1. Disciplinary case :
In the case of ICAI v. Shri V. C. Agarwarl, on the
basis of information given by the ITO, Circle 5(7) Mumbai, a disciplinary case
was registered against the member. In this case the member audited the books of
WIE P. Ltd. and also conducted audit u/s.44AB of the Income-tax Act. During the
course of assessment proceedings of the company, the ITO noticed that there were
cash deposits in the bank account of the company. In the audited accounts this
was shown as cash sales. It was also shown in the audited accounts that the
company carried on trading activities whereas, the ITO on inquiry, found that
the company was only acting as Hawala broker and cash deposits related to Hawala
business.
The disciplinary committee conducted the enquiry. The member
did not attend before the committee but made written representation. The
committee held that the member was guilty of professional misconduct under
clauses (5) to (8) of Part I of the Second Schedule of the C.A. Act. This
finding was accepted by the Council which recommended to the High court that the
name of the member be removed for a period of six months.
The Bombay High Court has accepted the findings of the
Council and confirmed the penalty of removal of the name of the member for six
months. (Refer page 646 of C.A. Journal for October, 2008).
2. Guidelines for members of ICAI :
Prior to the enactment of the Chartered Accountants
(Amendment) Act, 2006, clause (ii) of Part II of the Second Schedule to the C.A.
Act authorised the Council of ICAI to issue a Notification whereby it could
provide that a member of ICAI would be held guilty of professional misconduct if
he is guilty of such act or omission as may be specified by the Council in the
Notification issued under this clause. Since this power of issuing such
Notification is not given to ICAI by amendment of the above Schedule by the
Amendment Act of 2006, old Notifications issued from 1965 to 2004 have now been
repealed w.e.f. 8-8-2008.
ICAI has now issued ‘Council General Guidelines, 2008’ by a
Notification dated 8-8-2008. These guidelines are published at pages 686-689 of
C.A. Journal of October, 2008. These guidelines deal with the following subjects
which were covered by the various Notifications issued from 1965 to 2004 under
erstwhile clause (ii) of Part II of Second Schedule to the C.A. Act :
(i) Conduct of a member being an employee.
(ii) Prohibition of appointment of member as cost auditor.
(iii) A member shall not express opinion on financial
statements of any business or enterprise in which one or more of his
relatives, either by themselves or in conjunction with such member, has
substantial interest in such business or enterprise. It may be noted that
under the earlier Notification dated 20-3-1971, under clause (ii) of Part II
of Second Schedule, it was provided that if such opinion is expressed, the
member should disclose his interest in his report. Under the above guidelines,
such member is prohibited from expressing his opinion on financial statements
of any enterprise in which he and/or his relatives have substantial interest.
(iv) Maintenance of books of accounts by a member in
practice or a firm of Chartered Accountants.
(v) Ceiling on tax audit assignments u/s.44 AB of the
Income-tax Act.
(vi) Appointment of an auditor in case of non-payment of
undisputed fees to previous auditor.
(vii) Specified number of audit assignments under the
Companies Act, 1956. This specified number under the Companies Act is 20
audits of public companies per partner (including 10 audits of public
companies with paid-up share capital of Rs.25 lacs or more). It may be noted
that this ceiling of 20 audits does not apply to audits of private companies.
Therefore, the Council of ICAI had decided in 2001 that an overall ceiling of
30 for public and private company audits (including 10 audits of public
companies with paid-up capital of Rs.25 lacs or more) should be observed by
members. The member/firm is required to maintain a register relating the
ceiling of 30 audits giving the particulars of (a) name of the company, (b)
registration No. of the company, (c) date of appointment, (d) date on which
Form 23-B filed with ROC.
(viii) Appointment of statutory auditor — A member or his
firm cannot accept fees for other assignments for fees exceeding the statutory
audit fees.
(ix) A member who is indebted to a concern for an amount
exceeding Rs.10,000 cannot accept audit of that concern.
(x) Directions of Council/committee in case of unjustified
removal of auditors is binding on members.
(xi) Minimum audit fees in respect of audits in specified
cases.
3. Amendments to C.A. Regulations :
By a Notification dated 25-9-2008, C.A. Regulations, 1988
have been amended. Some of the important amendments are as under :
(i) List of members as on 1st April every year will now be
available to members only on payment of cost. The rates for Western, Southern
and Northern Regions are Rs.500 each, for Eastern Region Rs.300, for Central
Region Rs.400 and for All India Rs.750 per copy.
(ii) Any person, (other than the Central or State Government
or any statutory authority) desiring to file a complaint against a member will
have to pay a fee of Rs.2,500. The procedure for conducting an enquiry against a
member on the basis of information or complaint shall be as specified in the
‘Chartered Accountants (Procedure of Investigations of Professional and other
Misconduct and Conduct of Cases) Rules, 2007’.
(iii) A member in C.A. practice can now share his fees from
professional practice with other professionals or can get a share from the fees
of such other professionals or accept professional assignments by an arrangement
with such other professionals. For this purpose, the list of such other
professionals is provided in new Regulation 53A as under :
(a) Company Secretary,
(b) Cost Accountant,
(c) Actuary,
(d) RE.,
(e) R Tech,
(f) Architect
(g) Lawyer, and
(h) MBA.
(iv) New Regulation 53B now permits a CA. in practice to enter into partnership with (a) Company Secretary, (b) Cost Accountant, (c) Advocate, (d) Engineer, (e) Architect, and (f) Actuary. It may be noted that these professionals should be members of their respective regulatory bodies. Further, it will have to be ensured that these regulatory bodies permit their members to enter into such partnerships.
