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CA Ravi Taori

karta

19 PROFESSIONAL ETHICS & LIABILITIES OF

AUDITORS

INTRODUCTION

Case Study of CA R – NPA Reporting

Audit: CA R, a leading practitioner in Varanasi and partner in an 8-partner audit firm, is assigned to audit a
leading public sector bank branch in the same city with advances of `450 crore.
Irregularities: During the audit, CA R and his team find discrepancies in the drawing power in stock statements
submitted by some reputed export firms. They also uncover some minor procedural irregularities.
NPA: Despite the accounts operating satisfactorily, CA R intends to report these accounts as Non-Performing
Assets (NPAs), causing distress for the Assistant General Manager (AGM).
Delay: The audit completion is delayed due to various reasons, and even informal calls by the Circle Deputy
General Manager (DGM) prove unfruitful.
Intervention: The frustrated AGM advises the owners of the firms to meet CA R and resolve the issues. Three
owners meet CA R and assure him of future business, leading him to exclude their accounts from reporting.
Reporting: CA R reports the accounts of the firms whose owners didn't meet him as NPAs, raising questions
about his ethical conduct.
Analysis
Unethical: The Chartered Accountant is acting unethically by prioritizing personal benefits over professional
responsibilities, which is against the principles of the profession.
Intrinsic Ethics: Ethics should be an intrinsic part of an individual's temperament, enabling them to act in
accordance with moral principles and resist selfish motives.
Confidentiality: A Chartered Accountant should maintain confidentiality and avoid conflicts of interest, such
as using information from one client to the advantage or disadvantage of another.
Professional Guidelines: Accountants are governed by an exhaustive code of ethics and specific provisions of
the Chartered Accountants Act, 1949, which they should adhere to in their professional conduct.

(CNO-PE.020) Introduction
Ethics: Moral principles guiding behaviour, with professional ethics setting standards for professionals.
Trust: Chartered Accountants build trust among various stakeholders, carrying public interest responsibilities.
Code: Chartered Accountants has to adhere to a code of Ethics.
Discipline: Deviations from ethics lead to disciplinary actions, ensuring ethical behaviour and retaining society’s
trust.
Motto: The Institute's motto, 'Ya Esha Supteshu Jagrati', adopted from Kathopanishad, signifies 'eternal
vigilance' – being awake when the world is asleep.

(CNO-PE.060) Overview of The Code of Ethics
Structure: The revised Code of Ethics is divided into several parts.
Part 1: (Name) Complying with the Code, Fundamental Principles and Conceptual Framework, applicable to
all professional accountants.
Part 2: Professional Accountants in Service, applicable to accountants in various sectors and those in public
practice (Holding COP) as employees.
Part 3: Professional Accountants in Public Practice, applicable to accountants providing professional services.
Independence Standards: Additional material for accountants in public practice providing assurance services.

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