Page 400 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

SECOND SCHEDULE

Disciplinary Committee.
Where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct
mentioned in the second schedule or in both the Schedule, he shall place the matter before the Disciplinary
Committee.

Part I - Professional Misconduct in relation to Chartered Accountants in Practice
(CNO-PE.1460) CLAUSE 1
A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he
Clause (1): Discloses Information acquired in the course of his professional engagement to any person other than
his client so engaging him without the consent of his client or otherwise than as required by any law for the time
being in force.
Rationale
Access: Accountants in public practice have access to highly confidential client information. This information is
provided to facilitate the performance of their professional duties.
Confidentiality: Accountants must maintain the confidentiality of this information to uphold the dignity and
status of the profession. Disclosing this information would be a breach of professional confidence.
Consequences: Breaching confidentiality can lead to serious consequences, including legal action by the client.
Disclosure as a part of performance of professional duty.
Requirement: Disclosure may be required as part of a professional duty by a practicing member.
Consent: The client's requirement for such performance is considered as consent to disclosure.
Submission: Submitting information to authorities (e.g., exchange control authorities) during professional
duties is not considered disclosure without consent.
Initiative: The client must initiate or request the service that would require such disclosure.
Disclosure in other cases.
Consent: If disclosure is required, it should be ensured that the client's consent is given by a competent person.
Proprietorship: In a sole proprietorship, consent can be given by the proprietor or a legally empowered attorney.
Partnership: In a partnership, any partner can give consent as each partner has the authority to bind the firm.
Company: In a company, the Board of Directors is empowered to give consent as per section 179 of the
Companies Act, 2013.If the Board's powers are delegated to the Managing Director, consent can be sought from
them. If not, consent should be obtained through a resolution of the Board.
Access to working papers & Information Sharing.
Access: Auditors are not obligated to grant clients or other auditors access to their audit working papers. Auditors
may choose to make parts of their working papers available to the client in appropriate cases.
Branch auditors: Main auditors do not have the right to access the audit working papers of branch auditors.
However, statutory auditors must consider the report of the branch auditor and can seek clarifications or visit
the branch if necessary. Auditors, including internal auditors, can rely on the work of other auditors without
having access to their working papers.
Information Sharing: There is a difference between sharing working papers and sharing information. The
auditor can provide information to the client or a regulatory body with the client's consent. Generally sharing
of working paper is not expected & not required.
Confidentiality & Legal Complexities.
Section 126: This section provides a form of legal privilege which prohibits attorneys (and similar legal
professionals) from disclosing any communication made to them by their clients in the course of their
professional relationship, unless expressly permitted by the client.
www.auditguru.in 19.44