PROFESSIONAL ETHICS ICAI Code of Ethics 2019 visvis

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PROFESSIONAL ETHICS ICAI Code of Ethics, 2019 vis-à-vis ICAI Code of Ethics, 2009 1

PROFESSIONAL ETHICS ICAI Code of Ethics, 2019 vis-à-vis ICAI Code of Ethics, 2009 1

Applicability ü ICAI Code of Ethics, 2019 issued on 4 th February, 2019 ü

Applicability ü ICAI Code of Ethics, 2019 issued on 4 th February, 2019 ü Based on International Ethics Standards Board for Accountants (IESBA) Code of Ethics, 2018 edition ü Approved by Council at its 379 th Meeting held on 17 th – 18 th Dec. , 2018 ü Will come into effect from 1 st April, 2020 ü Existing edition of ICAI Code of Ethics, 2009 will remain applicable till 31 st March, 2020 2

Independence Q. Can an auditor write the books of accounts of the auditee? A.

Independence Q. Can an auditor write the books of accounts of the auditee? A. “ No, Council directions under clause (4) of part I of the Second Schedule of the Chartered Accountant Act, 1949 prescribe that an auditor is not permitted to write the books of accounts of his auditee clients. Further section 144 of the Companies Act, 2013 bars the auditor of a company to directly or indirectly render accounting and book keeping services to the said company or subsidiary company. ” 3

Communication by Incoming Auditor Q. Whether communication by the incoming auditor is • mandatory

Communication by Incoming Auditor Q. 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. ? A. “ Yes, the requirement for communicating with the previous auditor would apply to all types of audits viz. , statutory audit, tax audit, internal audit, concurrent audit or any other kind of audit. The council has laid down detailed guidelines in this regard and the same are appearing in the Code of Ethics, 2009 edition. ” 4

Disciplinary Mechanism Allegations against the member through formal ‘Complaint’ in Form ‘I’ received at

Disciplinary Mechanism Allegations against the member through formal ‘Complaint’ in Form ‘I’ received at Disciplinary Directorate Scrutiny of complaint and its registration Calling of Written Statement from the Respondent (minimum 21 days time to be given with a provision of extension of 30 days) Calling of Rejoinder from the Complainant (minimum 21 days time to be given with a provision of extension of 30 days) -Continued-

Disciplinary Mechanism Allegations against the member through ‘Information’ received at Disciplinary Directorate The Informant

Disciplinary Mechanism Allegations against the member through ‘Information’ received at Disciplinary Directorate The Informant is requested to file a formal complaint as per provisions of Rule 7(2) If Form ‘Í’ is received in response to the above, the same is processed as per previous slide i. e. the ‘Complaint’ route If no Form ‘Í’ is received and the papers/documents are insufficient, then the matter is placed before the BOD for closure If no Form ‘Í’ is received then the matter is examined based on the available documents and if required the matter is treated as ‘Information’ Calling of Written Statement from the Respondent (minimum 21 days time to be given with a provision of extension of 30 days)

Disciplinary Mechanism - (common steps to both the routes)Calling of additional documents, if required

Disciplinary Mechanism - (common steps to both the routes)Calling of additional documents, if required (minimum 21 days time to be given with a provision of extension of 30 days) Prima facie opinion is formed by the Director (Discipline) ` In case the member is found prima facie guilty of prima facie not guilty of professional and /or other misconduct falling under misconduct Place the matter before First Schedule Place the matter before Board of Discipline u/s 21 A Second or Both Schedule Place the matter before Board of Discipline Disciplinary Committee u/s 21 A u/s 21 B if BOD agrees with PFO, matter stands closed and if it disagrees with the same, the matter is either referred back to Director (Disc) for further examination or matter may be referred to BOD /DC (as the case may be) for further enquiry (i. e. , for personal hearing). if BOD / DC agrees with the Prima Facie Opinion, the matter is referred for further enquiry (i. e. , for personal hearing). In case of disagreement, the matter may either be closed or may be referred back to Director (Disc) for further examination.

Disciplinary. Mechanism HEARING STAGE - (common steps to both the routes i. e, Information

Disciplinary. Mechanism HEARING STAGE - (common steps to both the routes i. e, Information and Complaint routes)- • After the Respondent being found prima facie guilty by the Disciplinary Committee / Board of Discipline (as the case may be), the prima facie Opinion of the Director (Discipline) along with decision of the DC / BOD is sent to the Respondent and the Complainant (in case of complaint case), asking them to file their further Written Statement and Rejoinder respectively on the same. • After that hearing is fixed by BOD / DC (as the case may be) and notices to parties to the case and to the witness, if any, are issued informing them about the date, time and venue of the hearing. • After conclusion of the hearing, the DC / BOD issues its findings holding the Respondent either Guilty or Not Guilty. • • In case where the Respondent is held Not Guilty, the matter stands closed. • A Respondent aggrieved by the orders of the DC / BOD may prefer an appeal before the Appellate Authority within 90 days from the date on which the order is communicated to him. In case where the Respondent is held Guilty, an opportunity of hearing is awarded to the Respondent before passing any order of punishment.

Board of Discipline (BOD) Constituted by the Council

Board of Discipline (BOD) Constituted by the Council

Disciplinary Committee (DC) Constituted by the Council

Disciplinary Committee (DC) Constituted by the Council

Schedules to the Chartered Accountants Act • First Schedule • Part I : Professional

Schedules to the Chartered Accountants Act • First Schedule • Part I : Professional misconduct in relation to Chartered Accountants in practice (Sharing of fees, partnership with Non CAs, non-communication, solicitation, advertisement, offering to charge on percentage basis, etc ) • Part II : Professional misconduct in relation to members of the Institute in Service (sharing emoluments in employment, accepting part of fees /profits from other professionals by way of commission or gratification) • • Part III : Professional misconduct in relation to members of the Institute generally (falsely represents himself fellow, provides no information to ICAI or its Committees or gives false information while responding to tenders/enquiries) Part IV : Other misconduct of Members in General (acts bringing disrepute to the profession and/or committed acts punishable with imprisonment upto 6 months) • Second Schedule • Part I : Professional misconduct in relation to Chartered Accountants in practice (fails to perform the clients’ work diligently w. r. t. financial statements, disclosure of information acquired in professional engagements, etc) • Part II : Professional misconduct in relation to members of the Institute generally (Contravention of provisions of ICAI Regulations or Act, disclosure of confidential information as an employee, submitting false information to ICAI or its Committees) • Part III : Other Misconduct generally (acts wherein Court(s) have awarded imprisonment of more than 6 months)

Director Simplicitor Q. Whether a member in practice can be a Director Simplicitor of

Director Simplicitor Q. Whether a member in practice can be a Director Simplicitor of a company ? A. “ Yes, A member in practice is permitted generally to be a Director Simplicitor in a company provided he is not a Managing Director or Wholetime Director and is required only in the Board Meetings of the company and not paid any remuneration except for attending such meetings. Specific permission of the council is not required in this regard. ” 12

Partner in LLP engaged in commercial activity Q. Whether a practicing Chartered Accountant can

Partner in LLP engaged in commercial activity Q. Whether a practicing Chartered Accountant can be a partner or designated partner in a Limited Liability Partnership, which is not doing professional work, but is in the commercial activities? • A. “No, a practicing Chartered Accountant cannot be a partner or designated partner in a Limited Liability Partnership, which is not doing professional work, but is in the commercial activities. ” 13

Communication by Incoming Auditor Q. What is the intention behind communicating with the retiring

Communication by Incoming Auditor Q. What is the intention behind communicating with the retiring auditor ? • A. “ As per the Council directions under clause (8) of Part-I OF THE First Schedule to the Act, as appearing in Code of Ethics, 2009, 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 whethere any professional or other reasons why he should not accept the appointment. No, however the members in practice may advertise the services setting out the services provided by him or his firm, and particulars of his firm, through a ‘Write - Up’, subject to Advertisement Guidelines issued by the council. ” 14

Photo on visiting Card Q. Whether the members in practice can print their photograph

Photo on visiting Card Q. Whether the members in practice can print their photograph on their visiting cards ? • A. “ No, it is not permissible for the members in practice to print their photograph on their visiting cards. ” 15

All firms on one card Q. If a member is a partner in more

All firms on one card Q. 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, letterheads, stationery etc. ? • A. “ Yes, there is no violation under Clause (7) of Part I of the First Schedule to the Act. ” 16

Logo by CAs Q. Whether a members in practice/Firm of Chartered Accountants is permitted

Logo by CAs Q. Whether a members in practice/Firm of Chartered Accountants is permitted to use logo on letter heads, stationery, etc. ? • A. “ 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. ” 17

CA logo Q. Whether members of the Institute can use common CA logo ?

