Page 458 - CA Final PARAM Digital Book.

solicits clients or professional work either directly or indirectly by circular, advertisement, personal
communication or interview or by any other means.
In this connection, members sponsoring activities relating to Corporate Social Responsibility may
mention their individual name with the prefix “CA”. However, mentioning a firm’s name or CA Logo is
not permitted.
An event relating to Corporate Social Responsibility was sponsored by JP & Associates, whereby in
the sponsorship banner, name of Mr. Jayprakash as ‘CA Jayprakash, Proprietor ,JPC Associates’ was
mentioned. Thus, firm’s name was mentioned which is not allowed and thus, Mr. Jayprakash has
violated the restriction imposed under Clause (6) of Part I of the First Schedule to the Chartered
Accountants Act, 1949.

(iv)As per Clause (3) of Part II of the Second Schedule to the Chartered Accountants Act, 1949, a
member of the ICAI shall be deemed to be guilty of professional misconduct, if he includes in any
information, statement, return or form to be submitted to the Institute, Council or any of its
Committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board
or the Appellate Authority, any particulars knowing them to be false.

Mr. Jayprakash in the statement of appeal submitted with the Appellate Authority mentioned some
facts knowing them to be false and thus, he has violated the restriction imposed under Clause (3) of
Part II of the Second Schedule to the Chartered Accountants Act, 1949.

(b) As Mr. Jayprakash has been alleged of misconduct falling in First as well as Second Schedule, so
the matter would be placed before the Disciplinary Committee. The maximum punishment which
could have been imposed on him by the said authority would be:-
(i) reprimanding the member.
(ii) removing name of the member permanently or for any duration, it thinks fit.
(iii) imposing fine upto ` 5,00,000.

QNO NETWORK GUIDELINES & ROTATION Old Course—(N22M)
776.500 TITANIUM CNO – PE. 1760
AJ & Associates and PK & Co., chartered accountant firms have joined the Network firm A to Z &
Affiliates registered with Institute. AJ & Associates was statutory auditor of B Ltd. for last 10 years. Due
to rotation of auditor as per section 139 (2) of Companies Act, 2013, B Ltd. retires AJ & Associates and
appoints PK & Co., as auditor for the year 2020-21. Comment as per Chartered Accountant Act, 1949 -
Guidelines for Networking.
Answer As per Council General Guidelines, 2008, Chapter XV, Guidelines for Networking, once the relationship of
network arises, it will be necessary for such a network to comply with all applicable ethical requirements
prescribed by the Institute from time to time in general and the following requirements in particular in
those cases where rotation of firms is prescribed by any regulatory authority, no member firm of the
network can accept appointment as an auditor in place of any member firm of the network which is
retiring.

In the given situation, AJ & Associates was statutory auditor of B Ltd. For last 10 years and due to rotation
of auditor as per section 139(2) of the Companies Act, 2013 B Ltd., retires AJ & Associates and appoints PK
& Co. as auditor for the year 2020-21.

It may be considered that AJ & Associates and PK & Co., chartered accountant firms have joined the
network firm namely A to Z & Affiliates registered with Institute. In view of above Guidelines for
Networking PK & Co., is disqualified for appointment as an auditor of B Ltd.

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