Section 22 of the Chartered Accountants Act, 1949, has defined
cc Professional misconduct” as “any act or omission” on the part of a Chartered Accolthtant specified in the first two Schedules to the Act. In other words, the different types of behaviour on the part of a member of the Institute of Chartered Accountants which would be deemed to be “professional misconduct” (i.e. not befitting the Profession) within the meaning of the Chartered Accountants Act are Comprised in two Schedules. The First Schedule deals with professional misconduct of Chartered Accountant. Such cases can be decided by the Council of the Institute. The Second Schedule deals with misconduct of a Chartered Account in which the findings of the Council shall be referred to a High Court for adjudication. The First Schedule has three parts. Part I deals with the misconduct of a Chartered Accountant in practice, Part II with the misconduct of members in service, and Part III with the misconduct of the members generally.
Professional Misconduct by a Member to be Decided by the Council 2. Enumerate the various rules of professional conduct for Chartered Accountants, the breach of which shall be decided by the Council and does not require action by the High Court. The First Schedule of the Chartered Accountants Act, 1949 deals with professional conduct of Chartered Accountants, the breach of which does not require High Court action. It has three parts. Part I – Professional Misconduct by a Chartered Accountant in Practice. A Chartered Accountant in practice is deemed to be guilty of professional misconduct in the following circumstances:
Clause (1) : “If he allows any person to practice in his name as a chartered accountant unless such person is also and is Prol This partnership with or employed by a chartered accountant in practice is inten he practising under the cover of qualified accountants, It by that the work of the Accountant will be carried out either wby Partner who would be a Chartered Accountant or by his employees,h would work under his control and supervision. Clause (2) : “If hews or allows or agrees to pay or allow, directly is or indirectly, any share, commission or brokerage as the fees or profits of his professional business to any int person other than a member of the Institute or oft partner or a retired partner or the legal representativ cli of a deceased partner”. la) Thus while it is in order for a member to share his fees or profits pr with an associated firm of accountants, it would not be permissible a for a member to share his fees or profits with a non-member, say, of an advocate or an estate agent. The rule is directed against arrangements or understandings whereby, for a consideration) Ir professional work will be introduced to a member by a third party, Whenthere are two or more partners and one of them dies, the widow of the deceased partner can continue to receive a share of the profits of the firm. The Council however is of the view that the widow of a deceasedpartner would be able to share the fees only if the partnership agreement contains a provision that, on the death of the partner, his widow or legal respresentive would be entitled to a payment by way of sharing of fees or otherwise for a specified period. In the circumstances, there can be no sharing of profits betwee the widow or the legal representative of the proprietor of a single member firm and its purchaser on the death of the soleproprietor. The widow of a partner, when the partnership agreement does not contain a provision entitling her to do so, would also be prevented from sharing fees or profits. However, she may continue to receive the goodwill of her husband by instalments provided the agreement for the sale of goodwill contains such a stipulation. But the payments even when they are spread over a specified period should not be related to the earnings of the firm so that it may not amount to sharing, of profits. In recent years it has become necessary for accountants to work in association with engineering, legal or other professional firms on a specific project for a single client. In such cases, care should be taken by the accounting firm not to extend its service beyond its particular field and any reports or recommendations should clearly delimit the responsibilities assumed and service rendered; also a IDarate fees for the work should be charged. Clause (3) : “If he accepts or agrees to accept any part of the profits of theprofessional work of a lawyer,
auctioneer, broker or other agent who is not a member of the Institute”. Just as a member cannot share his fees with a non-member, he is also not permitted to receive and share the fees of others such lawyers, auctioneers, brokers, etc. It has been necessary to introduce such a restriction so that a Chartered Accountant who is Often required to engage, or to recommend for engagement by his lawyers, the services of the members of other professions, such as, lawyers, auctioneers, etc. may not share the fees received by other Professional men. In this regard the standard of independence which a Chartered Accountant is expected to maintain is perhaps in advance of that in the Western countries. According to the code of professional conduct of the English Institute as well as that of the American Institute the sharing of fees is permitted with the member of another profession with the permission of the client. Clause (4) : “If he enters into partnership with any person other than a Chartered Accountant in practice or a person resident without India who but for this residence abroad would be entitled to be registered as a member under clause (V) of sub-section (I) of section 4 or whose qualifications are recognised by the Central Government or the Council for the purpose of permitting such partnership, provided that the chartered accountant shares in the fees or profits of the business of the partnership both within and without India”. A Chartered Accountant in practice is not permitted to admit into pertnership with a person other than a Chartered Accountant in practice. But a Chartered Accountant can take a person as a partner who is not is practice provided (a) he is resident abroad, (b) he could be enrolled as a member of the Institute if he had been in India, and (c) if the member shares the fees and profits of the partnership earned both in India and abroad. Clause (5) : “If he secures, either through the services of a person not qualified to be his partner or by means whcih are not open to a chartered accountant any professional business”.