CA logo Q. Whether members of the Institute can use common CA logo ? • A. “ Yes, the common CA logo can be used by all members, whether in practice or not. Encapsulating the current beliefs, attitudes and values of the profession, the CA logo seeks to enhance the identity of the members. The logo consists of the letters ‘CA’ with a tick mark (upside down) inside a rounded rectangle with white background. ” 18

ICAI emblem / monogram by members Q. Can a Chartered Accountant in practice use/fix

ICAI emblem / monogram by members Q. 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 ? • A. “ No, in view of the Council directions under Clause (7) of Part I of the First Schedule to the Act, a Chartered Accountant in practice is not permitted to use/fix a monogram of the Institute on any column/wall located inside the office or on professional documents. ” 19

Values & Vision Q. Can a member/ Firm of Chartered Accountants print his/its vision

Values & Vision Q. Can a member/ Firm of Chartered Accountants print his/its vision and values behind the visiting cards ? • A. “ No, since such printing of vision and values behind the visiting cards may result in solicitation and violation of the provisions of clause (6) of Part - I of First Schedule to the Act. ” 20

Professional Attainment or Services Q. Can a Chartered Accountant in practice advertise his professional

Professional Attainment or Services Q. Can a Chartered Accountant in practice 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 ? A. “ No, as per Clause (7) of Part I of the First Schedule to the Act, a Chartered Accountant shall be deemed to be guilty of professional misconduct, if he advertises his professional attainments or services, or uses any designations or expressions other than Chartered Accountants 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 little 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. ” 21

Income Tax Consultant / GST Expert Q. Whether a Chartered Accountant in practice can

Income Tax Consultant / GST Expert Q. Whether a Chartered Accountant in practice can use expression like Income Tax Consultant, Cost Accountant, Company Secretary, Cost Consultant or a Management Consultant ? • A. “ No, Council directions under Clause (7) of Part I of the First Schedule to the Act as appearing in the Code of Ethics, 2009 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. ” 22

Whats app advertisment Q. Whether a members in practice can send the Whats. App

Whats app advertisment Q. Whether a members in practice can send the Whats. App messages to make people aware about his practice and services rendered ? • A. “ It is not permissible for a member in practice to send such Whats. App messages. ” 23

TV Radio Interview Q. Whether a member can appear on television/Radio or give lectures

TV Radio Interview Q. Whether a member can appear on television/Radio or give lectures at forums ? • A. “Yes, Council directions under clause (7) of Part-I of the First Schedule to the Act, as appearing in Code of Ethics, 2009, prescribes that a member may appear on television/Radio or give lectures at forums and may give his name and describe himself as Chartered Accountant. Special qualifications and specialized knowledge directly relevant to the subject matter of the programme may also be given. But no reference should be made, in the case of practicing member to the name and address or services of his firm. 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. ” 24

Silver / Diamond jubilee celebration of firm Q. Can a Chartered Accountants firm give

Silver / Diamond jubilee celebration of firm Q. Can a Chartered Accountants firm give advertisement in relation to Silver, Diamond, Platinum or Centenary celebration of the firm ? • A. “Yes, While considering the implications of Clause (6) & (7) of Part-I of the First Schedule to the Act in relation to such advertisements and also the need of interpersonal socialization/relationship of the members through such get-together occasions, the advertisement for Silver, Diamond, Platinum or Centenary celebration of the firms has been permitted to be published in any newspaper or in the newsletters. ” 25

Sponsorship or Prized in name of CA/Firm Q. Whether sponsorship or prizes can be

Sponsorship or Prized in name of CA/Firm Q. Whether sponsorship or prizes can be instituted in the name of Chartered Accountants or a firm of Chartered Accountants ? • A. “Yes, an individual Chartered Accountants 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 Act regarding advertisement and publicity is complied with. ” 26

Urban Clap / BNI ICAI Members in Practice are not permitted for listing themselves

Urban Clap / BNI ICAI Members in Practice are not permitted for listing themselves and their services with Online Application based service providers aggregators ! For details click on: http: //resource. cdn. icai. org 57 273 esb 231019. pdf 27

Certifying earnings/estimate. Forecast/CMA data Q. Whether the member in practice can permit his name

Certifying earnings/estimate. Forecast/CMA data Q. Whether the member in practice can permit his name or the name of his firm to be used in connection with an estimate of earnings contingent upon future in a manner which may lead to the belief that he vouches for the accuracy of the forecast? • • A. “No, as per clause (3) of part-I of Second Schedule to the Chartered Accountants Act, 1949, a member in practice will 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 earrings contingent upon future transaction in a manner which may lead to the belief that he vouches for the accuracy of the forecast. As per opinion of the Council, a Chartered Accountant can participate in the preparation of profile or financial forecasts and can review them, provided he indicates clearly in his report the sources of information, the basis of forecasts and also the major assumptions made in arriving at the forecast and so long as he does not vouch for the accuracy of the forecasts. The member has to comply with SAE 3400 while drafting the report for such engagements. ” 28

Forecast/CMA data & Unaudited FS 29

Forecast/CMA data & Unaudited FS 29

Five most important substantial changes in new Code ü Responding (NOCLAR) to Non-Compliance of

Five most important substantial changes in new Code ü Responding (NOCLAR) to Non-Compliance of Laws and Regulations ü (changes in) Provisions of Taxation Services to the Audit clients ü Prohibition on Management Responsibilities to the audit clients ü Restrictions on total Fees from a client ü Duty of Accountant in case of breach of Independence Standards 30

Five most important structural changes in new Code ü Independence requirements for Audit and

Five most important structural changes in new Code ü Independence requirements for Audit and Review Engagements and other Assurance engagements differentiated ü Independence sections Independence Standards” recharacterized as “International ü Change in the drafting conventions e. g. “should” to “shall” ü New pattern of structuring of sections – Requirements distinguished ü Increased clarity of responsibility for compliance - Firms, network firms, individuals within firms 31

Changes from IESBA Code Changes made fall under following broad heads: - üWhere domestic

Changes from IESBA Code Changes made fall under following broad heads: - üWhere domestic provision stricter than corresponding IESBA provision e. g. total bar on Accounting by the Statutory Auditor üWhere domestic legal requirement governs the issue e. g. “Network” would only refer to Network registered with ICAI ü Where a domestic requirement has no corresponding provisions in IESBA Code e. g. Firm rotation üLanguage changes – for example, “professional accountant in business” mentioned as “professional accountant in service” as per Chartered Accountants Act, 1949 32

Professional Accountant ü IESBA Code of Ethics uses the term “Professional Accountant” (hereinafter called

Professional Accountant ü IESBA Code of Ethics uses the term “Professional Accountant” (hereinafter called as “PA” on all slides) ü Same term adopted in 2009 and 2019 editions ICAI Code ü Defined as “An individual who is a member of the Institute of Chartered Accountants of India. ” ü In place of “professional accountants in business”, “professional accountant in service” used in ICAI Code of Ethics 33

