paperbook with coverpage

ereinafter referred to as “PA” in the presentation)

of Ethics. The same
also continued in
s an individual
nts of India.
nts in business
m is modified to
line with usage

Ananta - Udaipur 71

The Conceptual Framewo

The conceptual framework specifies an app

Identify threats to compliance with Evaluate the threats
the fundamental principles;

When applying the conceptual framework, the professio

• Exercise professional judgment;
• Remain alert for new information and to changes in facts
• Use the reasonable and informed third party test

49th RRC at The

ork - Threats & Safeguards

proach for a professional accountant to:

identified; and Address the threats by eliminating or
reducing them to an acceptable level.

onal accountant shall: 72
s and circumstances; and

Ananta - Udaipur

The Conceptual Framewo

Threats

• Self Interest Threats
• Self – review Threats
• Advocacy Threats
• Familiarity Threats
• Intimidation Threats

49th RRC at The

ork - Threats & Safeguards

Safeguards

• Education, Training & Experience
• Continuous Professional Education
• Corporate Governance
• Professional Standards
• Regulatory Monitoring & Disciplinary

Mechanism
• External Review

Ananta - Udaipur 73

The Conceptual Framewo

Threat Threat Ap
Identification Evaluation safeg

In the Code of Ethics, 2009, safeguards to be considered for threa
In the Code of Ethics, 2019, the application of safeguards require

49th RRC at The

ork - Threats & Safeguards

pply Reduce Accept
guards Threats Reject
Not possible
to reduce
threats

ats other than “clearly insignificant”

ed to eliminate threats or to reduce them to ‘an acceptable level’

Ananta - Udaipur 74

The Fundamental Princip

Integrity Objectivity Th
Fundam

Princi

Professional
Competence
and Due Care

49th RRC at The

ples and Independence

he
mental
iples

Confidentiality Professional Independence
Behaviour

Ananta - Udaipur 75

The Fundamental Princip

Integrity
• Integrity implies fair dealing and truthfulness
• This requires an accountant to be

straightforward and honest in all professional
and business relationships

Professional Competence and Due Care
• Professional Competence and Due Care im
• This requires an accountant to attain an

required to ensure that a client or employ
and act diligently and in accordance with a

49th RRC at The

ples

Objectivity
• Objectivity implies independent from

subjectivity caused by perception or bias
• This requires an accountant to not to

compromise professional or business judgment
because of bias, conflict of interest or undue
influence of others

mplies capability to perform skillfully and acting diligently
nd maintain professional knowledge and skill at the level
ying organization receives competent professional service
applicable technical and professional standards

Ananta - Udaipur 76

The Fundamental Princip

Confidentiality
• Confidentiality implies the state of bein

acquired as a result of professional and e
• This requires an accountant to be alert

information and maintain confidentiality
or right to disclose.

Professional Behaviour
• Professional Behaviour implies fair cond
• This requires an accountant to not to en

or might impair the integrity, objectivity
incompatible with the fundamental princ

49th RRC at The

ples

ng respectful and responsible for the confidential information
employment relationships
to the possibility of inadvertent disclosure of the confidential
y of the information unless there is a legal or professional duty

duct according to the relevant laws and regulations
ngage in any employment, occupation or activity that impairs
y or good reputation of the profession, and as a result would be
ciples.

Ananta - Udaipur 77

Independence

Independence Standards set out requirements and appli
to maintain independence when performing audits, revie

Professional accountants in public practice are required
performing audits, reviews or other assurance engageme

Independence is linked to the fundamental principles of

Independence of mind –

• the state of mind that permits the expression of a
conclusion without being affected by influences that
compromise professional judgment, thereby allowing
an individual to act with integrity, and exercise
objectivity and professional skepticism.

49th RRC at The

ication material on how to apply the conceptual framework
ews or other assurance engagements.

d by Independence Standards to be independent when
ents.

objectivity and integrity.

Independence in appearance –

• the avoidance of facts and circumstances that are so
significant that a reasonable and informed third party
would be likely to conclude that a firm’s or an audit or
assurance team member’s integrity, objectivity or
professional skepticism has been compromised.

Ananta - Udaipur 78

Non-Compliance with Law

What is Refers to any act of omission or commission, com
NOCLAR? client or employer contrary to prevailing laws or re

Why PA may face difficulties in recognizing such situat
NOCLAR? he has a prima facie ethical responsibility to not to
eye to the matter, provisions regarding NOCLAR w
to help the PA in dealing with the situation and in
best to serve the public interest in these circumstan

Applicable Applicable only to listed entities.
to whom? Applicable to only audit assignments.

