Page 451 - CA Final PARAM Digital Book.

ended 31.03.2022, Mr K, the proprietor signed the Balance sheet on 14.05.2022 but never subjected the
firm to the Peer Review process of the Institute. Hence, CA K would be held guilty of professional
misconduct under clause (1) of Part II of Second Schedule of the Chartered Accountants Act, 1949.

Second Schedule, Part I,Cl,10 --Did not keep money is Old Course-- (N06E, PM17, M17R, N19R)
QNO separate bank account.
760.000
TITANIUM CNO – PE.1640
M/s XYZ a firm of Chartered Accountants received ` 2 lakhs in January, 2015 on behalf of one of their
clients, who has gone abroad and deposited the amount in their Bank account, so that they can
return the money to the client in July, 2015, when he is due to return to India.

Answer Part I -- Relevant Standards & Laws
▪ Clause (10) of Part I of the Second Schedule to the Chartered Accountants Act, 1949
Part II -- Requirements of Relevant Standards & Laws
➢ A Chartered Accountant shall be deemed to be guilty of professional misconduct if “he fails to
keep money of his clients in separate banking account or to use such money for the purpose for
which they are intended”.
Part III – Case Discussion
➢ XYZ received the money in January, 2015 which is to be paid only in July 2015; hence it should be
deposited in a separate bank account.
Part IV – Conclusion
➢ In this case XYZ have failed to keep the sum of `2 lakhs received on behalf of their client in a
separate Bank Account. Hence, it amounts to professional misconduct under Clause (10) of
Part I of Second Schedule.

Second Schedule, Part I, Cl,10 --Did not keep money is separate Old Course-- (M10E, PM17, N20E)
QNO bank account (For Advance tax)
761.000
TITANIUM CNO – PE.1640
Mr. Z, a practicing Chartered Accountant, received a sum of `1 lac on 1.9.2014 from a Client who intends
to leave abroad for a period of a year, with a request that his advance tax liabilities to be paid over
the three instalments. On 15th September 2014, 15th December 2014 and 15th March, 2015. After

remitting the 1st instalment of advance tax on 15.9.2014, Z did not keep the Balance Money in a
separate Bank account and he is of the opinion he will remit the money within reasonable time as
per payment schedule of Advance tax
Answer Part I -- Relevant Standards & Laws
▪ Clause (10) 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 will be deemed to be guilty of professional misconduct if he
fails to keep moneys of his client other than the fees or remuneration or money meant to be
expended in a separate banking account or to use such moneys for purposes for which they are
intended within a reasonable time.

The term reasonable time would depend upon the circumstances of the case. Moneys which are
intended to be spent within a reasonably short time need not be put in a separate bank account.
Part III – Case Discussion
➢ Thus, in the instant case, Mr. Z should have kept the balance money into a separate bank account
after remitting the first instalment of advance tax
Part IV – Conclusion
➢ Hence, he is guilty of professional misconduct as per Clause (10) of Part I of Second Schedule
to the Chartered Accountants Act, 1949.

Second Schedule, Part I, Cl,10 --Did not keep money is separate Old Course-- (N14E, N16M, PM17,
QNO bank account (For Advance tax, Adjusted with Fees Outstanding) M19M)
762.000
TITANIUM CNO – PE.1640
M/s . ABC, a firm of Chartered Accountants received ₹ 2 lakhs in March, 2014 from a client to pay the

Advance Tax. However, the firm has used that money for its own purpose and later on adjusted the

www.auditguru.in PARAM 19.93 | P a g e