Source: Published in January, 2023 issue of the CA Journal

No, in terms of Clause (10) of Part I of First Schedule to the Chartered Accountants Act, 1949, it is not permitted to a Chartered Accountant or a firm of Chartered Accountants to charge fees on a percentage of turnover, except in the circumstances provided under Regulation 192 of the Chartered Accountants Regulations, 1988.

“192. Restriction on fees No Chartered Accountant in practice shall charge or offer to charge, accept or offer to accept, in respect of any professional work, fees which are based on a percentage of profits, or which are contingent upon the findings, or results of such work: Provided that:

• in the case of a receiver or a liquidator, the fees may be based on a percentage of the realization or disbursement of the assets;
• in the case of an auditor or a co-operative society, the fees may be based on a percentage of the paid up capital or the working capital or the gross or net income or profits; and
• in the case of a valuer for the purposes of direct taxes and duties, the fees may be based on a percentage of the value of the property
• in the case of certain management consultancy services as may be decided by the resolution of the Council from time to time, the fees may be based on percentage basis which may be contingent upon the findings, or results of such work;
• in the case of certain fund raising services, the fees may be based on a percentage of the fund raised;
• in the case of debt recovery services, the fees may be based on a percentage of the debt recovered;
• in the case of services related to cost optimisation, the fees may be based on a percentage of the benefit derived; and any other service or audit as may be decided by the

Note: Following activities have been decided by the Council under “h” above :-

• Acting as Insolvency Professional
• Non-Assurance Services to Non-Audit Clients.

No, in terms of Clause (11) of Part- I of First Schedule to the Chartered Accountants Act, 1949, in general a Chartered Accountant in practice is not permitted to engage himself in any business or occupation other than the profession of Chartered Accountants.

However, there are the following exceptions to it:

(i) A Chartered Accountant can be the Director of a Company (not being a Managing Director or Whole-Time Director), unless he or any of his partners is interested in such company as an auditor. [Proviso to Clause (11)]

(ii) A Chartered Accountant in practice may engage in any business or occupation with the permission granted in accordance with a resolution of the Council (Regulation 190A).

Appendix (9) of the Chartered Accountants Regulations, 1988 contains the said resolutions under two heads (A) permission granted generally and (B) permission to be granted specifically.

Source: Published in December, 2022 issue of the CA Journal

No, the use of logo/monogram of any kind/ form/style/design/colour, etc. whatsoever on any display material or media e.g. paper stationery, documents, visiting cards, magnetic devices,  internet,  signboard  by  the members in practice and/or a firm of Chartered Accountants, is prohibited. Use/ printing of member/firm name in any other manner tantamounting to logo/monogram is also prohibited. However, a common CA logo has been allowed to the members, provided it is used correctly within the Council guidelines.

Who is “previous auditor” for the purposes of communication to be made in terms of clause (8) of Part I of First Schedule to the Chartered Accountant Act, 1949?

The Council has taken the view that the provisions of audit fee made in accounts signed by both- the auditor and the auditee along with other expenses, if any,  incurred by the auditor in connection with the audit, shall be considered as ‘undisputed’ audit fees. In this connection, attention of members is invited to the Council General Guidelines, 2008.

No, a mere posting of a letter “Under Certificate of Posting” is not sufficient to establish effective communication with the retiring auditor unless there is some evidence to show that the letter has in  fact  reached the person communicated with. Members should therefore communicate with a retiring auditor in such a manner as to retain in their hands positive evidence of the delivery  of the communication to the addressee. In the opinion of the Council, the following would in the normal course provide such evidence:-

Communication by a letter sent through “Registered Acknowledgement due”, or

By hand against a written acknowledgement, or

Acknowledgement of the communication from retiring auditor’s vide email address registered with the Institute or his last known official email address , or

Unique Identification Number (UDIN) generated on UDIN portal (subject to separate guidelines to be issued by the Council in this regard)

As per Council directions under Paragraph 2.14.1.8(i) under Clause (8) of Part-I of the First Schedule to the Chartered Accountant Act, 1949, appearing in Volume II of the Code of Ethics, professional courtesy alone is not the major reason for requiring a member to communicate with the existing accountant. The underlying objective is that the member may have an opportunity to know the reasons for the change in order to be able to safeguard his own interest, the legitimate interest of the public and the independence of the existing accountant. When making the enquiry from the retiring auditor,  the  one  proposed  to  be appointed or already appointed should primarily find out whether there are any professional or other reasons why he should not accept the appointment.

