Page 433 - CA Final PARAM Digital Book.

practice relating to the business of his clients to any person other than his client without the
consent of his client or otherwise than as required by any law for the time being in force would
amount to breach of confidence.
➢ The Code of Ethics
The Code of Ethics further clarifies that such a duty continues even after completion of the
assignment. The Chartered Accountant may however, disclose the information in case it is
required as a part of performance of his professional duties.
➢ SA 200 on " Overall Objectives of the Independent Auditor and the Conduct of an Audit
in Accordance with Standards on Auditing"
SA 200 on " Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with Standards on Auditing" also reiterates that, "the auditor should respect the
confidentiality of information acquired in the course of his work and should not disclose any such
information to a third party without specific authority or unless there is a legal or professional
duty to disclose".
Part III – Case Discussion
➢ In the given case, Mr. Parekh has disclosed vital information of his client’s business without the
consent of the client under the impression that it will help the nation to compete with other
countries at International level.

Part IV – Conclusion
➢ Thus, it is a professional misconduct covered by Clause (1) of Part I of Second Schedule to the
Chartered Accountants Act, 1949
Author’s Note
# Mistake point

Clause 1 talks about breach of confidentiality. Code of ethics further clarifies that it is applicable to past
clients also. ICAI is inconsistent in referring to code of ethics in answers. You can make a rule to refer it
wherever there is breach of confidentiality.

QNO Second Schedule, Part I, Cl 3 Financial Forecast Old Course-- (PM17)
740.000 TITANIUM CNO – PE.1500
Z, a Chartered Accountant, certifies a financial forecast of his client which was forwarded to the

client’s bank based on which the bank sanctioned a loan to the client.
Answer Part I -- Relevant Standards & Laws
▪ Clause (3) of Part I of the Second Schedule to the Chartered Accountants Act, 1949
▪ SAE 3400 “The Examination of Prospective Financial Information”
Part II -- Requirements of Relevant Standards & Laws
➢ Clause (3) of Part I of the Second Schedule
Under Clause (3) of Part I of Second Schedule to the Chartered Accountants Act, 1949, a chartered
accountant in practice is deemed to be guilty of professional misconduct if he permits his name or
the name of his firm to be used in connection with an estimate of earnings contingent upon future
transactions in a manner which may lead to the belief that he vouches for the accuracy of the
forecast.
➢ SAE 3400 “The Examination of Prospective Financial Information”
Further, SAE 3400 “The Examination of Prospective Financial Information”, provides that the
management is responsible for the preparation and presentation of the prospective financial
information, including the identification and disclosure of the sources of information, the basis of
forecasts and the underlying assumptions. The auditor may be asked to examine and report
on the prospective financial information to enhance its credibility, whether it is intended
for use by third parties or for internal purposes. Thus, while making report on projection, the
auditor needs to mention that his responsibility is to examine the evidence supporting the
assumptions and other information in the prospective financial information, his responsibility
does not include verification of the accuracy of the projections, therefore, he does not vouch for
the accuracy of the same.
Part III – Case Discussion
➢ In the instant case, Mr. Z has certified a financial forecast of his client which was forwarded to the
client’s bank based on which the bank sanctioned a loan to the client.
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