Overview of the structure of existing Code of Ethics i. e 2009 Part-A [Based

Overview of the structure of existing Code of Ethics i. e 2009 Part-A [Based on IFAC/IESBA Code of Ethics, 2005 edition] Chapter 1 – General application of the Code Chapter 2 - Professional Accountants in public practice Chapter 3 – Professional Accountants in service Part –B [Based on domestic Indian provisions ] Chapter 4 – Accounting and Auditing standards Chapter 5 – The Chartered Accountants Act, 1949 Chapter 6 – Council Guidelines Chapter 7 – Self Regulatory Measures Recommended by the Council Appendices A – F

Overview of the structure of new Code of Ethics i. e 2019 Part 1

Overview of the structure of new Code of Ethics i. e 2019 Part 1 (Applicable to all Professional Accountants) Complying with the Code, Fundamental Principles and Conceptual Framework Part 2 Part 3 Professional Accountants in Business Professional Accountants in Public Practice International Independence Standards (Parts 4 A & 4 B) Part 4 A—Independence for Audits & Reviews (Sections 400 to 899) Part 4 B—Independence for Other Assurance Engagements (Sections 900 to 999) Glossary (All Professional Accountants)

What happens to Part –B of 2009 Code ? ü ICAI Code of Ethics

What happens to Part –B of 2009 Code ? ü ICAI Code of Ethics , 2019 is the revised version of Part-A of the existing Code of Ethics, 2009 ü Part-B of ICAI Code of Ethics, 2009 is presently under exposure draft stage. üRevised Part-B approved for exposure draft by present council in its meeting 386 th meeting held on 5 & 6 November, 2019 36

Compliance üPart-A of 2009 Code issued as a Guideline of the Council ü 2019

Compliance üPart-A of 2009 Code issued as a Guideline of the Council ü 2019 ICAI Code also issued as a Guideline of the Council ü Change in drafting conventions - “should” to “shall” üRequirements clearly demarcated from other provisions üNon-compliance of the Code deemed as professional misconduct 37

New pattern of structuring of each section Sections of the Revised Code is Restructured

New pattern of structuring of each section Sections of the Revised Code is Restructured as follows: - üIntroduction – subject matter addressed üRequirements - Designated by the Letter “R” – Includes the word “shall”. Contain general and specific obligations üApplication material – Designated by the letter “A” - Provides context, explanations , suggestions , or matters to consider, illustrations and other guidance 38

Responding to Non-Compliance with Laws and Regulations (NOCLAR) – 260 and 360 ü Refers

Responding to Non-Compliance with Laws and Regulations (NOCLAR) – 260 and 360 ü Refers to any act of omission or commission, committed by a client or employer contrary to laws or regulations. ü Such a situation can be a difficult and stressful one for the PA ü Accepting that PA has a prima facie ethical responsibility to not turn a blind eye to the matter, NOCLAR was introduced to guide him to deal with the situation considering how best to serve the public interest in these circumstances. 39

NOCLAR – Applicability üFor now, limited application of NOCLAR prescribed in ICAI Code of

NOCLAR – Applicability üFor now, limited application of NOCLAR prescribed in ICAI Code of Ethics, 2019 as against comprehensive application of NOCLAR to all assignments/employees in the IESBA Code. üApplicable only to listed entities in India ü Applicable to only audit assignments in India üIn case of PAs in service, applicable to employees of listed entities 40

NOCLAR – Scope of Laws and Regulations üLaws and regulations having nexus to PAs’

NOCLAR – Scope of Laws and Regulations üLaws and regulations having nexus to PAs’ professional training and expertise, i. e. : § Having direct effect on the determination of material amounts and disclosures in the financial statements § Compliance of which fundamental to the entity’s business § Compliance necessary to avoid material penalties. üExamples : - Fraud, corruption and bribery, Money laundering, terrorist financing and proceeds of crime, Securities markets and trading, etc. 41

NOCLAR – other salient points ü Following matters not in scope of NOCLAR: -

NOCLAR – other salient points ü Following matters not in scope of NOCLAR: - § Clearly inconsequential § Personal misconduct unrelated to the business activities § Non-compliance other than by the client or employer üPA to address NOCLAR only when, and if, he encounters the same in the course of providing a professional service to a client üAppropriate authority for disclosure will depend on the nature of the matter. E. g. SEBI for fraudulent financial reporting 42

Independence Standards ü 2009 Code contains Section 290 (“Independence – Assurance Engagements”) ü 2019

Independence Standards ü 2009 Code contains Section 290 (“Independence – Assurance Engagements”) ü 2019 edn. based on 2018 IESBA Code introduces Parts 4 A /4 B : § Part 4 A : Independence for Audit and Review Engagements § Part 4 B : Independence for Assurance Engagements other than Audit and Review ü 4 A and 4 B christened as “Independence Standards”, as against “Section” earlier. Above differentiation most bulky change between 2009 and 2019 editions 43

Breaches of the Code (400. 80 - 400. 89) ü Mechanism of self-correction in

Breaches of the Code (400. 80 - 400. 89) ü Mechanism of self-correction in the revised Code of Ethics ü Addresses steps to be taken in case of breach of Independence Standards i. e. Parts 4 A and 4 B. üIf a firm concludes that a breach of a requirement in this Part has occurred, the firm shall take prescribed steps therein, e. g. : - § End, suspend or eliminate the interest that created breach § Consider applicable legal or regulatory requirements and apply them 44

 Key Audit partner • The term “Key Audit Partner” does not find mention

Key Audit partner • The term “Key Audit Partner” does not find mention in ICAI Code of Ethics, 2009 • The term finds mention in ICAI Code of Ethics, 2019 as: “The Engagement partner, the individual responsible for the engagement quality control review, and other audit partners, if any, on the engagement team who make key decisions or judgments on significant matters with respect to the audit of the financial statements on which the firm will express an opinion. Depending upon the circumstances and the role of the individuals on the audit, “other audit partners” might include, for example, audit partners responsible for significant subsidiaries or divisions. ” 45

Firm rotation ü 2009 edition of Code of Ethics contains requirements relating to partner

Firm rotation ü 2009 edition of Code of Ethics contains requirements relating to partner rotation on the scale of 7/2 years. No Firm rotation requirements exist in this code üUnder the revised code, partner rotation shall co-exist along with Audit Firm rotation (wherever prescribed by a statute) ü 2019 Code incorporates Firm rotation requirements e. g. under Companies Act, 2013 vide section 550 for providing comprehensive guidance for members 46

Partner rotation (540) üUnder Companies Act, 2013, partner rotation is done on behest of

Partner rotation (540) üUnder Companies Act, 2013, partner rotation is done on behest of Company only üIn case Companies, where members of Company prescribe a shorter time on period , such shorter period shall prevail üSimilarly, partner rotation requirements prescribed by certain regulators such as RBI, certain NBFCs, etc. shall prevail 47

Changes in partner rotation 2009 2019 7 -year time-on No change 2 -years cooling-off

Changes in partner rotation 2009 2019 7 -year time-on No change 2 -years cooling-off 5 -years cooling-off: EP 3 -years cooling-off: EQCR 2 -years cooling-off: all other KAPs 48

Management Responsibilities (607 – 608) • Does not find mention in ICAI Code of

Management Responsibilities (607 – 608) • Does not find mention in ICAI Code of Ethics, 2009 • In 2019 edition, new section on ‘Management Responsibilities’. As per this, the firm shall not assume a management responsibility for an audit client • However, providing following to an audit client is permissible: (a) advice and recommendations to assist the management; and (b) administrative services 49

Non - assurance Services (600 / 950) • Existing prohibitions on provision of certain