In case of PAs in service, applicable to employ
entities

49th RRC at The

ws and Regulations (NOCLAR)

mmitted by a
egulations.

tion and since
o turn a blind
was introduced
deciding how
nces.

yees of listed 79

Ananta - Udaipur

NOCLAR – Scope of Laws

Part of Code of Ethics, 2019 –

• Section 260 (Members in Service)
• Section 360 (Members in Practice)

Laws and regulations that have a nexus to PA's pro
and expertise, i.e.:-
• Laws and regulations that have a direct effect on the

disclosures in the financial statements
• Other laws and regulations, compliance with which

and operations or to avoid material penalties.

Examples of laws and regulations required to be a

• Fraud, Corruption and bribery,
• Money Laundering, Terrorist financing and proceed
• Securities Market and Trading
• Banking and other Financial products & Services
• Data Protection
• Tax & Pension liabilities & Payments
• Environmental Protection
• Public Health and Safety

49th RRC at The

and Regulations

ofessional training
e determination of material amounts and
may be fundamental to the entity’s business

addressed are :-
ds of crime

Ananta - Udaipur 80

NOCLAR – Other salient p

Following matters are not in scope of NOCL
• Matters clearly inconsequential
• Personal misconduct unrelated to
employer
• Non-compliance other than by the c
governance, management or other
direction of the client or employer

When PA is required to address NOCLAR?
• Only when, and if, he encounters
professional service

Appropriate authority for the purpose of d
the matter.

• For example, the appropriate aut
fraudulent financial reporting

49th RRC at The

points 81

LAR:-
the business activities of the client or
client or employer, or those charged with
r individuals working for or under the

the same in the course of providing a
disclosure will depend on the nature of
thority would be SEBI in the case of

Ananta - Udaipur

Independence Standards

Code of Ethics 2009 Code of Ethics 2019
(Volume – I)

49th RRC at The

s - Overview

Most bulky change as a number of similar
provisions/compliances are common to
both Parts 4A and 4B but given separately
in the Code under both parts

Ananta - Udaipur 82

Independence Standards

Major areas where Independence has to be considered are

Actual or
threatened
Gifts and Litigation
Compensation Hospitality
and
Fees Evaluation

policies

Business Family and
relationships personal
relationships

Financial Loans and
Interest Guarantees

Long
assoc
49th RRCpaet Trhseo
an au

s – Part 4A and 4B

e as under:

Employment Temporary
with an audit personnel
client assignments

Recent Serving as a
service with director or
an audit officer of an
client audit client

Auditor Provision of Reports that
rotation non assurance include a
services to an restriction on
audit client use and
distribution

g 83
ciation of
oAnnanntae-lUwdaiiptuhr
udit client

Breaches of the Code (Sectio

• Mechanism of self-correction prescribed in th
unintentional violation

• Mentions steps to be taken in case of breach of
• PA who identifies a breach shall evaluate s

ability to comply with the fundamental princip
• If a firm concludes that a breach of a require

prescribed steps therein e.g.:-
 End, suspend or eliminate the interest that
 Consider applicable legal or regulatory req

49th RRC at The

on 400.80 - 400.89) – New Provision

he Code in case the PA on his own discovers an

f Independence Standards i.e. Parts 4A and 4B.

significance of breach and its impact on PA’s
ples.

ement in this Part has occurred, it shall take

t created breach
quirements and apply them

Ananta - Udaipur 84

Major Changes

Particulars Code of Ethics, 2009

Key audit partner Not mentioned

Firm Rotation Contains requirements relating to
partner rotation only

(No Firm rotation requirements
exist in this edition).

