Clause 12 – Part I – First Schedule

Question 1

Mr. ‘K’, a practicing Chartered Accountant is the proprietor of Mis K & Co. since 1995. He went abroad in the month of December 2018. He delegated the authority to Mr. ‘Y’ a Chartered Accountant, his employee for taking care of the important matters of his office. During his absence Mr. ‘Y’ has conducted the undermentioned jobs in the name of Mis K & Co.
(i) He issued Net worth certificate to a client for furnishing to a Bank.
(ii) He attended the GST proceedings for a client as authorized representative before GST Authorities.
Please comment on eligibility of Mr. ‘Y’ for conducting such jobs in name of Mis K & Co. and liability of Mr. ‘K’ under the Chartered Accountants Act, 1949. ·

Answer 1

Delegation of Authority to the Employee: As per Clause (12) of Part I of the First
Schedule of the Chartered Accountants Act, 1949, a Chartered Accountant in practice
is deemed to be guilty of professional misconduct “if he allows a person not being a
member of the Institute in practice or a member not being his partner to sign on his behalf
or on behalf of his firm, any balance sheet, profit and loss account, report or financial
statements”.
In this case CA. ‘K’ proprietor of M/s K & Co., went abroad and delegated the authority to
another Chartered Accountant Mr. Y, his employee, for taking care of the important matters
of his office who is not a partner but a member of the Institute of Chartered Accountants
of India.
The Council has clarified that the power to sign routine documents on which a professional
opinion or authentication is not required to be expressed may be delegated and such
delegation will not attract provisions of this clause like issue of audit queries during the
course of audit, asking for information or issue of questionnaire, attending to routing
matters in tax practice, subject to provisions of Section 288 of Income Tax Act etc.
(i) In the given case, Mr. ‘Y’, a chartered accountant being employee of M/s K & Co. has
issued net worth certificate for furnishing to a bank. Since the issuance of net
worth certificate to a client by Mr. “Y” being an employee of M/s K& Co. (an audit
firm), is not a routine work and it is outside his authorities. Thus, CA. ‘K’ is guilty
of professional misconduct under Clause (12) of Part I of First Schedule of the
Chartered Accountants Act, 1949.
(ii) Further, Mr. “Y”, CA employee of the audit firm M/s K& Co. has attended the GST
proceedings for a client as authorized representative before GST Authorities. Since
the council has allowed the delegation of such work, the chartered accountant
employee can attend to routine matter in tax practice as decided by the council.
Therefore, there is no misconduct in this case as per Clause (12) of Part I of First
schedule to the Act.