Non - assurance Services (600 / 950) • Existing prohibitions on provision of certain types of Non assurance services to Audit clients retained : • e. g. in Preparing Accounting Records and Internal Audit Services , and partial prohibitions in valuation services, IT Systems Services , etc. • New prohibitions of recruiting services: - üEnhanced general description of recruiting services üClearer guidance on types of recruiting services prohibited üNew provisions to help avoid assuming management responsibilities when providing recruiting services–Similar to IT and internal audit ü Prohibition on providing certain recruiting services now applies to all entities –Searching for or seeking out candidates ü Undertaking reference checks of prospective candidates 50

Taxation services to the Audit clients • ICAI Code Ethics, 2009 : Taxation to

Taxation services to the Audit clients • ICAI Code Ethics, 2009 : Taxation to Audit client include compliance, planning, provision of formal taxation opinions and assistance in the resolution of tax disputes. Such assignments are generally not seen to create threats to independence • ICAI Code of Ethics, 2019 : Further guidance on Taxation matters provided. Generally, it states that providing tax services to an audit client might create a self review or advocacy threat…see next slide 51

Taxation services to the Audit clients in 2019 Code (604) • • Tax Return

Taxation services to the Audit clients in 2019 Code (604) • • Tax Return preparation – Usually no threat • Tax Planning /Other Tax Advisory Services - Might create self-review/advocacy threat- appropriate safeguards to be adopted, E. g. Using professionals who are not audit team members to perform the service; having an appropriate reviewer, not involved in providing the service, review the audit work, etc. Tax Calculations for the Purpose of Preparing Accounting Entries (that will subsequently be audited by the Firm) - Creates a self-review threat 52

Taxation services to the Audit clients in 2019 Code …contd. • Tax Services Involving

Taxation services to the Audit clients in 2019 Code …contd. • Tax Services Involving Valuations- Might perform only where the result of the valuation will not have a direct effect on the financial statements • Assistance in the Resolution of Tax Disputes - Might create a self- review or advocacy threat – appropriate safeguards to be adopted – Not to provide if involves acting as advocate for the audit client OR amounts involved are material to the financial statements on which the firm will express an opinion 53

Safeguards • In the ICAI Code of Ethics, 2019, safeguards to be considered for

Safeguards • In the ICAI Code of Ethics, 2019, safeguards to be considered for threats other than “clearly insignificant” (defined as ‘trivial or inconsequential’) • In the revised Code, the application of safeguards required to eliminate threats or to reduce them to ‘an acceptable level’ • “Acceptable level” defined as a level as the reasonable and informed third party knowing facts would likely conclude • Identified threats must be addressed in one of three ways: • • Eliminate circumstances creating the threats; Apply safeguards; or Decline or end the service New “step back” requirement for an overall conclusion 54

Close and Immediate Family üPart-A of 2009 Code had replaced the “close family” and

Close and Immediate Family üPart-A of 2009 Code had replaced the “close family” and “immediate family” used by IESBA Code with “relative” üIn 2009 Code, a person shall be deemed to be “relative” of a PA when related to him in the manner mentioned in Section 6 of Companies Act, 1956 üIn 2019 Code, with respect to companies, the definition of “relative” refer to Section 2(77) of the Companies Act, 2013. ü“Immediate family”/ “close family”, as appearing in IESBA Code is applicable in all other cases (i. e. other than Companies) 55

Public Interest Entity ü 2019 edition contains a new term “Public Interest Entity” (PIE)

Public Interest Entity ü 2019 edition contains a new term “Public Interest Entity” (PIE) ü Enhanced independence requirements for PIE in the new Code ü Definition of PIE , as given in IESBA Code of Ethics extended by inclusion of banks and insurance companies in the 2019 Code ü Firms encouraged to determine whether to treat an additional entities as PIE because of large number of stakeholders. 56

Restrictions on Activities During Cooling-off (w. r. t partner rotation – 540) • Continuing

Restrictions on Activities During Cooling-off (w. r. t partner rotation – 540) • Continuing prohibition on consulting with engagement team or client technical or industry-specific issues, transactions or events • Prohibition on leading or coordinating the professional services provided by the firm to the audit client, or overseeing the relationship of the firm with the audit client • Prohibition on undertaking any other role that would result in : - i. Having significant or frequent interaction with senior management; or ii. Exerting direct influence on the outcome of the audit engagement. 57

Inducements - Gifts and Hospitality (250, 340, 420 and 906) ICAI Code of Ethics,

Inducements - Gifts and Hospitality (250, 340, 420 and 906) ICAI Code of Ethics, 2009 ü Offer of gifts/hospitality ordinarily gives rise to threats ü Significance of such threats depend on the nature, value and intent behind the offer. ü Reasonable and Informed Third Party test – If its within normal course of business without the specific intent to influence decision making or to obtain information, may conclude that it is acceptable ü If threats other than significant, must take safeguards ü Total prohibition in case of Assurance clients except if inconsequential ICAI Code of Ethics, 2019 ü Inducements elaborated ü To first see whether prohibited by Laws and Regulations ü Offering also prohibited ü Reasonable and Informed Third Party test – To see whether it is with the intent to improperly influence the behaviour of the recipient or of another individual. ü Clarifications about appropriate boundaries for offering and accepting of inducements ü Extended to PAs in service also ü Total prohibition in case of Audit/Assurance clients to continue 58

Documentation ü 2009 Code requires Firms to document their conclusions regarding compliance with independence

Documentation ü 2009 Code requires Firms to document their conclusions regarding compliance with independence requirements (290. 27) ü In the 2019 Code, the requirements of Documentation given in greater detail ü NOCLAR requires all steps in responding with NOCLAR to be documented 59

Fees – Relative Size üIn the revised Code, where for two consecutive years, total

Fees – Relative Size üIn the revised Code, where for two consecutive years, total gross annual professional fees from the audit client and its related entities represent more than 15% of total fees, the firm shall disclose to Those charged with Governance (TCWG) üNo such ceiling on total fees of the Firm would be applicable where such fees does not exceed Rs. 5 lakhs üNo such ceiling on the total fees would be applicable in the case of audit of government Companies, public undertakings, nationalized banks, public financial institutions or Government appointments 60

Criteria of Indebtedness ü Chapter X of Council General Guidelines, 2008 prescribes limit of

Criteria of Indebtedness ü Chapter X of Council General Guidelines, 2008 prescribes limit of indebtedness as the one fixed in a statute, and in other cases exceeding Rs. 10, 000/- ü No concept of materiality of Loans and Guarantee in earlier IESBA Code editions ü Provisions of Loans and Guarantees in Part-A of ICAI Code of Ethics, 2009 are subject to limit of indebtedness in Chapter X of Council General Guidelines, 2008 ü IESBA Code of Ethics, 2018 brought concept of materiality of Loans and Guarantees. Whether a loan or guarantee is material would depend on combined net worth of the individual and his immediate family members. ü Concept adopted in ICAI Code of Ethics, 2019 ü The Chapter X of Council General Guidelines , 2008 proposed to be repealed with revision of Part-B of Code of Ethics 61

Changes in Professional Appointment (320) üNew Code has guidance on client acceptance and changes

Changes in Professional Appointment (320) üNew Code has guidance on client acceptance and changes in professional appointment üICAI “Know Your Client” (KYC) Guidelines incorporated üIn case of change , if unable to communicate with predecessor accountant, proposed accountant to take steps to obtain information about any possible threats üCommunication requirements in Audit and Non-Audit Assignments üDuty of predecessor to respond to communication. He shall: § Comply with relevant laws governing the request; and § Provide any unambiguously. information honestly and 62

Contingent Fees (330, 410. 9, 905. 6) ü Code of Ethics, 2009 (Para 290.

