In the case of
ICAI v. Shri Sandeep Abbott, a firm engaged in share trading filed a complaint against the member. In this complaint it was alleged that the member induced the complainant to become his client by giving free swot scan (stock market review by CAs) offering useful tips. This swot scan did not come till the close of his business. It was also alleged that the member was engaged in the business of brokership of shares besides his practice as an auditor. It was further alleged that the member had not disclosed in his statement the deliveries not given to the complainant and shares which were sent for transfer on behalf of the complainant. Further, the member had not given to the complainant the right or preferential quota for the said shares. It was also alleged that the member had sold some shares without consent of the complainant and not paid the sale proceeds of the shares to the complainant.
When the case was referred to the Disciplinary Committee of ICAI (DC), the member did not appear at the time of hearing and did not make any written representation in his defence. After considering the documents and evidence produced by the complainant, the committee decided that the member was guilty of professional misconduct under clause (11) of the First Schedule (Engagement in other occupation) and of ‘Other Misconduct’ u/s.22 of C.A. Act.
The Council accepted the above finding of the D.C. The member did not appear before the Council and did not send written representation. As regards the first charge, it was decided by the Council that the name of the member be removed from the Register of Members for a period of 6 months. As regards the 2nd charge that the member was guilty of ‘Other Misconduct’, the Council recommended to the Delhi High Court that the name of the member be removed for a period of 3 months.
The Delhi High Court noted that the member did not appear before the D.C., the Council as well as the High Court. After considering the report of DC/Council, the High Court directed that the name of the member be removed for a period of 3 months. (C.A. Journal August, 2009, Page 220).
2. Valuation of Material-in-Transit (EAC Opinion) :
A govt. company is in the business of refining and marketing of petroleum products. It has refineries for processing crude oil and lube blending/filling plants. The main raw material for processing in the refineries is crude oil which is both imported and indigenously procured. On the date of Balance sheet, a few shipments of crude oil are in transit. The company also imports other products which can also be in transit on the Balance sheet date.
The crude oil cargos are generally lifted from load port on FOB basis and consequently the ownership of the goods shipped vests in the company. Once the tanker is loaded from the port, liability for associated expenses like freight, insurance, customs duty, survey fees, wharfage and handling charges (herein referred to as incidental expenses) becomes the cost to the company. The company makes provision for these expenses, irrespective of whether the material enters the Indian territorial waters or not before the Balance sheet date. The company values the crude oil-in-transit as well as other material-in-transit at the Balance sheet date inclusive of all such incidental expenses. The company sought the opinion of Expert Advisory Committee (EAC) of ICAI as to whether this method of valuation of crude oil-in-transit (material-in-transit) was in order.
The EAC has considered paras 6, 7, 11 and 13 of AS-2 (Valuation of Inventories) and given the opinion that the above method of valuation of material-in-transit was not in order. According to the EAC, only those expenses which contribute to bringing the inventory to its present location and condition can form part of the cost of the inventory. Therefore, the liability for the expenses for (i) freight, (ii) handling charges at the load port (iii) customs duty on imported cargo, and (iv) wharfage should be recognised in the books of account in respect of material-in-transit only when those are incurred or the liability in respect of the same has arisen. As regards insurance and survey fees, the same should not be included in the valuation, unless they are mandatory i.e., without which the material cannot be moved or transported from the port. (Refer page 221-222 of C.A. Journal, August, 2009).
3. Exposure Draft of AS-1 (Revised)
— Presentation of Financial Statements :
ICAI has issued the above exposure draft. This Exposure Draft is issued pursuant to the decision to converge with IFRSs in respect of accounting periods commencing on or after April 01, 2011. This corresponds with IAS-1.
The objective of the Standard is to prescribe the basis for presentation of general purpose financial statements to ensure comparability both with the entity’s financial statements of the previous periods and with the financial statements of other entities. The general purpose financial statements are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs.
The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to wide range of users in making economic decisions.
A complete set of financial statements comprises : (a) a statement of financial position at the end of the period; (b) a statement of comprehensive income of the period; (c) a statement of changes in equity for the period; (d) a statement of cash flows for the period; (e) notes, comprising a summary of significant accounting policies and other explanatory information; and (f) a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. An entity is required to present a complete set of financial statements (including comparative information) at least annually.
This Accounting Standard is mandatory for accounting periods commencing on or after April 01, 2011.
This Standard also gives guidance for implementation and has also given illustrative presentation of financial statement. [Refer pages 317 to 334 of ICAI Journal, August, 2009].
4. Auditing standards :
The following Auditing Standards have been issued and published on pages indicated below in the CA.
