Page 445 - CA Final PARAM Digital Book.

Answer Part I -- Relevant Standards & Laws
▪ Clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949
▪ Clause (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949
Part II -- Requirements of Relevant Standards & Laws
➢ Clause (7) of Part I of the Second Schedule
It states that a Chartered Accountant in practice shall be deemed to be guilty of professional
misconduct if he does not exercise due diligence or is grossly negligent in the conduct of his
professional duties.

➢ Clause (2) of Part IV of the First Schedule
A member of the Institute, whether in practice or not, shall be deemed to be guilty of other
misconduct, if he, in the opinion of the Council, brings disrepute to the profession or the Institute
as a result of his action whether or not related to his professional work.

Part III – Case Discussion
➢ In the given case, Mr. Brainy, a Chartered Accountant in practice, is grossly negligence in conduct
of his professional duties by issuing clean reports on the balance sheet without examining the
accounts. Further, he has also brought disrepute to the profession by advising unethical practice to
the managing director of the company.

Part IV – Conclusion
➢ Therefore, Mr. Brainy will be held guilty for professional and other misconduct under above
mentioned Clauses to the Chartered Accountants Act, 1949.
Author’s Note

Clause (6) of Part I of Second Schedule can also be referred as over valuation of sales consists a material
misstatement, and a clean report has been issued by auditor

QNO Second Schedule, Part I, Cl,7 –Audit Report Not Filed Within Time Old Course-- (M13E, PM17, N17M,
755.000 TITANIUM CNO – PE.1540 SM17, N18R, N19R, N20M)
CA Dev, a practicing Chartered Accountant, did not complete his work relating to the audit of the
accounts of a company and had not submitted his audit report in due time to enable the company to
comply with the statutory requirements
Answer Part I -- Relevant Standards & Laws
▪ Clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949
Part II -- Requirements of Relevant Standards & Laws
➢ A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he
does not exercise due diligence or is grossly negligent in the conduct of his professional duties.

It is a vital clause which unusually gets attracted whenever it is necessary to judge whether the
accountant has honestly and reasonably discharged his duties. The expression negligence covers a
wide field and extends from the frontiers of fraud to collateral minor negligence.

Where a Chartered Accountant had not completed his work relating to the audit of the accounts a
company and had not submitted his audit report in due time to enable the company to comply
with the statutory requirement in this regard, it was held, under a case, that he was guilty of
professional misconduct under Clause (7).
Part III – Case Discussion
➢ In the given case, CA. Dev has not completed his audit work in time and consequently could not
submit audit report in due time and consequently, company could not comply with the statutory
requirements.

Part IV – Conclusion
➢ Therefore, CA. Dev will be held guilty of professional misconduct under Clause (7) of Part I of the
Second Schedule of the Chartered Accountants Act, 1949.

www.auditguru.in PARAM 19.87 | P a g e