49th RRC at The

Code of Ethics, 2019

The Engagement partner, the individual responsible
for the engagement quality control review, and other
audit partners, if any, on the engagement team who
make key decisions or judgments on significant
matters with respect to the audit of the financial
statements on which the firm will express an
opinion.

o Partner rotation will co-exist along with Audit Firm
rotation (wherever prescribed by a statute)

s Firm rotation requirements vide the section 550

Ananta - Udaipur 85

Major Changes

Particulars Code of Ethics, 2009 7y
5-y
Changes in 7 years time on
partner rotation 2-years cooling-off 3-y

2-y

Restrictions on Activities During Cooling-off

(w.r.t partner rotation – Section 540)

• Prohibition on consulting with engagement team regarding
industry-specific issues, transactions or events

• Prohibition on leading or coordinating the professional services
the firm to the audit client, or overseeing the relationship of the
audit client

• Prohibition on undertaking any other role or activity that would
individual: (i) Having significant or frequent interaction

management or those charged with governance; or (ii) Exe

influence on the outcome of the audit engagement. 49th RRC at The

Code of Ethics, 2019

years time on
years cooling-off: EP
years cooling-off: EQCR
years cooling-off: other key audit partners

technical or 86

s provided by
firm with the

d result in the
with senior
erting direct

Ananta - Udaipur

Major Changes

Particulars Code of Ethics, 2009

Management Not mentioned
Responsibilities
Section 607 –
608)

Non Assurance Prohibitions on provision of
Services certain types of Non assurance
Section 600 & services to Audit clients such as
950 Internal audit, Accounting and
Book keeping services, partial
prohibitions in valuation
services, IT Systems Services ,
etc.)

49th RRC at The

Code of Ethics, 2019

New section dealing with ‘Management
Responsibilities’.

As per the same, the firm shall not assume a
management responsibility for an audit client.

Existing prohibitions to continue.

Addition - Prohibition on providing certain recruiting
services now applies to all entities –Searching for or
seeking out candidates and undertaking reference
checks of prospective candidates

Ananta - Udaipur 87

Major Changes

Particulars Code of Ethics, 2009

Taxation services to Taxation assignments are generally not seen t
the Audit clients create threats to independence

Taxation service to Audit clients – Section 604

• Tax return preparation – usually no threat

• Tax Calculations for the Purpose of Preparing Accounting Entries –
Review threat since to be audited by the firm

• Tax Planning / Other Tax Advisory Services - Might create self-re
/ advocacy threat – Appropriate safe guards to be applied.
(Eg. - Using professionals who are not audit team member
perform the service; having an appropriate reviewer, not involve
providing the service, review the audit work, etc.

• Tax Services Involving Valuations - Might perform only where
result of the valuation will not have a direct effect on the fina
statements

• Assistance in the Resolution of Tax Disputes - Might 4c9rtheRaRCteat aThe
review or advocacy threat

Code of Ethics, 2019

to Guidance on Taxation matters states that providing tax services to
an audit client might create a self review or advocacy threat

– Self 88

eview
rs to
ed in

e the
ancial

self-Ananta - Udaipur

Close and Immediate Fam

2009 Code “close family” and “immediate
(Part-A) family” were replaced with
“relative” (as defined in Section 6
of Companies Act, 1956.)

Close family A parent, child or sibling who is not
Immediate immediate family member.
family A spouse (or equivalent) or depende

49th RRC at The

mily

2019 edition For companies, “relative” of partner refers
(Volume –I) to definition given under Section 2(77) of
the Companies Act, 2013.
For clients other than Companies,
“Immediate family”/ “close family”, as
appearing in IESBA Code is applicable

t an 89
ent.

Ananta - Udaipur

Inducements, Including Gifts

Code of Ethics, 2009 Code o

• Offer of gifts/hospitality ordinarily gives • Inducem
rise to threats to fundamental principles • To first

• Significance of such threats depend on and Reg
the nature, value and intent behind the • Offering
offer. • Reasona

• Reasonable and Informed Third Party Test – T
Test – If its within normal course of intent to
business without the specific intent to behavio
influence decision individu
• Clarifica
• making or to obtain information, may bounda
conclude that it is acceptable inducem
• Extende
• If threats other than insignificant, must • Total pr
take safeguards Audit/A

• Total prohibition in case of Assurance 49th RRC at The
clients (except if inconsequential)

and Hospitality (Sections 250 & 340)

of Ethics, 2019 (Volume –I) 90

ments elaborated
see whether prohibited by Laws
gulations
g also prohibited
able and Informed Third Party
To see whether it is with the
o improperly influence the
our of the recipient or of another
ual.
ations about appropriate
aries for offering and accepting of
ments
ed to PAs in service also
rohibition in case of
Assurance clients to continue

Ananta - Udaipur

Criteria of Indebtedness

No concept of materiality of Loans and Guarante
the IESBA Code of Ethics, 2005 and in Code of Et
2009

The IESBA Code of Ethics, 2018 introduces
concept of materiality of Loans and Guaran
In determining whether such a loan or guara
is material to an individual, the combined
worth of the individual and the individ
immediate family members may be taken
account.

