Page 421 - CA Final PARAM Digital Book.
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Sleeping partner in the family business Prior Approval - Members of the Institute in practice may
engage in the following category, among other points, of business or occupations, after obtaining the
specific and prior approval of the Council in case of:
Interest in family business concerns (including such interest devolving on the members as a result of
inheritance / succession / partition of the family business) or concerns in which interest has been
acquired as a result of relationships and in the management of which no active part is taken.
In the given case, CA AB is a promoter director of ABG Pvt Ltd and also he is a sleeping partner in his
family business of garments manufacturing firm. Applying the above to the given case, it can be
concluded that-CA AB:
• As Promoter Director- Not guilty of professional misconduct under Chartered Accountants Act,
1949
• As Sleeping Partner- guilty of professional misconduct under Chartered Accountants Act, 1949 as
he did not obtain prior approval of the Council.
QNO First Schedule, Part I,Cl,12 --Signing (Audit Queries) Old Course – (N16M, N17R)
722.000 TITANIUM CNO – PE.1300
Mr. 'Anuj' is a practicing Chartered Accountant working as proprietor of M/s A & Co. He went abroad for
3 months. He delegated the authority to Mr. 'Youth' a Chartered Accountant his employee for taking care
of routine matters of his office. During his absence Mr. 'Youth' has issued the audit queries to client
which were raised during the course of audit in the name of M/s A & Co.
Answer Part I -- Relevant Laws
▪ Clause (12) of Part I of the First Schedule to the Chartered Accountants Act, 1949
Part II -- Requirements of Relevant Laws
➢ A Chartered Accountant in practice is deemed to be guilty of professional misconduct “if he allows
a person not being a member of the Institute in practice or a member not being his partner to sign
on his behalf or on behalf of his firm, any balance sheet, profit and loss account, report or financial
statements”.
The Council has clarified that the power to sign routine documents on which a professional opinion
or authentication is not required to be expressed may be delegated and such delegation will not
attract provisions of this clause like issue of audit queries during the course of audit, asking for
information or issue of questionnaire, attending to routing matters in tax practice, subject to
provisions of Section 288 of Income Tax Act etc.
Part III – Case Discussion
➢ In this case CA. ‘Anuj’ proprietor of M/s A & Co., went abroad and delegated the authority to another
Chartered Accountant Mr. Youth, his employee, for taking care of routine matters of his office who
is not a partner but a member of the Institute of Chartered Accountants. Mr. ‘Youth’, a chartered
accountant being employee of M/s A & Co. had issued audit queries which were raised during the
course of audit.
Part IV – Conclusion
➢ Here “Youth” is right in issuing the query since the same falls under routine work which can be
delegated by the auditor. Therefore, there is no misconduct in this case as per Clause (12) of Part I
of First schedule to the Act.
Author’s Note
The Council in this connection clarified that the Attest function for the purpose of this Resolution would
cover services pertaining to audit, review, certification, agreed upon procedures, and compilation, as
defined in the Framework of Statements on Standard Auditing Practices and Guidance Notes on Related
Services published in the July, 2001 issue of the Institute’s Journal.”
So, anything covered under attest function cannot be considered as routine work.
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