ETHICAL
STANDARDS
BOARD (ESB)
CODE OF ETHICS
The mission statement of ESB :"To work towards evolving a dynamic and
contemporary Code of Ethics and ethical
behaviour for members while retaining the
long cherished ideals of `excellence,
independence, integrity' as also to protect the
dignity and interests of the members".
Thus,
‘Code of Ethics’ for
members is not a mere publication
of ESB, it is an ideology , carefully
nurtured and developed by ESB,
and synonymous with ESB.
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THE CA ACT – PRECURSOR
TO THE CODE OF ETHICS
Code of Ethics today represents the strong
edifice of virtues evolved through a period
of time. However, the legacy from which it
took over the realm of ethics , is that of :
The Chartered Accountants Act , 1949.
The Act comprehensively covers matters
pertaining to regulation to the profession of
chartered accountancy .
The two Schedules spell out the various acts
and omissions entailing professional/other
misconduct , which are dealt with
punishment in accordance with Chapter-V
of the Act.
For quality control, there is Section 15.
The Disciplinary mechanism of the Institute
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is also provided in detail in the Act.
CODE OF CONDUCT FOR
MEMBERS
In November, 1963 , the Council of
ICAI brought the first edition of the
‘Code of Conduct’ , which included
not only the provisions of the
Chartered Accountants Act but also
the interpretation of the Council,
various High Courts and the
Supreme Court. The
"Code of
Conduct" was essentially a set of
professional
ethical
standards
regulating the relationship of
Chartered Accountants with others.
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ESB : FORMATION
For the formulation
of
ethical
standards
for
members in response to
changing conditions and
environment , the Council of
ICAI constituted Ethical
Standards Committee (a non
standing committee) at its
74th
Meeting
held
in
December, 1975.
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FUNCTIONS OF ESB
EXPANDED
The Committee was later
also
given
the
responsibility of evolving
ethical
standards
,
providing guidelines and
to generally oversee the
that the ethical standards
were observed by the
members.
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NOMENCLATURE
CHANGED
ESC, as it then was , later
changed to Committee on
Ethical
Standards
and
Unjustified Removal of Auditors
(CESURA),
whereinafter
it
would be a fact-finding body
and shall also be entitled to
consider cases of unjustified
removal
of
Auditors
in
Government Companies Public
Sector Banks etc.
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CODE OF ETHICS
The ‘Code of Conduct’ , was
called as ‘Code of Ethics’ for the
first time in its ninth edition in
2001.
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ETHICAL STANDARDS BOARD
CESURA was changed to CES , i.e
Committee on Ethical Standards
by the Council at
its
249th
Meeting held in March, 2005 .
Finally, CES came to be known as
Ethical Standards Board (ESB) in
December, 2008 in line with the
international practice, as majority
of the countries have Ethical
Standards Boards in place.
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UPDATION TIME TO TIME
Since its first edition, the Code has been
constantly updated from time to time to
fine tune it with the changes in legislation,
ethical and professional standards .
E.g. the fourth edition of the Code
included certain relaxations made by
Council
with regard to publicity by
members ,the seventh edition contained
principles pertaining to responding to
tenders & use of CA designation in
invitation cards, the eighth edition made
changes necessitated by the advent of the
Chartered Accountants Regulations , 1988
(by repealing the Chartered Accountants
Regulations, 1964) .
The current (2009) edition of the Code of
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Ethics is the eleventh edition of Code.
CONVERGENCE WITH
IFAC
Code of Ethics, 2009 incorporates for
the first time ever, the provisions of
IFAC Code of Ethics, thus complying
with the membership obligation of
ICAI towards IFAC.
The Code of Ethics, 2009 is divided
into Part-A and Part-B, Part-A
incorporating provisions of IFAC
Code of Ethics , and Part-B based on
the Chartered Accountants Act, 1949.
The two parts are complimentary
components of each other.
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REVISION DUE TO IFAC
CODE OF ETHICS, 2010 IN
OFFING
IFAC has now issued ‘Handbook of the Code of
Ethics for professional accountants (2010 edn.)’
clarifying the requirements for all
professional accountants and significantly
strengthening
the
independence
requirements of all auditors. Another
significant change in the revised Code is
making all compliances mandatory by
replacing ‘should’ with ‘shall’.
ESB has made recommendations for changes
required in the Code of Ethics, 2009 due to
the
revised
IFAC
Code
.
The
recommendations are pending approval of
the Council , whereinafter they shall become
effective.
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ESB HAS A DYNAMIC ROLE
TODAY
Over the time , functions of ESB have not only
become manifold, but critical to the well being
of the profession. ESB is today engaged in
dissemination of professional ethics, to the
highest standards, among the members of the
ICAI. It formulates ethical principles for
members and creates awareness of ethics
among them through various ways. Besides, it
examines and renders advice on ethical issues
referred to it. It reviews and revises its
publications as and when required. It
promotes public awareness and confidence in
the fundamental principles. It also examines
and deals with the complaints of members
against their unjustified removal as auditors.
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TAKING LEAD
During its nearly six decades of existence, ICAI has
achieved recognition as a premier accounting body
globally. Some of the (ethical) areas where ICAI is
ahead of International standards are :( 1) Writing the books of accounts of auditee clients
prohibited in ICAI , whereas IFAC Code of Ethics
contains situations where a member may provide
book-keeping services.
(2) ICAI Code of Ethics provides that a statutory
auditor of a company cannot also be its internal
auditor whereas IFAC Code contains situations
where a member may provide internal audit
services.
( 3) Contingent fees is not allowed by ICAI whereas
the provisions for contingent fees on non-audit
services as contained under the IFAC Code of
Ethics are elaborative.
( 4) Other areas where we are ahead are : having self
-regulatory measures , MCS, Recommended scale
of fees, Ceiling of Audit Assignments,
Advertisement Guidelines, Website Guidelines, 14
etc.