Contingent Fees (330, 410. 9, 905. 6) ü Code of Ethics, 2009 (Para 290. 197) states inter alia that the fees contingent upon the findings , or results of such work not allowed except in cases permitted by council under Regulation 192 ü Code of Ethics, 2019 - incudes description of contingent fees , and the fact of prohibition of contingent fees ü Regulation 192 reproduced – “Rendering Non-assurance services to non-audit clients” allowed under 192(h) , wherein contingent fees may be charged 63

Applicability of provisions for members in service to members in practice (R 120. 4,

Applicability of provisions for members in service to members in practice (R 120. 4, 200. 4, R 300. 5) üNo corresponding provisions in ICAI Code of Ethics, 2009 üRevised Code contains guidance for members in practice that relevant provisions on members in service in Part 2 will apply to them while performing activities pursuant to relationship with the firm whether as contractors, employees or owners of the firm üWould apply for example to an employee of a Firm , who is holding certificate of practice 64

Preparation and Presentation of Information (220) üComprehensive provisions addressing members in service responsibilities when

Preparation and Presentation of Information (220) üComprehensive provisions addressing members in service responsibilities when preparing or presenting information üProhibition on exercising discretion when preparing or presenting information with intent to mislead or inappropriately influence contractual or regulatory outcomes üEnhanced guidance to assist members in disassociating from misleading information 65

PART - B REVISED PARTS TO BE CALLED VOLUMES ü CODE OF ETHICS BASED

PART - B REVISED PARTS TO BE CALLED VOLUMES ü CODE OF ETHICS BASED ON IESBA CODE (PART-A); AND CODE OF ETHICS BASED ON DOMESTIC PROVISIONS (PART-B) TO BE SEPARATE PUBLICATIONS (VOLUME-I AND II RESPECTIVELY) ü ü VOLUME-II WILL BE UPDATED WITH THE FOLLOWING : - ü BOTH VOLUMES TO BE SIMULTANEOUSLY APPLICABLE FROM 1. 4. 2020 COUNCIL DECISIONS FROM 2009 TO 2019 COMMITTEES DECISIONS FROM 2009 TO 2019 RELEVANT TO CODE DISCIPLINARY CASE LAWS FROM 2009 TILL 2019 WITH COMMENTARY TO SECTIONS AND CLAUSES TO TWO SCHEDULES TO BE INCORPORATED AS “CASE LAWS REFERENCER” 66

Administrative Services ü Does Not Find Mention In ICAI Code Of Ethics, 2009 ü

Administrative Services ü Does Not Find Mention In ICAI Code Of Ethics, 2009 ü Newly Introduced In Code Of Ethics, 2019 - Section 602 (Page 205) ü Administrative Services Involve Assisting Clients With Their Routine Or Mechanical Tasks Within The Normal Course Of Operations, Requiring Little To No Professional Judgment And Are Clerical In Nature E. G. Word Processing Services, Preparing Administrative And Statutory Forms For Client Approval, Submitting Such Forms ü No Enabling Provisions In The Existing Part-b Of Code Of Ethics, 2009 W. R. T Member In Practice ü In The Same Line Council Has Already Recommended Definition Of Management Services Under Section 144 Of The Companies Act, 2013 Pending To Be Notified By The Mca üProposed : Administrative Services May Be Incorporated In Guidelines For Management Consultancy And Other Services Under Section 2(2) (Iv) Of Ca Act 67

Valuation Services – Guidelines for MCS Existing (xv) Valuation of shares and business and

Valuation Services – Guidelines for MCS Existing (xv) Valuation of shares and business and advice regarding amalgamation, merger and acquisition. Proposed (xv) Valuation of shares and business (subject to this, members may act as Registered valuer under the Companies Act, 2013 read with The Companies (Registered Valuers and Valuation) Rules, 2017); and advice regarding amalgamation, merger and acquisition. 68

Obligation(s) on Previous Auditor Existing Code – Commentary under Clause (8) communication – there

Obligation(s) on Previous Auditor Existing Code – Commentary under Clause (8) communication – there are obligations on Incoming auditor – No corresponding obligation on previous auditor – he can choose to remain silent (page 165, COE, 2009) Proposed New incorporations in Clause (8) commentary pursuant to 2019 code 1. 2. In line with Para 320. 8 of the ICAI Code of Ethics, 2019, the Incoming auditor shall request retiring auditor to provide known information about client . The retiring auditor shall provide the information honestly and unambiguously. As per Para 360. 22 of 2019 Code, the retiring auditor shall, on request by the Incoming auditor pursuant to paragraph R 320. 8, provide all relevant facts and other information concerning the identified or suspected non-compliances 69

Permissible modes of Communication Existing 1. 2. Communication required by Clause (8) of Part-I

Permissible modes of Communication Existing 1. 2. Communication required by Clause (8) of Part-I of First schedule 3. As per opinion of the Council, Communication by a letter sent “Registered A. D. ” or by hand against written acknowledgement are permissible proofs of delivery (page 166, COE, 2009) This is substantiated by showing proof of delivery of communication Proposed more Options as valid proof(s) of Communication : - 1. In view of UDIN being mandatory, communication through UDIN portal be added to above permissible modes of delivery 2. Acknowledgement received from Previous Auditor’s Registered email id. 70

Circumstances of Communication S. New circumstance No. Existing Provision Proposed provision 1. Registered office

Circumstances of Communication S. New circumstance No. Existing Provision Proposed provision 1. Registered office of previous Auditor is locked and no communication with him. Deadlock exists, since Registered A. D. and Manual Acknowledgement are only two acceptable modes of delivery The Postal Department has rule for two trials for delivery of a Registered AD Letter, and therefore, once “Locked” written on the AD should be reckoned as proof of delivery. 2. Previous Auditor Bank details not available , so NEFT not possible – Can not be traced to send him the cheque as office is also closed. The Incoming auditor cannot accept the audit assignment if undisputed audit fees of previous Auditor is pending The client may purchase Demand Draft of the amount equivalent to undisputed Audit Fees of Previous Auditor. The Incoming Auditor can accept the Assignment after verifying the same. The incidental expenses of the Auditor (for doing Audit) should also be paid 3. Communication received back with remarks “No such office exists at this address” (Address is registered with ICAI) Code of Ethics is silent The letter will be deemed to be delivered, unless the retiring auditor proves that it was not really served and that he was not responsible for such non-service” (based on decision of Hon’ble Supreme Court K. Bhaskaran vs Sankaran Vaidhyan Balan And Another , 29 th September, 1999 4. Communication for Non- Audit Services For certification, it would be healthy practice to communicate The line mentioned in left column be repealed 71

Clause (1) of Second Schedule - Confidentiality Liability towards earlier client Existing : “The

Clause (1) of Second Schedule - Confidentiality Liability towards earlier client Existing : “The Accountant’s duty not to disclose information after the completion of his assignment” (page 230, COE, 2009) Proposed: “However, nothing in this Clause would bar the previous accountant to inform such client affairs to the new accountant, as he may deem fit. ” (in view of the conditions in the revised Code and NOCLAR & to comply other Regulatory and Statutory requirements) 72

Clause (1) of Second Schedule - Confidentiality Sharing of Working Papers: Not required to

Clause (1) of Second Schedule - Confidentiality Sharing of Working Papers: Not required to provide access to working papers to Client/other Auditors. However at his discretion, can provide access of extracts of working papers to clients. Sharing of information to Regulators is permissible with consent of Client. Proposed: “However, the auditor would not be exempt from sharing the working papers if any law/regulation specifically requires auditor to share his working papers. ” 73

Statutory Auditor cannot be Internal Auditor [Clause 4 of Part-I of Second Schedule] The

Statutory Auditor cannot be Internal Auditor [Clause 4 of Part-I of Second Schedule] The existing Provision : • A statutory auditor of a Company cannot be its internal auditor, as it will not be possible for him to give independent and objective report issued under sub-Section 4 A of Section 227 of the Companies Act read with the Companies (Auditor’s Report) Order, 2003. (page 243, COE, 2009) • Above provision not appearing in Companies Act, 2013, though prohibition appears in its Section 144. Proposed: • “Statutory Auditor cannot be the Internal Auditor of the same entity”- be incorporated irrespective of the reference of the Companies Act 74