Journal for August, 2009. These are effective on all audits relating to accounting periods beginning on or after 1-4-2010.
i) Standard on Auditing (SA) 320 (Revised) :
Materiality in Planning and Performing an Audit (P. 335-338).
ii) Standard on Auditing (SA) 402 (Revised):
Audit Considerations Relating to an Entity Using a Service Organisation (P. 339-346).
iii) Standard on Auditing (SA) 450 :
Evaluation of Misstatements Identified During the Audit (P. 347-350).
iv) Standard on Auditing (SA) 610 (Revised) : Using the Work of Internal Auditors (P. 351-353).
5. NBFC Auditors’ Report:
Reserve Bank of India has issued directions called ‘Non-Banking Financial Companies Auditors’ Report (Reserve Bank) Directions, 2008′. They have been notified by a Circular dated 1-7-2009 and they have come into force on that date. Full text the directions is published on P. 288-291 of CA. Journal, August 2009.
6. Transfer/Termination of articleship :
ICAl has clarified, by a Notification dated 30-6-2009, that transfer/termination of articleship of articled assistants under Regulation 56(1) will be permitted under the following circumstances only:
“(a) Medical grounds requiring discontinuance of articles for a minimum period of three months (on production of a medical certificate issued by a Government hospital).
b. Transfer of a working parent to another city involving a distance of minimum 50 kms (on production of a certified copy of the transfer order and the proof of relocation to another city).
c. Misconduct involving mortal turpitude.
d. Other justifiable circumstances/reasons:
i. Grounds already permissible in the Char-tered Accountants Regulations, 1988 (on submission of requisite proof of the act warranting transfer/termination of article-ship) :
a) Industrial training (Regulation 51).
(b) Secondment of articles (Regulation 54).
c) Conversion from PCC to lPCC (for termination of articles only. Re-registration of articles to be allowed only after passing Croup-I of lPCC).
(d) Death of Principal [Regulation 57(1)(c)]
e) Ceasing of practice by the Principal [Regulation 57(1)(a)].
f) Removal of name of the Principal from the Register of Member due to any reason [Regulation 57(1)(b)].
ii. Marriage basis (only if there is relocation to another city involving distance of 50 kms).
iii. Irregular payment or non payment of stipend with reference to Regulation 67.
iv. Articled assistant desires to serve balance period of training outside India.
v. Shifting by the principal to another city involving distance of more than 50 kms.
The articled assistants are required, in the first instance, to get the consent of the Institute before getting Form 109 signed by the Principal, in their own interest.
The request, on anyone or more of the aforesaid grounds, of an articled assistant on plain paper with recommendations of the Principal for transfer/termination of articleship accompanied by evidence/ proof (self-attested by the articled assistant) to the satisfaction of the Institute be made.”
7. Campus Placement Programme:
As in the past, ICAI has organised Campus Placement Programme for providing opportunity to our students who have qualified in CA. Final Examinations held in May, 2009. The campus placement interviews will be held at the following places on the dates mentioned below:
8. Know Your Ethics:
The Ethical Standards Board has issued certain clarifications about ICAI Ethical Standards which are published on page 192 of CA. Journal for August, 2009. The following clarifications may be noted:
i) Management consultancy companies floated by Chartered Accountants can receive remuneration from an employer based on percentage of the annual CTC of the candidate while providing services relating to recruitment or placement of such candidate. However, a firm of Chartered Accountants is not permitted to charge fees on percentage of CTC of the candidate for rendering similar services.
ii) A Member who is in practice cannot use the designation of ‘District Governor’ in his Rotary Club visiting card along with the word ‘Chartered Accountant’.
iii) It is not permissible for a member of ICAI, who is practising as an advocate, to use CA logo on his personal stationery, visiting cards, etc.
9. ICAI News:
(Note: PageNos. given below are from c.A. Journalof August, 2009)
i) lCAl Elections:
Elections to the 21st Council and 20th Regional Councils will take place on 4th and 5th December, 2009. Details about these elections are put on the web site of ICAI www. icai.org. (Page 306).
ii) lCAl MOTO Song:
ICAI MOTO song instills a sense of pride amongst members of our Institute and expresses our solidar-ity with the Institute. This is uploaded on the web site of lCAl. (Page 188).
iii) Membership Card:
ICAI is issuing membership cards. Those who have not so far obtained this card can apply to ICAl. (Page 188).
(iv) Payment of Annual Membership Fees:
ICAI has issued a clarification that the Annual Membership Fees and Certificate of Practice Fees for 2009-10was payable on 1-4-2009.If any member has not paid the fees so far he/she can make the payment on or before 30-9-2009. (Page 308)
(v) New Branch of ICAl :
119th Branch in Western Region has been opened at Vapi w.e.f. 9-7-2009. (Page 300)
(vi) Publications of ICAl :
(a) Technical Guide on Internal/Concurrent Audit of Investment Functions of Insurance Companies (Page 299)
(b) Micro Insurance (Page 299)
(c) Technical Guide on Internal Audit of Intangible Assets (Page 300)
