2.6       Query

Whether a Chartered Accountant can accept Coaching Assignment in a College

or Institution of which he or his partnership firm are Auditors.

 Chartered Accountants have often been requested to take classes in Commerce Colleges, at a nominal honorarium. Of course, before accepting such assignment, it may be necessary for such a Chartered Accountant to obtain the permission of the Council, which he may seek.

The problem however is whether a Chartered Accountants can accept honorarium from a college or an institution of which he or his firm is the auditor.

Many Chartered Accountants are faced with similar situations and many of them are inclined to take a decision which may not necessarily be the correct decision. Under these circumstances, would the Expert Advisory Committee of the Council give their opinion as to whether it would be proper and legal for a Chartered Accountant to accept honorarium from a college or institution of which he or his partnership firm is the auditor?

At present, educational trusts are established to run many institutions, like Commerce College, Arts College, Science College, Law College, etc. Normally the appointment of auditor is made by the Central Body to audit the accounts of the trust and the institution run by it.

The Chartered Accountant is requested to take classes in Commerce College which is one of the many institutions run by the trust. Can he accept the remuneration from the College which is run by the trust of which he or a firm in which he is a partner is the auditor? The opinion of the Expert Advisory Committee is solicited.

                                                          Opinion                                                September 15,1973

On the basis of a scrutiny of the facts furnished, the committee is of the opinion that a Chartered Accountant cannot accept appointment as auditor if he or his partner is interested to take classes in a college run by the same Trust, with or without honorarium.

 The reply is based on paras 5 and 6 on page 41 and paras 1and 2 on page 42 of Code of Conduct (4^th edition) reproduced below:

“Section 226 (3) of the Companies Act, 1956, contains a list of persons who because of their close association with a company are not eligible for appointment as auditors. But the law cannot visualise every contingency or circumstance which would affect the independence of the auditor.

Public conscience is expected to be ahead of the law. Members therefore, are expected to interpret the requirement as regards independence much more strictly than what the law requires and should not place themselves in positions which would either compromise or jeopardise their independence.

Members must take care to see that they do not land themselves in situations where there could be conflict of interest and duty. For example, where a Chartered Accountant is appointed the Liquidator of a company, he should not qua a Chartered Accountant himself, audit the Statement of Accounts to be filed under Section 551(1) of the Companies Act, 1956. The audit in such circumstances should be done by a Chartered Accountant other than the one who is the Liquidator of the Company.

In this connection the Council has decided not to permit a Chartered Accountant in employment to certify the financial statements of the concern in which he is employed”.

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