(v) Amendments are made in the following Regulations dealing with certain administrative matters :
(a) 137Co-option by Regional Council
(b) 175Functions of Executive Committee
(c) 176A Functions of Finance Committee
(d) 194Maintenance of Accounts
(e) 197Comparison of Actual Income & Expenditure with Budget Estimates.
4. Accounting Standards:
(i) Accounting Standard (AS-32) – Financial Instruments – Disclosures:
(Note: Page Nos. given below are from CA. Journal for October, 2008)
Text of AS-32 is published on pages 690-705. This standard is recommendatory for accounting periods commencing on or after 1-4-2009 and mandatory for accounting periods commencing on or after 1-4-2011. The principles in this standard complement the principles for recognising, measuring and presenting financial assets and financial liabilities in AS-30 – Financial Instruments – Recognition and Measurement and AS-31 – Financial Instruments – Presentation.
(ii) Limited Revision of AS-19 – Leases:
This limited revision of AS-19 (Leases) is consequential to issue of AS-32 dealing with Financial Instruments – Disclosures. (Refer Page 705)
(iii) Exposure Draft – Accounting Standard (AS- 2) (Revised) :
Exposure Draft of Revised AS-2 – Inventories is published for comments by members on pages 724-727.
5. Standards on Auditing (SA) :
(Note: Page Nos. given below are from c.A. Journal of October, 2008)
(i) SA580 – Written representations:
The above standard is revised and published on pages 706-710. Earlier this standard was known as ‘Representations by Management’ AAS-11.
(ii) Exposure Drafts:
The following Exposure Drafts are published for comments by members:
(a) Audit Considerations Relating to an Entity Using a Third Party Service Organisation (Revised) SA-402 with Explanatory Memorandum (Pages 728-736).
(b) Initial Audit Engagements – Opening Balances with Explanatory Memorandum – (Re-vised) SA 510 (Pages 737-741).
6. Standards on Internal Audit (SIA) :
(Note: Page Nos. given below are from c.A. Journal of October, 2008)
(i) Framework for standards on Internal Audit:
ICAI has decided to publish standards on Internal Audit (SIA). The framework for these standards is published on page 711.
(ii) SIA-4 – Reporting:
The purpose of this standard is to establish standard on the form and content of Internal Auditor’s Report. This is published on pages 712-714.
(iii) SIA-5 – Sampling:
This standard explains the design and selection of an audit sample for Internal Audit. It is published on pages 714-718.
(iv) SIA-6 – Analytical Procedure:
SIA-6 establishes standard on the application of analytical procedures during an internal audit. This is published on pages 718-721.
(v) SIA-7 – Quality Assurance in Internal Audit:
The purpose of SIA-7 is to establish standards and provide guidance regarding quality assurance in internal audit. This is published on pages 721-723.
(vi) Exposure Drafts:
Following Exposure Drafts are issued for Standards on Internal Audit (SIA) :
(a) Terms of Internal Audit Engagement (Pages 742-743).
(b) Internal Audit Evidence (Pages 743-744).
(c) Communication with Management (Page 744-746).
(d) Co-ordination with External Auditors (Pages 746-747).
(e) Consideration of Fraud in Internal Audit (Pages 747-748).
7. ICAI News:
(Note: Page Nos. given below are from C.A. Journal for October, 2008)
(i) ICAI Awards for 2008 to members in industry :
ICAI has decided to honour members in industry for 2008 on 25th January 2009. The Awards will be given under three categories viz. (a) Business Achievers,
(b) Chief Financial Officers (CFO’s), and (c) Professional Achievers. Nominations are invited for this purpose by 30-11-2008 (Refer pages 589 and 669).
(ii) Convocation for new members of ICAI :
First ICAI convocation to give away Certificate of Passing CA. Final Examination, Certificate of Membership and Certificate of Practice to new members will be held at New Delhi on 2-11-2008. Similar convocation will be held at various Regional Centres later on (Refer pages 588 and 596).
(iii) Common Proficiency Test (CPT) – ONLINE Examination:
ICAI has decided that in addition to the existing paper-pencil mode of CPT Examination to be held on 14-12-2008, online Examination will also be held on 7-12-2008 in 11 cities viz. Ahmedabad, Mumbai, Pune, Nagpur, Chennai, Bangalore, Hyderabad, Kolkata, Kanpur, Jaipur and New Delhi. Students will have option to select anyone mode of examination. (Details on page 596)
(v) SIA-7 – Quality Assurance in Internal Audit:
The purpose of SIA-7 is to establish standards and provide guidance regarding quality assurance in internal audit. This is published on pages 721-723.
(iv) Enhancing Audit Quality:
Some observations made by Reviewers while conducting peer review are listed in order to enable the members to improve the quality of audit of corporate bodies. (Page 655)
(v) Accounting Technician Course:
As reported earlier, ICAl proposes to introduce a new course called ‘Accounting Technician Course’ to enable students who are not able to complete CA. course to get a certificate as ‘Accounting Technician’. Draft Regulations for this purpose are published for comments by members at pages 682 to 685.
(vi) New Publications of lCAl :
(a) Technical Guide on Accounting for Micro-finance Institutions (Page 678).
(b) Introduction to WTO and Opportunities for CAs in International Trade Laws and WTO (Page 678).
(c) Compendium of Standards and Statements on Auditing as on 1-4-2008 Vol. I and Compendium of Guidance Notes Vol. II (Page 679).
(d) A study on Basel II and Risk-based supervision (Page 679).
(e) Frame work for Standards on Internal Audit and Standards on Internal Audit (SIA) 4 – Reporting, SIA 5 – Sampling, SIA 6 – Analytical Procedure, and SIA 7 – Quality Assurance in Internal Audit (Page 680).