Chapter IV-Council General Guidelines, 2008 “Opinion on Financial Statements when there is substantial Interest”

Chapter IV-Council General Guidelines, 2008 “Opinion on Financial Statements when there is substantial Interest” bars Auditing of financial statements wherein relatives have substantial interest [As per AS-18 i. e spouse, son, daughter, brother, sister, father and mother ] Clause (4) of Part-I of Second Schedule bars Audit where there is substantial interest of self/partner [“substantial interest” as per Appendix (9) Relative-Husband, wife, brother or sister or any lineal ascendant or descendant of that member] Proposal Chapter IV of CGG proposed to be repealed due to duplicity. Proposed to change definition of “Relative” as defined under Companies Act. 75

Chapter VII- Council General Guidelines, 2008 Appointment of an Auditor in case of non-payment

Chapter VII- Council General Guidelines, 2008 Appointment of an Auditor in case of non-payment of undisputed fees • Existing provision - “Sick Unit” shall mean where the net worth is Negative • On the basis of views of Council members in council at its 379 th Meeting held in December, 2018 the definition of sick unit be further elaborated from the Sick Industrial Companies (Special Provisions) Act, 1985 notwithstanding that the said Act has been repealed. Proposed new Definition of “Sick Company”: “A Company registered for not less than five years, which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth. ” 76

 Chapter VIII - Council General Guidelines, 2008 This chapter gives Audit Limit as

Chapter VIII - Council General Guidelines, 2008 This chapter gives Audit Limit as per Companies Act, 1956 : - a) 30 audits in respect of all Companies b)Public Com. each of which has a paid-up share capital of Rs. 25 lacs or more, shall not exceed 10. Companies Act, 2013 Section 141 , read with Notification of MCA dt. 5. 6. 2015 lays down Audit limit to 20 companies , with following exceptions: - • a) OPC; b) Dormant companies, c) Small Companies and Private Co. having paid-up share capital less than 100 crores Proposed To retain the chapter , such that there is maximum limit of 30 audits , with the exceptions of OPC, Dormant Companies and Small Companies. 77

Chapter-X Council General Guidelines, 2008 Chapter X Appointment of an Auditor- Indebtedness • Indebtedness

Chapter-X Council General Guidelines, 2008 Chapter X Appointment of an Auditor- Indebtedness • Indebtedness limits fixed amount not exceeding Rs. 10, 000/- • The Council at its 379 th Meeting held on 17 th - 18 th December, 2018 noted that IESBA Code of Ethics, 2018 para 511. 3 A 1 introduces the concept of materiality for determining indebtedness : - • 511. 3 A 1; In determining whether such a loan or guarantee is material to an individual, the combined net worth of the individual and the individual’s immediate family members may be taken into account. • In the revised Code, For Corporates as per Companies Act and for non. Corporates as mentioned in IESBA has been adopted Proposed To have limit of indebtedness as prescribed in the statute , or Rs. 1 lakh (instead of Rs. 10, 000/-) 78

 7. 6 Ceiling of Fees – Self Regulatory measures • Existing chapter in

7. 6 Ceiling of Fees – Self Regulatory measures • Existing chapter in Self Regulatory Measures has 40% limit on Gross Annual Fees from one or more clients under the same management. • Exemptions: - (A) less than two lakhs Annual Fees ; (B) Audit of Govt Cos. (C) PSUs (D) Nationalized Banks ( E) Public Financial Institutions ; or (F) where appointments are made by Government • R 410. 4 of ICAI Code of Ethics, 2019 (as modified in IESBA Code) prescribes that more than 15% Fees from a client consecutively for two years, would require disclosure to TCWG. Exceptions same as in Self Regulatory measures. Further, Annual Fees exempted is Rs. 5 lakhs Proposed • It is recommended that Chapter 7. 6 of Self Regulatory Measures be repealed as new provision has already come. 79

Insurance Financial Advisory Services • “Insurance Financial Advisory Services under the IRDA, 1999, including

Insurance Financial Advisory Services • “Insurance Financial Advisory Services under the IRDA, 1999, including Insurance Brokerage” is a MCS service at s. no. xxvi of MCS Guidelines. • However, it was clarified through Announcement by ICAI in June, 2005 that as on date the members in practice are not permitted to render these services as the conditions to be complied with by the members to be eligible to render the aforesaid services are yet to be prescribed by ICAI • These conditions haven't been issued by Committee on Banking, Insurance & Pension and Financial Markets till date. Proposed The above entry be continued, and requirement of any conditions as stipulated in 2005 announcement be dispensed with 80

MDP & Partnership with Non-CAs • Clause (4) of Part-I of First Schedule bars

MDP & Partnership with Non-CAs • Clause (4) of Part-I of First Schedule bars partnership of a member in practice with a Non-member, except with professionals permitted by Council • • Council has accordingly allowed certain Professionals , vide Regulation 53 B • Council at its 375 th Meeting held on 24 th - 26 th May, 2018 while agreeing with recommendations of ESB , noted that the existing directions of the Council in relation to allowing a member in practice to be Director Simplicitor in a company (simultaneously with Directors who are non CAs or non-practicing CA), cannot be compared with the partner/ designated partner in a non-professional LLP. Therefore, as of now, a member in practice cannot become a partner/ designated partner (non-working and non-remuneration drawing) in an LLP not carrying out professional work. However, in the absence of other Regulators are not on same page, members cannot enter into such partnerships Proposed • To incorporate the above in commentary to Clause (4) 81

Definition of “Director Simplicitor” • Existing definition – “Ordinary/simple Director” (page 213, COE, 2009)

Definition of “Director Simplicitor” • Existing definition – “Ordinary/simple Director” (page 213, COE, 2009) • As per clarification in 2009 -10 , pursuant to directions of the Council, “Director Simplicitor” means an ordinary/simple Director, who is not a Managing Director or Whole time Director and is required only in the Board Meetings of the company and not paid any remuneration except for attending such meetings. 82

Regulation 192 New exemptions in Regulation 192 after amendment • Contains new exemptions (d)

Regulation 192 New exemptions in Regulation 192 after amendment • Contains new exemptions (d) to (h) of Regulation 192 [from Clause (10) of Part-I of First Schedule to the CA Act, 1949], wherein contingent Fees may be charged • “(h) any other service or audit as may be decided by the Council” – its is proposed that the services decided by Council under this entry should be part of Regulation itself e. g. acting as Insolvency professional As agreed by Council at its 379 th Meeting held in December, 2018, exemption of charging of Contingent fees for “Non-Assurance Services to Non-Audit Clients” – ESB has approved Proposed Services mentioned under Regulations 192(h) should be mentioned under the Code of Ethics 83

Situations of conflict under Clause(4) of Second Schedule Existing pattern of situations conflict of

Situations of conflict under Clause(4) of Second Schedule Existing pattern of situations conflict of interest 1. Where the member, his firm or his partner or his relative has substantial interest in the business or enterprise (i) An enterprise/concern of which a member is either an owner or a partner (ii) Where the partner or relative of a member has substantial interest 2. Where the member or his partner or relative is a director or in the employment of an officer or an employee of the Company. Proposed pattern of situations conflict of interest (i) (iii) (iv) (vi) Member is holding a position in the Company as Director/Officer/Employee Member is not holding a position in the Company, but holding any security or interest Where the partner of the member is an officer or employee of a company Where the partner of the member is holding any security or interest in the Company Relative of member is a director employee or KMP in the Company Where the relative of the member is holding any security or interest in the 84 Company

Inclusions in Generally accepted Audit procedure üClause (9) of part-I of Second schedule mandates