Source: Published in November, 2022 issue of the CA Journal

Yes. The 12th edition of the Code of Ethics came into effect w.e.f. 1st July 2020, with the exception of three provisions contained in Volume – I of the Code of Ethics, 2019, which were deferred from 1st July 2020 till 30th September 2022. Now, these provisions have been made applicable from 1st October 2022 with certain amendments. These three provisions are: –

• Responding to Non-Compliance with Law and Regulations (NOCLAR) – Sections 260 and 360
• Fees – Relative Size – Paragraphs 410.3 to 6

Tax Services to Audit Clients – Subsection 604

Thus, with the coming into force of above provisions, all provisions of the Code of Ethics are applicable w.e.f 1st October, 2022.

This Announcement dt. 29th September, 2022 issued by the Institute  in  this  regard  may be accessed at https://resource.cdn.icai.org/71662esb57665.pdf

The senior professional accountants in service refer to the Key Managerial Personnel. They are directors, officers, or senior employees able to exert significant influence over and make decisions regarding, the acquisition, deployment, and control of the employing organization’s human, financial, technological, physical, and intangible resources. There is a greater expectation for such individuals to take whatever action is appropriate in the public interest to respond to non-compliance or suspected non-compliance than other professional accountants within the employing organization. This is because of senior professional accountants’ roles, positions, and spheres of influence within the employing organization.

Thus, a professional accountant in public practice has to comply with the provisions of NOCLAR with respect to such Audit assignments.

What is the threshold percentage of gross annual professional fees (i.e. limit beyond which there will be threats) received for an audit client which is a public interest entity?

As per the Code of Ethics, Public interest entities include: –

(a) A listed entity; or

(b) An entity:

(1) Defined by regulation or legislation as a public interest entity; or

(2) For which the audit is required by regulation or legislation to be conducted in compliance with the same independence requirements that apply to the audit of listed entities. Such regulation might be promulgated by any relevant regulator, including an audit regulator.

For purpose of this definition, it may be noted that Banks and Insurance Companies are to be considered as Public Interest Entities.

(a) An entity that has direct or indirect control over the client if the client is material to such entity;

(b) An entity with a direct financial interest in the client if that entity has significant influence over the client and the interest in the client is material to such entity;

(c) An entity over which the client has direct or indirect control;

(d) An entity in which the client, or an entity related to the client under (c) above, has a direct financial interest that gives it significant influence over such entity and the interest is material to the client and its related entity in (c); and

(e) An entity which is under common control with the client (a “sister entity”) if the sister entity and the client are both material to the entity that controls both the client and sister entity.

Source: Published in October, 2022 issue of the CA Journal

Yes, as per Paragraph 2.14.1.6(iv) F under Clause (6) of Part-I of First Schedule to the Chartered Accountants Act, 1949, appearing in Volume-II of Code of Ethics, considering the need of interpersonal socialization/ relationship of the members through such get-together occasions, the advertisement for Silver, Diamond, Platinum, and Centenary celebrations of the firms has been permitted to be published in any newspaper or in the newsletters.

As per paragraph 2.14.1.6(iv) O under Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949, appearing in Volume-II of Code of Ethics, a Chartered Accountant in practice can give public interviews. While doing so, due care should be taken to ensure that such interviews or details about the members or their firms are not given in a manner highlighting their professional attainments, any detail which is given must, in addition to meeting above requirements, be given only as a response to specific question, and of factual nature only.

A Chartered Accountant in practice during a TV interview, handed over a biodata of his firm to the Chairperson. Such biodata 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 biodata during the interview. Is it a professional misconduct?

Yes, Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949, prohibits solicitation of client or professional work either directly or indirectly by circular, advertisement, personal   communication, or interview or by any other means since it shall constitute professional misconduct. The member would be held guilty of professional misconduct under Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949, under the given circumstances.

Yes, Council direction under Paragraph 2.14.1.7(x) under Clause (7) of Part I of the First Schedule to the Chartered Accountants Act, 1949, as appearing in Volume-II of Code of Ethics prescribes that a member may appear on television, films and  internet  and  agree to broadcast in the Radio or give lectures at forums and may give his name and describe himself as chartered accountant. Special qualifications or specialized knowledge directly relevant to the  subject  matter  of  the programme may also be given. Firm name may also be mentioned, however, any exaggerated claim or any kind of comparison is not permissible. What he may say or write must not be promotional of him or his firm but must be an objective professional view of the topic under consideration.

Yes, it is permitted that website may provide link to the website of ICAI, its Regional Councils and Branches and also to the websites of Govt./Govt. Departments/Regulatory authorities and other professional bodies.

