Ethics for the auditors and CAs

Here is an imaginary dialogue between a confused CA—Arjuna and Lord Krishna—which makes for an interesting reading, more particularly in these days, when questions are raised on the integrity of the members of the once an extremely honourable accountancy profession

The editors of The Bombay Chartered Accountant Journal ought to be complimented for publishing a very timely spoof “Ethics and U” in the April 2013 issue. This is an imaginary Q&A dialogue between a confused CA—Arjuna and Lord Krishna— a brilliant attempt at demystifying what really constitutes “bringing disrepute to the profession” as enunciated in the provisions of Clauses 1 and 2 of Part IV of the First Schedule and Part III of the Second Schedule to the Chartered Accountants Act, 1949.

The dialogue makes for an interesting reading, more particularly in these days, when questions are raised on the integrity of the members of the once an extremely honourable accountancy profession.

The auditing and accounting profession is under the scanner for misdemenours and transgressions abroad in the audits of BCCI, Tyson, Palmart and Enron also here in India—the Global Trust Bank and Satyam, considered the biggest financial frauds to date. Recently there have been reports of negligence in Wipro, SBI, Sesa Goa, Reliance InfoTech and Reebook.

Quote and Unquote, suitably modified, appropriate questions and answers:

  • Question: A few of my CA friends are doing only this ‘entry’ business. They are minting money and I have to slog like this
  • Answer: I had already told you—you have a right, only the performance of your duty; not in the fruits. Those unscrupulous CAs are getting fruits of their deeds!
  • Q: I agree. But the harassment of the tax office is unbearable. Their demands are astronomical.
  • A: are you also involved in settling the cases?

What to do? There is no alternative. I don’t do it myself. That is why my cases remain pending.

  • Q: But the profession has generated into business.
  • A: Let the profession degenerate; but not a professional like you. Your thoughts are confused; but fortunately, your upbringing has held you from acting in that manner.
  • Q: Where in ‘Misconduct’ is it stated?
  • A: See, bribery is a crime. If you are a party to it, it is abetment—that again is a crime.
  • Q. But that is only if one is caught! It is a secret deal between the client and the officer. The CA is just a middleman.
  • A. Remember, apart from the specific items of misconduct in the Schedules, Section22 of the CA Act covers “other misconduct” also. It is very wide. If you are involved as a middleman, both the officer as well as your client discounts your value. They are happy because they are benefited; but your image is tarnished. 
  • Q: You mean, it is not only professional misconduct.
  • A: No. So if you are caught, you are directly covered by clause (1) of Part IV and also Part III... That means conviction of a punishable crime. Clause (2) of Part IV is very wide—if your action brings disrepute to the profession that also is misconduct.
  • Q: Clients treat us as agents only.
  • A: You should be careful as to how the society perceives your profession. In many scandals the role of your colleagues is exposed.

There are cases of even CAs demanding dowries.

Does the public really respect you? Three CAs formed a company for some business, it did not pick up, and so they neglected compliances totally. The company was transferred to someone… the buyer filed a complaint. Such negligence brings disrespect to the profession. They were held guilty, though left on reprimand.

  • Q: Oh! Then it will cover traffic rules also.
  • A: Yes. Even the indiscipline in behaviour, indecency and so many things! There are complaints of ill treatment of articles, misbehaviour with lady staff and what not!  Any professional is expected to have exemplary behaviour—punctuality, courtesy, proper communication and personal habits.
  • Q: I have seen professionals with irritating personal habits and mannerisms—they can’t even speak properly; even in conferences they rush for lunch—acts not befitting a professional.
  • A: Good! You have understood it. Take care of public image, you will command respect. Council is concerned with that.

Many thanks to the author CA Mr Vaze, chairman and the Journal Committee of BCAJ for this enlightening dialogue.

(Nagesh Kini is a Mumbai-based chartered accountant turned activist).

Arun Mehta
9 years ago
The way comments are coming up makes one feel that the otherwise presumed dedicated protectors of investors/stakeholders wealth seems to be more interested in lining up their own pockets.Brings back the ultimate eternal issue,who will audit the auditors ?
Dayananda Kamath k
9 years ago
rbi has mandated and devised so many audits for the banks such as concurrent audit,income audit, tax audit, internal audit, statutory audit,stock audit.but their quality of audit is so poor. as an internal auditor( employee not a chartered accountant) of a nationalised bank i have found so many basic principles are not followed by them. i have filed a complaint with disciplinery authority of institute of chartered accountants almost 3 years back. i would give some of the examples. amount paid for purchase of right shares of SWIFT debited to general expenses. the original shares also were not shown as foriegn investment in banks balance sheet for years. only when i raised the issue in annual general body meeting as shareholder it is being shown now. bank opend l/c for its own import of y2k software. without paying the amount used the software. amd amount about .rs. 50 lakhs kept in suspence for more than 3 years. none of them objected. accounting of interest on gold deposits was being done wrongly and actually short charged to profit and loss account for more than 3 years. excess interest charging on staff as well as general housing loans. refunding only to those who claim, some times amount involved is in lakhs. it may also lead to getting income tax benefit which is not due. even these is fudging of accounts.
Replied to Dayananda Kamath k comment 9 years ago
Mr. Kamath,
I agree with you 110 %. I have also worked in Banks and headed Audit department of two Banks. The performance of CAs under Concurrent / statutory / revenue audit is pathetic. In fact, I made it a point to give Con. audits only to CAs who came from Banks or people who had good SVRS employees. In fact, I can boldly say that CAs are mostly responsible for NPAs in Banks. I would like to have your Email ID. I can share a lot with you.
Dayananda Kamath k
Replied to T PARAMASIVAN comment 9 years ago
my e mail id is [email protected]
9 years ago
No wonder in many places, CAs are called Cheater Accountants, Corruption Advisors and Convenient Accountants. The last one was by US consulate when they found that CAs certify financial papers without verification.
9 years ago
Good one. Must read for all CA in private organization who manipulate the Books of Accounts.
ADAG group has been maniupulating their accounts since a long time but nothing's happened.
Arun Mehta
9 years ago
The eternal question who will audit the auditors ?have we learnt lessons from Satyam scandal?Why can't we have an act like Oxley -Saxby act in India too.
nagesh kini
Replied to Arun Mehta comment 9 years ago
It is very much possible.
The SEC in the US and the European Commission are very much at it.
The Cos. Bill has many new provisions that need to be implemented and enforced.
Only alert stake holders like shareholders, lenders, financial institutions, financial analysts and investigative journalists can do it. Get ready to act!
shanti Patel
9 years ago
Nagesh has done a very good job.
Nagesh please give your mobile no./email address. I have something for you with proof.

nagesh kini
Replied to shanti Patel comment 9 years ago
Thanks for your comment Shantibhai.
I'm allergic to mobiles.
My land line is 022 2437 3052.
Email - [email protected] or
[email protected]
Look forward to hear from you.
At first I thought it was Dr. Shanti Patel, former Mayor and MP.
I know him too. Now you are Shanti Patel II!
shanti Patel
Replied to nagesh kini comment 9 years ago
Dear Mr.Kini,
My emil id is [email protected]
My Mobile No. 9892485457
nagesh kini
Replied to shanti Patel comment 9 years ago
CAShanti Patel spoke to me today.
Vaibhav Dhoka
9 years ago
All professions were HONORABLE few decades back.Now most lack professionalism . Unscrupulous elements have invaded in most of them.In medical profession when corp-orates entered in hospital business it became free for all and downfall started in once Noble Medical profession.
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