Inclusions in Generally accepted Audit procedure üClause (9) of part-I of Second schedule mandates compliance with Generally Accepted Audit Procedure (GAAP) ü“GAAP” are various pronouncements of Institute issued from time to time üProposed to include following in the commentary üUDIN üRequirement of mentioning the FRN üPeer Review Certification in case of Audit of listed entities 85

Council General Guidelines, 2008 üChapter VI Tax Audit assignments under Section 44 AB of

Council General Guidelines, 2008 üChapter VI Tax Audit assignments under Section 44 AB of the Income- tax Act üExempted Audits : - 44 AD, 44 ADA and 44 AE and 44 AF (368 th Council meeting in 2017) üTax audit Limits increased from 45 to 60 (331 st meeting held in Feb, 2014 ) ü “Financial year” to “Assessment Year” (Announcement dt. 2. 7. 2014) ü One partner signing audits on behalf of other partners (2013 Announcement) Note : - In view of CBDT Press Release dt. 20 th June, 2016, assesses having turn over exceeding Rs. 1 crore but not exceeding Rs. 2 crores, and also not opting for presumptive taxation u/s 44 AD will be required to get their book of accounts audited u/s 44 AB(a) of the Income Tax Act, 1961 86

Council General Guidelines, 2008 Chapter III Appointment of a Member as Cost auditor •

Council General Guidelines, 2008 Chapter III Appointment of a Member as Cost auditor • The Companies Act, 2013 has Section 148 as the equivalent Section of 233 B of Companies Act, 1956 , which has dropped the erstwhile provision. Now only cost Accounants can conduct Cost Audits. • Further, the restriction of stator auditor not being the cost auditor is still coming. • Hence, this chapter has become infructuous. -------------------------------------------------Chapter XII – Minimum fees in respect of Audit Repealed by 306 th Meeting held from 7 th to 8 th June, 2011 Repealed by 87

7. 7 Recommended scale of Fees chargeable for the work done by the Members

7. 7 Recommended scale of Fees chargeable for the work done by the Members of the Institute – Self Regulatory measures • Proposed to be repealed since Minimum Recommended Scale of Fees has been brought by Committee for Capacity Building, which is revised from time to time by it 88

Unjustified removal of auditors • Proposed changes: (a) online transfer of Fees of Rs.

Unjustified removal of auditors • Proposed changes: (a) online transfer of Fees of Rs. 1000/- be allowed for filing a complaint of unjustified removal of auditors, and (b) whether complaint can also be filed online with Ethical Standards Board, with no requirement of filing papers in hard form 89

 Appendices – comparative position Appendix Old New A Appendix No. (11) of the

Appendices – comparative position Appendix Old New A Appendix No. (11) of the Institute’s publication, viz. , List of auditing Standards applicable of the Chartered Accountants Act, 1949 date B Announcement regarding withdrawal of Appendix no. (6) of the Institute’s publication viz. the Chartered Accountants Act, 1949 as published at page 53 of February 1998 issue of the Journal. List of Accounting Standards effective as on April 01, 2019 C Announcement regarding withdrawal of Appendix no. (5) of the Institute’s publication viz. the Chartered Accountants Act, 1949 as published at page 93 to 96 of May 1998 issue of the Journal. Guidelines for Corporate Form of Practice D Guidelines of the Council in the context of use of designation etc. and manner of Printing of Letter -heads and visiting cards E Ethical Standards Board (ESB) F Appendix (9) to CA Regulations 1988 G Advertisement Guidelines 90

Disciplinary cases in the Code ü Repetitive cases on same point deleted ü New

Disciplinary cases in the Code ü Repetitive cases on same point deleted ü New Disciplinary Cases from 2008 to 1 st April, 2019 updated ü Sub-titles to cases for quick reference 91

Advertisement - Existing position üClauses (6) and (7) of Part-I of First schedule to

Advertisement - Existing position üClauses (6) and (7) of Part-I of First schedule to CA Act generally bar advertisement and solicitation ü As per proviso to Clause (7) , members may advertise the services through “write-up” in accordance with Guidelines issued by Council from time to time ü In accordance thereof, Council has issued Advertisement Guidelines dt. 14. 5. 2008 ü Committee of Experts of MCA dt. 25. 10. 2018 pursuant to Hon’ble Supreme Court decision in ICAI vs. Sukumar recommends that CAs and CA firms should be permitted to advertise subject to certain conditions 92

Advertisement – International position • IESBA • • Australia Accounting Professional and Ethical Standards

Advertisement – International position • IESBA • • Australia Accounting Professional and Ethical Standards Board (APESB) in Australia allows solicitation of work by public accountants through advertisement, but requires conformity with two necessary conditions. First, there should be no exaggerated claims for services offered. Second, such practices should not amount to disparaging references or unsubstantiated comparison to the work of others. Further, it provides that in the event of any doubt, the member is required to consult the professional body. USA No restriction on solicitation of work through advertisement and promotion, subject to certain conditions. The code laid down by AICPA states that a member shall not solicit work by advertising or other forms of solicitation in a manner that is false, misleading, or deceptive. Further, it prohibits member from promoting or marketing abilities to provide professional services or make any claim which is false, misleading or deceptive. The code also clarifies that: promotional efforts would be false, misleading, or deceptive if they contain any claim or representation that would likely cause a reasonable person to be misled or deceived. • • shall be honest and truthful and shall not make: (a) Exaggerated claims for the services offered by, or the qualifications or experience of, the accountant; or (b) Disparaging references or unsubstantiated comparisons to the work of others. (c) Any direct or indirect measures to advertise any professional/other facts which are in violation of Advertisement Guidelines issued by the Council of the Institute from time to time. 93

Advertisement – Commentary in Clause (6) üCA Advertisement and Notes in the press Existing

Advertisement – Commentary in Clause (6) üCA Advertisement and Notes in the press Existing : Members exempted from securing work from other members , advertise changes in partnerships and issuing classified in CA Journal for professional work or employment Proposed : No change ü Application for empanelment for allotment of audit and other professional work Existing : Can apply for empanelment if panel within knowledge. Cannot make roving enquiries Proposed : No change 94

Advertisement – Commentary in Clause (6) ü Publication of Name or Firm Name by

Advertisement – Commentary in Clause (6) ü Publication of Name or Firm Name by Chartered Accountants in the Telephone or other Directories published by Telephone Authorities or Private Bodies Existing : CA Firm can have entries in directories , subject to these Guidelines. Include vide electronic media like Internet Proposed : Not permissible for members to list themselves with Application based service provider Aggregators 95

Advertisement – Commentary in Clause (6) Existing üProviso to Clause (6) of Part-I of

Advertisement – Commentary in Clause (6) Existing üProviso to Clause (6) of Part-I of First schedule to CA Act permits members to respond to Tenders ü(d) “It is not prohibited to the members to respond to tenders and requests made by users of professional work” (page 138, COE, 2009) Proposed to add ü To incorporate Council Guideline on Tenders dt. 7 th April, 2016 No 1 CA(7)/03/2016, and FAQs on Tenders ü Further changes are proposed: (a) Minimum Fees on tenders should commensurate with size, value, volume, manpower requirement and nature of work (b) Can accept also if only CAs are invited even though can be taken up Non-CAs 96

Advertisement – Commentary in Clause (6) (e) Publication of Books or Articles Existing :

Advertisement – Commentary in Clause (6) (e) Publication of Books or Articles Existing : Not permitted to indicate in a book or an article, published by him, the association with any firm of Chartered Accountants. Proposed : No change (f) Issue of greeting cards or invitations Existing : “CA” as well as name of Firm may be mentioned in 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 Proposed : No change 97

Advertisement – Commentary in clause (6) (g)Sponsoring Activities • • Existing : Code of

