Yes, with safeguards to eliminate threats.
5.10 What are the safeguards available to a Professional Accountant in Public Practice in respect of Custody of Client Assets?
Keep assets separate, use them as intended, and comply with laws.
5.11 What is Independence?
Independence of mind (unbiased judgment) and appearance (avoiding compromising perceptions).
5.12 What is the Conceptual Framework to Independence?
Applying judgment to eliminate or reduce independence threats.
5.13 What is Engagement Period?
From starting assurance services to issuing the report, except for recurring engagements.
5.14 What is the meaning of Direct Financial Interest?
Ownership or control of a financial interest.
5.15 What is the meaning of Indirect Financial Interest?
Beneficial ownership without control.
5.16 What is Financial Statement Audit Client?
An entity audited by a firm, including related entities for listed clients.
5.17 When conflict of interest arises, what are the options available to a firm/Network firm when the firm/ network firm has a direct financial interest/Indirect financial interest in a Financial Statement Audit Client or a client that is not a Financial Statement Audit client?
Dispose of interest, reduce it, or withdraw from the audit.
5.18 Whether a loan, or a guarantee of a loan to the professional accountant/any partner of the firm/firm from an assurance client, or deposits made by, or brokerage accounts of a firm or a member of the assurance team with an assurance client, creates any threats to Independence?
Yes, unless under statutory terms or normal banking conditions.
5.19 What are the examples of Close Business Relationships giving rise to conflict of interest?
Joint ventures, combined service packages, or significant purchases from clients.
5.20 What are the safeguards available when the same senior personnel have been engaged over a long period of time by an Assurance Client in an Assurance Engagement?
Rotation, additional reviews, or internal quality checks.
5.21 Whether a person who is an officer or employee of an entity shall be qualified for appointment as auditor of that entity?
No (Section 290.148).
5.22 Whether a firm can obtains an assurance engagement at a significantly lower fee level than that charged by the predecessor firm, or quoted by other firms?
Yes, if time, staff, and standards are adequate.
5.23 When the situation for Potential Conflict arises?
When employer duties conflict with professional obligations for CAs in service.
5.24 Whether a Professional Accountant in Service should undertake those tasks for which he does not have sufficient specific training or experience?
No, unless trained or with expert advice.
5.25 Whether a Professional Accountant in Public Practice can provide services that create a Self-Review Threat?
Yes, with safeguards if threats are reduced to an acceptable level.
5.26 Whether a Professional Accountant in Public Practice can provide services that create a Management Threat?
No, unless safeguards eliminate the threat.
5.27 Whether a Professional Accountant in Public Practice can accept gifts or hospitality from a client?
Yes, if not significant and per Council guidelines.
Disclaimer: These FAQs are based on the ICAI’s "Frequently Asked Questions on Ethical Issues" (Second Edition, February 2012) and are not a substitute for the Code of Ethics. Members should verify details with the Chartered Accountants Act, 1949, Regulations, and Council decisions. For updates, visit www.icai.org or email esb@icai.org.
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