The mention of catchwords / catchphrases (for e.g., excellence in a particular area, Firm having professionals of integrity etc.) on Firm’s website, Letter heads and visiting cards is not permissible in view of  the provisions of Clauses (6) and (7) of Part-I of the First Schedule to the Chartered Accountants Act,1949. It may be noted that the above catch words are only indicative and not exhaustive.

No, as per Clause (7) of Part I of the First Schedule to the Chartered Accountants Act,1949, a Chartered Accountant shall be deemed to be guilty of professional misconduct, if he 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 recognized by the Central Government or a title indicating membership of the  Institute of Chartered Accountants or of any other institution that has been recognized by the Central Government or may be recognized by the Council.

However, the member in practice may advertise through  a  write-up  setting  out the services provided by him  or  his  firm  and particulars of his firm subject to such guidelines as may be issued by the Council.

Yes, Council direction under Paragraph 2.14.1.7(v) under Clause (7) of Part I of the First Schedule to the Chartered Accountants Act,  1949,  appearing  in  Volume-II   of  Code of Ethics prescribes that a Chartered Accountant in practice who is otherwise eligible may practice as an Advocate subject to the permission of the Bar Council but in such cases, he should not use designation ‘Chartered Accountant’ in respect of the matters involving the practice as an Advocate. In respect of other matters, he should use the designation ‘Chartered Accountant’ but he should not use the designation ‘Chartered Accountant’ and ‘Advocate’ simultaneously.

No, Council direction under Paragraph 2.14.1.7(ii) of Clause (7) of Part I of the First Schedule to the Chartered Accountants Act,1949, appearing in Volume II of  the  Code of Ethics prescribes that it is improper for a Chartered Accountant to state on his professional documents that he is an Income- tax Consultant, Cost Accountant, Company Secretary, Cost Consultant, or a Management Consultant.

No, Council direction under Paragraph 2.14.1.7(iv) of Clause (7) of Part I of the First Schedule to  the  Chartered  Accountants  Act, 1949, appearing in Volume-II  of  Code of Ethics prescribes that the date of setting  up of the firm on the letterheads and the professional documents, etc. should not be mentioned. However, in the Website, the year of establishment can be given.

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?

The Council’s attention has been  drawn  to the fact that more and more companies are appointing Chartered Accountants as directors on their Boards. The prospectus or public announcements issued by these companies often publish descriptions about the Chartered Accountants’ expertise, specialization and knowledge in any particular field or add appellations or adjectives to their names. Attention of the members in this context is invited to the provisions of Clause (6) and (7) of Part I of the First Schedule to the Chartered Accountants Act,1949.

In order that the inclusion of the name of a member of the Institute  in  the  prospectus  or public announcements or other public communications issued  by  the  companies  in which the member is a director does not contravene  the   above   noted   provisions,   it is necessary that  the  members  should  take necessary steps to ensure that such prospectus or public announcements or public communications  do  not  advertise  his professional attainments and also that such prospectus or public  announcements  or public communications do not directly or indirectly amount to solicitation  of  clients  for professional work by the member. While it may be difficult to  lay  down  a  rigid  rule in this respect, the members must use their good judgement, depending upon the facts and circumstances of each case to ensure that the above noted provisions are complied with both in letter and spirit.

It is advisable for a member that as soon as  he is appointed as a director on the Board of  a company, he should specifically invite the attention of the management of the company to the aforesaid provisions and should request that before any such prospectus or public announcements or public communication mentioning the name of the member concerned, is issued, the material pertaining to the member concerned should, as far as practicable be got approved by him.

Source: Published in September, 2022 issue of the CA Journal

No, Clause (6) of Part-I of the First Schedule to the Chartered Accountants Act, 1949 prohibits a practicing Chartered Accountant from soliciting clients or professional work either directly or indirectly by circular, advertisement, personal communication, or interview or by any other means. However, there are following exceptions to it:-

(1) A member can respond to tenders or enquiries issued by various users of professional services or organizations from time to time and securing professional work as a consequence. In this regard, attention is invited to Council Guidelines dated 7th April, 2016 which are appearing at Appendix “J” of Volume II of Code of Ethics

(2) A member may advertise changes in partnerships or dissolution of a firm, or of any change in the address of practice and telephone numbers, the advertisement being limited to a bare  statement  of  facts and consideration given to the appropriateness of the area of distribution of newspaper or magazine and number of insertions.