Advertisement – Commentary in clause (6) (g)Sponsoring Activities • • Existing : Code of Ethics is silent Proposed : Not permissible for a CA Firm to sponsor a Conference. However, an individual member can be a knowledge partner to such conference [As per ESB decision at its 139 th Meeting held on 26. 12. 2017. ] (h) Advertisement of Teaching/coaching activities by members Existing : Code of Ethics is silent Proposed : Advertisement of Coaching /teaching activities not permissible (Announcement dt. 18. 5. 2017) 98

Advertisement – Commentary in Clause (6) (i) Sharing Firm Profile with prospective Client •

Advertisement – Commentary in Clause (6) (i) Sharing Firm Profile with prospective Client • • Existing: Code of Ethics is silent Proposed : It is not permitted to share Firm profile with a prospective Client unless it is in response to a proposed client’s specific query, and otherwise not prohibited to be used by the client [As decided by ESB at its 132 nd Meeting held on 24 th June, 2016] (j) TV/Movie Credits • • Existing : Code of Ethics is silent • [131 st Meeting of ESB held on 27. 4. 2016] Proposed : Member’s / firm’s name allowed in TV/Movie Credits , provided not mentioned differently from other persons 99

Advertisement – Commentary in Clause (6) (j) Soliciting professional work by making roving enquiries

Advertisement – Commentary in Clause (6) (j) Soliciting professional work by making roving enquiries • Existing : It is not permissible for a member to address letters or circulars to persons who are likely to require services of a Chartered Accountant • Proposed : No change (k) Seeking work from professional colleagues Existing : issue of an advertisement or a circular by a Chartered Accountant, seeking work from professional colleagues on any basis whatsoever except as provided above would be in violation of this Clause. Proposed : No change 100

Advertisement – Commentary in Clause (6) (l) Scope of representation which an auditor is

Advertisement – Commentary in Clause (6) (l) Scope of representation which an auditor is entitled to make under Section 225(3) of the Companies Act, 1956) • Existing : The right to make representation does not mean that an auditor has any prescriptive right or a lien to an audit. The wording of his representation should be such that, apart from the opportunity not being abused to secure needless publicity, • Proposed : Change to Section 140(4) of the Companies Act, 2013 (m) Acceptance of original professional work by a member emanating from the client introduced to him by another member Existing : member should not accept the original professional work emanating from a client introduced to him by another member Proposed : No change 101

Advertisement – Commentary in Clause (6) (n) Giving public interviews Existing : While giving

Advertisement – Commentary in Clause (6) (n) Giving public interviews Existing : While giving any interview or otherwise furnishing details about themselves or their firms in public interviews or to the press or at any forum, the members should ensure that, it should not result in publicity Proposed : Any detail which is given, must, in addition to meeting the above requirements, be given only on a specific question being posed, and of factual nature only (o) Members and/or firms who publish advertisements under Box numbers Existing : Members/Firms are prohibited from inserting advertisements for soliciting clients or professional work under box numbers in the newspapers Proposed : No change 102

Advertisement – Commentary in clause (7) ISO Certification of CA Firms • Existing provision

Advertisement – Commentary in clause (7) ISO Certification of CA Firms • Existing provision - (1) Not allowed in Advertisement Guidelines (2) ESB at its 83 rd Meeting 02. 04. 2003 was of the view that there is no bar for ISO 9001: 2000 certification. However, cannot use the expression like `ISO certified’ on his professional documents, etc. as the current provisions of the CA Act do not permit using any designation/expression other than that of a CA in documents Proposed – Should be allowed to be mentioned in an advertisement. Prohibition on visiting cards and Letter heads to continue 103

Advertisement – Commentary in clause (7) Affiliation with Network üExisting provision – 1. Not

Advertisement – Commentary in clause (7) Affiliation with Network üExisting provision – 1. Not permitted in Advertisement Guidelines 2. ICAI Network Guidelines say that Networks may advertise in accordance with ICAI Advertisement guidelines ü Proposed - Affiliation with a Network registered with ICAI may be mentioned in an advertisement Photograph üExisting provision - Passport size photo of proprietors /partners permissible üProposed – Passport size style to be the criterion 104

Advertisement – Commentary in clause (7) - On visiting New proposals cards üProhibitions The

Advertisement – Commentary in clause (7) - On visiting New proposals cards üProhibitions The members of the Institute who are also Directors in Companies, members of Political parties or Chartered Accountants Cells in the political parties , holding different positions in clubs or other organizations are not permitted to mention these positions as they would be violative of the provisions of Section 7 of the Act üFor Council / Regional council members - Last highest position held in ICAI (as an elected representative) on his visiting card , provided it is without ICAI emblem and the visiting card is of individual member only, and not of CA Firm , wherein he may be the partner (382 nd (Adjourned) meeting on 15 th and 16 th April, 2019 ) 105

Advertisement – Commentary in clause (7) Size/illumination of Sign Board Existing provision (page 157,

Advertisement – Commentary in clause (7) Size/illumination of Sign Board Existing provision (page 157, COE, 2009) üWith regard to the size of sign board for his office that a member can put up, it is a matter in which the members should exercise their own discretion and good taste. Use of glow signs or neon lights on large-sized boards as is used by traders or shop-keepers would not be proper. üFurther proposed to be added : - While keeping in mind the appropriate visibility and illumination of the sign Board. 106

Advertisement – Commentary in clause (7) Logo Firm Logo Existing provision üNot allowed Proposed

Advertisement – Commentary in clause (7) Logo Firm Logo Existing provision üNot allowed Proposed üTo continue with the prohibition CA Logo Existing Provision üLogo Guidelines not appearing in Code of Ethics Proposed üCA Logo Guidelines to be mentioned in code of Ethics 107

Advertisement – Commentary in clause (7) – BNI Networks other than those registered with

Advertisement – Commentary in clause (7) – BNI Networks other than those registered with ICAI e. g. BNI Existing : Networks allowed only via registration with ICAI Proposed : Such Networks are not to be permitted 108

Comprehensive Advertisement Guidelines Proposed üNo amendment of Clauses (6) and (7) required üAs per

Comprehensive Advertisement Guidelines Proposed üNo amendment of Clauses (6) and (7) required üAs per Advertisement Guidelines (page 309, COE, 2009) , professional services can be advertised through “write up” , which means setting out services and any writing or display , circulated or published by way of print or electronic mode or otherwise including in newspapers, journals, magazines and websites in accordance with the Guidelines üAdvertisement Guidelines need to be made comprehensive and include CA Firm websites (presently governed vide separate Website Guidelines) and Social media 109

Comprehensive Advertisement Guidelines üPresently website Guidelines have been separately issued. Proposed that Website Guidelines

Comprehensive Advertisement Guidelines üPresently website Guidelines have been separately issued. Proposed that Website Guidelines to also form part of Advertisement guidelines üWould result in same information and restrictions made permissible on CA Firm website as to any other website üFollowing additional features would apply to CA Firm website only : ü (a) Professional updates , articles and bulletin boards ü (b) Client Information if Regulator requires (as per decision of 3456 th Meeting of Council held on 14 th – 16 th August, 2015) ü (c) Online advice to clients ü (d) Chat rooms ü (e) Links of other organizations 110

Comprehensive Advertisement Guidelines • • Social Networking substantially grew and developed after 2008 •

Comprehensive Advertisement Guidelines • • Social Networking substantially grew and developed after 2008 • However, for the purpose of clarity, proposed to add “social Sites ” in the definition of write-up • Online uploading of videos by members in practice on professional matters is not permissible. • Educational videos can be uploaded by a member in practice only if no reference is made to the CA Firm wherein the member may be a partner/proprietor. Existing definition of “write-up” broad enough to cover Social Networking and Micro blogging sites [ “………issued, circulated or published by way of print or electronic mode or otherwise including in newspapers, journals, magazines and websites (in Push as well in Pull mode) in accordance with the Guidelines. ] 111

Where is the Captain………

Where is the Captain………

COME TOGETHER

COME TOGETHER

Thanking you 114

Thanking you 114