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ETHICAL STANDARDS BOARD (ESB). 2 CODE OF ETHICS The mission statement of ESB :- The mission statement of ESB :- "To work towards evolving a dynamic and.

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Presentation on theme: "ETHICAL STANDARDS BOARD (ESB). 2 CODE OF ETHICS The mission statement of ESB :- The mission statement of ESB :- "To work towards evolving a dynamic and."— Presentation transcript:

1 ETHICAL STANDARDS BOARD (ESB)

2 2 CODE OF ETHICS The mission statement of ESB :- 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". "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. 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.

3 3 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, 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, The Act comprehensively covers matters pertaining to regulation to the profession of chartered accountancy. 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. 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. For quality control, there is Section 15. The Disciplinary mechanism of the Institute is also provided in detail in the Act. The Disciplinary mechanism of the Institute is also provided in detail in the Act.

4 4 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. 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.

5 5 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, 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.

6 6 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. 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.

7 7 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. 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.

8 8 CODE OF ETHICS The Code of Conduct, was called as Code of Ethics for the first time in its ninth edition in The Code of Conduct, was called as Code of Ethics for the first time in its ninth edition in 2001.

9 9 ETHICAL STANDARDS BOARD CESURA was changed to CES, i.e Committee on Ethical Standards by the Council at its 249 th Meeting held in March, CESURA was changed to CES, i.e Committee on Ethical Standards by the Council at its 249 th Meeting held in March, 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. 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.

10 10 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. 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). 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 Ethics is the eleventh edition of Code. The current (2009) edition of the Code of Ethics is the eleventh edition of Code.

11 11 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. 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, The two parts are complimentary components of each other. 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, The two parts are complimentary components of each other.

12 12 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. 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. 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.

13 13 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. 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.

14 14 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. ( 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. (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. ( 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, etc. ( 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, etc.


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