Concept adopted in Code of Ethics, 2019 (Volume

49th RRC at The

(Section 511.3 A1) 91

ee in
thics,

s the
ntees.
antee
d net
dual’s

into

e – I)

Ananta - Udaipur

Contingent Fees (Section

Code of Ethics, 2009 (Paragraph 290.197) mentions:
• fees based on percentage of profits or contingent upon t

work not allowed (as per Clause 10 of Part-I of First Sc
permitted under Regulation 192
Code of Ethics, 2019 (Volume – I) mentions:
• general description of Contingent fees and the general proh

Regulation 192 reproduced – further , the activities
Council has permitted Contingent fees under 192 (h)
other service or audit as may be decided by the Council” :
• Charging of Fees by Members enrolled as Insolvency
individually or as an entity under Insolvency and Bankrupt
thereunder
• Fee for rendering Non-assurance services to non-4a9tuh dRRiCt actlTiheen

ns 330, 410.9, 905.6)

the findings, or results of such 92
chedule to CA Act) except as

hibition
s where
i.e “any
:-
professional rendered either
tcy Code, 2016 and rules made
ntsAnanta - Udaipur

Management Consulting

Administrative Insurance Fi
services Advisory se

• Section 602 of Code of Ethics, • 2009 Code –
2019 (xxvi)Insuranc
Advisory Ser
• Refers to Routine or mechanical Insurance
works like compliance / Development
Submitting Forms 1999 , inc
Brokerage.
• Differentiated from • 2019 Code –
“Management Responsibilities” (xxvi) Insu
(Management Responsibilities Advisory Ser
cannot be undertaken by the Insurance
Auditor, Administrative Development
Services can be undertaken by 1999 inclu
him) Brokerage
Insurance Age
• No enabling provisions in the
2009 Code from the point of 49th RRC at The
view of a member in practice.

Services Valuation

inancial • 2009 Code –
ervices (xv) Valuation of shares and
business and advice regarding
– amalgamation, merger and
ce Financial acquisition.
rvices under the • 2019 Code –
(xv) Valuation of shares and
Regulatory & business and advice regarding
Authority Act, amalgamation, merger and
acquisition.
cluding Insurance Acting as Registered valuer
under the Companies Act, 2013
– read with The Companies
urance Financial (Registered Valuers and
rvices under the Valuation) Rules, 2017.

Regulatory & 93
Authority Act,

uding Insurance
(not including

ency)

Ananta - Udaipur

Guidance on Tenders

It is not Guidance in view of 7.4
prohibited Guideline on Tenders No. n
to respond to A(7)/03/2016 –
tenders of
professional a member of the Institute in pr
Assignments shall not respond to any tender i
2009 Code by an organization or use
2019 Code professional services in area
services which are exclusively res
for chartered accountants, such as
and attestation services.

However, such restriction shall n
applicable where minimum fee o
assignment is prescribed in the t
document itself or where the are
open to other professionals along
the Chartered Accountants.

49th RRC at The

4.2016 94
no 1-

ractice
issued
er of
as of
served
s audit

not be
of the
tender
eas are
g with

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Guidance on other matte

Particulars Code of Ethics, 2009

Use of “CPA” on Under commentary in clause (7) o
visiting cards Part-I of First Schedule to The
Chartered Accountants Act, 1949 -
not permitted to use the initials
‘CPA’

Sponsoring Silent
activities

49th RRC at The

ers

Code of Ethics, 2019

of Mentioning qualifications of Accounting Institutes
which have MRA/MOU with ICAI permitted.

-
s

• Member or Firm not permitted to sponsor an
event. However, may sponsor an event
conducted by a Programme Organizing Unit
(PoU) of ICAI , provided it has a prior approval
of CPE

• Members sponsoring activities relating to CSR
may mention their individual name with
the prefix “CA”. However, the mention of Firm
name or CA Logo is not permitted.

Ananta - Udaipur 95

Guidance on other matte

Particulars Code of Ethics, 2009

Advertisement Teaching is other “occupatio
of Teaching and business” in terms of Appendix (
Coaching CA Regulations, 1988.
Activities
However, Code of Ethics is silen
advertisement of teaching / coa
activity

Sharing of Silent
educational
videos

Advertisement Silent
in movie / TV
49th RRC at The