(3) A member is permitted to issue a classified advertisement in the Journal/ Newspaper of the Institute intended to give information for sharing professional work on assignment basis or for seeking professional work on partnership  basis or salaried employment in the field of accounting profession provided it only contains the accountant’s name, address, telephone, fax number, e-mail address and address(es) of Social Networking Sites of members. However, mere factual position of experience and area of specialization, relevant to seek response to the advertisement, are permissible.

A member in practice, engaged in Coaching/ teaching activities in accordance with general and specific permission of the Council should abstain from advertisement of such Coaching / teaching activities, as it may amount to indirect solicitation, as well as solicitation by any other means, and may therefore be violative of the provisions of Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949. However, subject to the above, members engaging in teaching activities may display, outside their Coaching/teaching premises, sign board mentioning the name of Coaching/ teaching Institute, contact details and subjects taught therein only. Please refer to paragraph 2.14.1.6 (iv) H under Clause (6) of Part I of First Schedule to the Chartered Accountants Act, 1949, appearing in Volume II of Code of Ethics.

It has been clarified by the Council under proviso (ii) to clause (6) of the part-I of the first schedule of the Chartered Accountants Act, 1949, that if announcements are  made for empanelment by the Government, Corporations, Courts, Cooperative Societies, Banks and other similar institutions, the members may respond to such announcements provided the existence of panel is within their knowledge. The Council has further clarified that the quotations of fees can be sent if enquiries are received by the members in this regard. Attention is also invited to Council Guidelines dated 7th April 2016 which are appearing at Appendix “J” of Volume-II of Code of Ethics.

The entry should not appear  in  any other section/category except that of “Chartered Accountants”.

The member/firm should belong to the town/city in respect of which the directory is being published.

The order of the entries should not be in any manner other than alphabetical.

The entry should not be made in a different or prominent manner giving the impression of publicity/advertisement.

The entries should not be restricted and should be open to all the Chartered Accountants/firms of Chartered Accountants in the particular city/ town in respect whereof the directory is published.

The members can also include their names in trade/social directories.

Yes, it is permitted as per proviso (ii) to clause (6) of part I of the First Schedule to   the Chartered Accountants Act, 1949. Please refer to Paragraph 2.14.1.6(iv)C under Clause (6) of Part I of First Schedule to the Chartered Accountants Act, 1949, appearing in Volume II of Code of Ethics. This should be  read  with the Council Guidelines dated 7th April, 2016 which are appearing at Appendix “J” of Volume-II of Code of Ethics.

However, he may indicate in a book, article, or presentation the designation “Chartered Accountant” as well as the name of the firm.

Yes, as per Paragraph 2.14.1.6(iv)E under Clause (6)  of  Part  I  of  First  Schedule  to the Chartered Accountants Act, 1949, as appearing in Volume II of the Code of Ethics, the Council is of the view that the designation “Chartered Accountant” as well as the name of the firm may be used in greeting cards, invitations for marriages and religious ceremonies and any invitations for opening or inauguration of office of the members, change in office premises and change in telephone numbers, provided that such greeting cards or invitations etc. are sent only to clients, relatives and friends of the members concerned.

No,  it  is  not  permissible  for  a  member    to address letters, emails or circulars to persons who are likely  to  require  services  of a Chartered Accountant. It would be tantamount to advertisement as per Paragraph 2.14.1.6(iv)K under clause (6) of Part-I of the First Schedule to the Chartered Accountants Act, 1949, appearing in Volume II of Code of Ethics.

Yes, in terms of proviso (i) of Clause (6) of Part-I of the First Schedule to the Chartered Accountants Act, 1949, a member is permitted to apply or request for or to invite or to secure professional work from another Chartered Accountant in practice. The issue of advertisement or a circular by a Chartered Accountant, seeking work from professional colleagues on any basis whatsoever is in violation of Clause (6) of Part I of the First Schedule to the Chartered Accountants Act, 1949.  However,   classified   advertisement  in the  Journal/Newsletter  of  the  Institute  is permissible in this regard. A member is permitted to issue a classified advertisement in the Journal/Newsletter of the Institute intended to give information for sharing professional work on assignment basis or for seeking professional work on partnership basis or  salaried  employment  in  the  field  of accounting profession provided it only contains the accountant’s name, address, telephone, fax number and E-mail address and address(es) of social Networking sites of members. However, mere factual position of experience and area of specialization, relevant to seek response to the advertisement, are permissible.

Yes,  an  individual  Chartered  Accountant or a firm of Chartered Accountants can institute or sponsor prizes, provided that the designation “Chartered Accountant”, is not appended to the prize and the provisions of Clause (6) of Part-I of the First Schedule to the Chartered Accountants Act, 1949, regarding advertisement and publicity is complied with.