1. Whether a Chartered Accountant who is appointed as tax auditor for conducting special audit under the Income-Tax Act 1961, by the Income Tax Authorities is required to communicate with the statutory auditor?
A. Yes, Council direction mentioned in Paragraph 2.14.1.8(xiii) under Clause (8) of Part-I of First Schedule to the Chartered Accountants Act, 1949, appearing in Volume II of the Code of Ethics, prescribes that it would be a healthy practice if a tax auditor appointed for conducting special audit under the Income- Tax Act 1961, communicates with the member who has conducted the statutory/tax audit.
2. Whether communication with the previous auditor is necessary in case of appointment as statutory auditor by nationalized and other Banks?
A. Yes, Clause (8) of Part-I of the First Schedule to the Chartered Accountants Act, 1949 is equally applicable in the case of nationalized and other Banks and also to Government agencies.
3. 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 internal audits etc.?
A. Yes, the requirement for communicating with the previous auditor would apply to all types of audits. The Council has laid down detailed guidelines in this regard and the same are appearing in Paragraphs 2.14.1.8(xiv) to 2.14.1.8(xvii) under Clause (8) of Part-I of First Schedule to the Chartered Accountants Act, 1949, appearing in Volume II of the Code of Ethics.
4. Whether a Chartered Accountant will be deemed to be guilty of professional misconduct if he accepts his appointment as an auditor immediately after intimating his appointment over the phone to the previous auditor?
A. Yes, the member would be held guilty of professional misconduct for the following reasons:
(a) That he had failed to communicate with the retiring auditor in writing; and
(b) That he did not wait for a reasonable length of time for a reply to be received from him.
5. Whether a Chartered Accountant can accept an appointment as auditor of a company without first ascertaining from it whether the requirements of the Companies Act, in respect of such appointment have been duly complied with?
A. No, as per Clause (9) of Part-I of the First Schedule to the Chartered Accountants Act, 1949, a Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he accepts an appointment as auditor of a company without first ascertaining from it whether the requirements of Section 225 of the Companies Act, 1956 (sections 139 and 140 of Companies Act, 2013) in respect of such appointment have been duly complied with. In this regard, the Council has laid down detailed guidelines that are appearing in Paragraphs 2.14.1.9(ii) to 2.14.1.9(xxxix) under Clause (9) of Part-I of the First Schedule to the Chartered Accountants Act,1949, appearing in Volume II of the Code of Ethics.
6. Whether a statutory auditor of a company can be appointed in the adjourned meeting in place of existing statutory auditor where no special notice for removal or replacement of the retiring auditor is received at the time of the original meeting?
A. No, if any annual general meeting is adjourned without appointing an auditor, no special notice for removal or replacement of the retiring auditor received after the adjournment can be taken note of and acted upon by the Company, since in terms of Section 115 of the Companies Act, 2013, special notice should be given to the Company at least fourteen clear days before the meeting in which the subject matter of the notice is to be considered. The meeting contemplated in Section 115 undoubtedly is the original meeting. Where at any annual general meeting, no auditor is appointed or re-appointed, the existing auditor shall continue to be the auditor of the company mentioned in Section 139.
7. Whether a Chartered Accountant or a Firm of Chartered Accountants can charge or offer to charge professional fees based on a percentage of turnovers?
A. 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:
(a) 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;
(b) 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
(c) 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 valued.
(d) 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;
(e) in the case of certain fund raising services, the fees may be based on a percentage of the fund raised;
(f) in the case of debt recovery services, the fees may be based on a percentage of the debt recovered;
(g) in the case of services related to cost optimisation, the fees may be based on a percentage of the benefit derived; and
(h) any other service or audit as may be decided by the Council.
Note: Following activities have been decided by the Council under "h" above :-
(i) Acting as Insolvency Professional
(ii) Non-Assurance Services to Non-Audit Clients.
8. Whether a Chartered Accountant in practice can engage in any business or occupation other than the profession of Chartered Accountancy?
A. 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.
9. Whether a member in practice is allowed to become a whole-time director of a company?
A. No, members are not allowed to become whole-time Directors of a company generally. However, a member in practice may become a Managing director or a whole-time Director of a body corporate subject to the Council Guidelines of Corporate Form of practice.
10. 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.
11. Whether a member in practice, who is a resident director, in terms of the provisions of Section 149(3) of the Companies Act, 2013, is covered under the scope of "Director Simplicitor"?
A. A Director, as contemplated within the provisions of Section 149(3) of the Companies Act, 2013, would be within the scope of Director Simplicitor provided, he is a non- executive director required to attend the Board Meetings only, and not paid any remuneration except for attending such Board Meetings.
12. Whether a Chartered Accountant in practice is entitled to accept teaching assignment?
A. Yes, a Chartered accountant in practice is allowed to accept teaching assignment in university, affiliated colleges, educational institution, coaching organization, private tutorship, provided that for the purpose of entitlement to attest functions the direct teaching hours devoted to such activities taken together do not exceed 25 hours a week.
13. Can a Chartered Accountant working in a Firm of Chartered Accountants hold Certificate of Practice?
A. Yes, a chartered Accountant working in a Firm of Chartered Accountants can hold Certificate of Practice. However, he is not entitled to do any attest function.
14. Whether a member in practice take license of investment advisor (as required by SEBI to provide service of Investment advice) and provide the service as an Investment advisor and other attestation services?
A. Member in practice is allowed to take license/ registration of investment advisors from SEBI. However, the member is not allowed to engage in the service of broking, underwriting and cannot take agency of mutual funds etc.
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