Significant Action/ Initiatives of Ethical Standards Board in 2015-16
- Website Guidelines of ICAI were revised.
- A Study Group was constituted for revision of Code of Ethics and other Issues.
- IESBA-NSS Meeting was held at New York on 06th May, 2015. Various important issues having ethical bearing were discussed at the meeting, such as, Jurisdictional Developments of International Relevance, Responding to Non-Compliance with Laws and Regulations (NOCLAR), Structure of the Code, Safeguards, and Long Association of Senior Personnel with an Audit Client.
: It has come to our knowledge that certain message is doing rounds on WhatsApp and social Media, which contains compilation of ethical issues , wherein concern has been raised as to their authenticity.
In view of this , we are enclosing herewith a tabulation
comparing the issues contained in the message and the corresponding actual ESB decision.
Recent Decisions of Ethical Standards Board
- The Ethical Standards Board in 2013 generally apply the stipulations contained in the then amended Rule 11U of Income Tax generally, wherein statutory auditor /tax auditor cannot be the valuer of unquoted equity shares of the same entity.
The Board has at its recent Meeting (January, 2017) has reviewed the above, and decided that where law prohibits for instance in the Income Tax Act and the rules framed thereunder, such prohibition on statutory auditor/tax auditor to be the valuer will continue, but where there is no specific restriction under any law, the said eventuality will be permissible, subject to compliance with the provisions, as contained in the Code of Ethics relating to independence.
- The Ethical Standards Board had in 2011 decided that it is not permissible for a member who has been Director of a Company, upon resignation from the Company to be appointed as an auditor of the said Company, and the cooling period for the same may be 2 years.
The Board has at its recent Meeting (January, 2017) has reviewed the above, and noted that the Section 141 of Companies Act, 2013 on disqualification of auditors does not mention such prohibition; though threats pertaining to the said eventuality have been mentioned in Code of Ethics.
Further, the Board was of the view that a member may take decision in such situation based on the provisions of Companies Act, 2013 and provisions of Code of Ethics.
- A chartered accountants in practice cannot become Financial Advisors and receive fees/commission from Financial Institutions such as Mutual Funds, Insurance Companies, NBFCs etc.
- A chartered accountant cannot exercise lien over the client documents/records for non-payment of his fees.
- It is not permissible for CA Firm to print its vision and values behind the visiting cards, it would result in solicitation and therefore would be violative of the provisions of Clause (6) of Part-I of First Schedule to the Chartered Accountants Act, 1949.
- It is not permissible for chartered accountants in practice to take agencies of UTI, GIC or NSDL.
- It is permissible for a member in practice to be a settler of a trust.
- A member in practice cannot hold Customs Brokers Licence under section 146 of the Customs Act, 1962 read with Customs Brokers Licensing Regulations, 2013 in terms of the provisions of Code of Ethics.
- A Chartered accountant in service may appear as tax representative before tax authorities on behalf of his employer, but not on behalf of other employees of the employer.
- A chartered accountant who is the statutory auditor of a bank cannot for the same financial year accept stock audit of the same branch of the bank or any of the branches of the same bank or sister concern of the bank, for the same financial year.
- A CA Firm which has been appointed as the internal auditor of a PF Trust by a Government Company cannot be appointed as its Statutory Auditor.
- A concurrent auditor of a bank ‘X’ cannot be appointed as statutory auditor of bank ‘Y’, which is sponsored by ‘X’.
- A CA/CA Firm can act as the internal auditor of a company & statutory auditor of its employees PF Fund under the new Companies Act (2013).
- The Ethical Standards Board while noting that there is requirement for a Director u/s 149(3) of the Companies Act, 2013 to reside in India for a minimum period of 182 days in the previous calendar year, decided that such a Director would be within the scope of Director Simplicitor (which is generally permitted as per ICAI norms) , if he is non –executive director, required in the Board Meetings only , and not paid any remuneration except for attending such Board Meetings.
- Illustrative Formats of acceptance letters to be submitted by the incoming auditor u/s 139(1) of the Companies Act, 2013 (the formats are illustrative only and not mandatory)
- Permitting the use of firm name by client, mentioning the firm as a "Knowledge Partner" or in the "Thank You" advertisement, is not permissible, however mention of name of an individual member with prefix/suffix “CA” as a “knowledge partner “ is permissible.
- Concurrent auditor of an entity cannot accept an assignment under ant statute.
- A chartered accountant in practice may establish a TIN – FC, and may as well establish a TIN - FC under franchise from the other entity which is already a TIN – FC.
- Quick Response Code (QR Code) may be printed on the visiting Card by a member in practice, provided that the Code does not contain information that is not otherwise permissible to be printed on a visiting Card.
- A statutory auditor and tax auditor can not be valuer of the unquoted equity shares as it would create threats to independence of the auditor, which may not possibly be reduced by application of safeguards.
- The use of banner with name of CA firm is not permissible in terms of provisions of Items 6 and 7 of Part –I of First Schedule to The Chartered Accountants Act, 1949.