Page 452 - CA Final PARAM Digital Book.

same with the outstanding fee payable.
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
➢ M/s. ABC received the money in March 2014 for payment of the advance tax; hence it should be
deposited in a separate bank account.

Part IV – Conclusion
➢ Since in this case M/s. ABC have failed to keep the sum of ₹ 2 lakhs received on behalf of their
client in a separate Bank Account, 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-- (M04E, PM17, SM17)
QNO bank account (No Investment Made) New Course—(SM23)
763.000
TITANIUM CNO – PE.1640
A charitable institution entrusted ` 10 lakhs with its auditor’s M/s Ram and Co., a Chartered
Accountant firm, to invest in a specified security. The auditors pending investment of the money,
deposited it in their Savings bank account and no investment was made in the next three months.
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
➢ If a Chartered Accountant in practice fails to keep moneys of his clients in a separate bank account
or fails to use such moneys for purposes for which they are intended then his action would
amount to professional misconduct under Clause (10) of Part I of Second Schedule to the
Chartered Accountants Act, 1949.

In the course of his engagement as a professional accountant, a member may be entrusted with
moneys belonging to his client. If he should receive such funds, it would be his duty to deposit
them in a separate banking account, and to utilise such funds only in accordance with the
instructions of the client or for the purposes intended by the client.
Part III – Case Discussion
➢ In the given case by depositing the client’s money by M/s Ram and Co., a firm of Chartered
Accountants, in their own savings bank account, the auditors have committed a professional
misconduct.
Part IV – Conclusion
➢ Hence in the given case, M/s Ram & Co. will be held guilty of professional misconduct under clause
10 of part I of Second Schedule.

QNO Second Schedule, Part I, Cl,10 –Using Client Money for Own Purpose Old Course-- (N14R, PM17,
764.000 TITANIUM CNO – PE.1640 M18E)
Mr. Ram, a Chartered Accountant in practice, received ₹ 15,00,000 on 15th December 2014 on behalf of
one of his clients, who has gone to USA. Mr. Ram deposited the said amount in his saving bank
account (SB Account). As per instruction of the client, the said amount is to be returned to the client on
March 31, 2015 when he will return to India. On the occasion of birthday of his wife Sita, Mr. Ram
withdrew ₹ 5,00,000 and spent on Birthday party. He re-deposited ₹ 5,00,000 in the said SB account
on 25th March 2015 and then returned the entire amount of ₹ 15,00,000 to the client on March 31,
2015.
Answer Part I -- Relevant Standards & Laws
▪ Clause (10) of Part I of the Second Schedule to the Chartered Accountants Act, 1949
▪ Connected case Law: Mr. R. S. Murugai Vs. (1) S K Gadh & (2) V. K. Bajaj
Part II -- Requirements of Relevant Standards & Laws
➢ A Chartered Accountant shall be deemed to be guilty of professional misconduct if “he fails to
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