ICAI Code of Ethics: What a CA in Practice Cannot Do

Ask a member what professional misconduct means and most will describe a botched audit or something involving missing money. The disciplinary record looks different. A substantial share of cases concern conduct rules that have nothing to do with technical competence: how a member sought work, who they shared a fee with, whether they wrote to the outgoing auditor, whether they held a job they never mentioned. These are not obscure provisions. They sit in the First and Second Schedules to the Chartered Accountants Act, 1949, and they catch members who simply never read them.

How the Framework Is Built

The Act defines professional misconduct through two Schedules. The First Schedule covers matters generally treated as less grave, dealt with by the Board of Discipline, and includes most of the conduct rules around soliciting work, fee arrangements, and a member's relationship with other members. The Second Schedule covers more serious matters, handled by the Disciplinary Committee, including gross negligence, failure to obtain sufficient information before expressing an opinion, and disclosure of confidential client information. The Code of Ethics published by ICAI elaborates on both and is where the reasoning behind each restriction is set out.

For a member in practice, the useful way to hold this is not as a list of clauses but as four questions: how am I getting work, what am I doing with fees, what am I doing besides practice, and what did I do before I accepted this engagement.

Soliciting Work

A member in practice may not solicit clients or professional work by advertisement, circular, personal communication, or interview. This is the restriction that surprises new practitioners most, because it cuts against everything they know about starting a business. The rule's logic is that professional work should come through reputation and referral rather than salesmanship, on the view that a client choosing an auditor on the strength of marketing is choosing on the wrong criterion.

The Council has relaxed parts of this over time, and members may maintain a website within prescribed conditions, may list themselves in directories in a permitted form, and may respond to tenders in circumstances the Council has defined. But the relaxations are specific, and the general prohibition remains the default rather than the exception. A practitioner designing a website, running paid advertising, cold-emailing prospective clients, or posting promotional content about their firm's services should check the current position before publishing rather than after. The distance between permitted professional information and prohibited solicitation is narrower than it looks from outside.

Fees and Who You Share Them With

• A member may not pay or allow any share of their professional fees to a person who is not a member of the Institute, subject to the exceptions the Act permits.
• A member may not accept a share of the profits of the professional work of a lawyer, auctioneer, broker, or other agent who is not a member.
• Charging fees contingent on the outcome, or as a percentage of profits or results, is restricted, with defined exceptions for particular engagement types.
• A member may not accept a position previously held by another chartered accountant without first communicating with them in writing.
• Undercutting was historically restricted, and while the position has been liberalised, the surrounding obligations around not bringing the profession into disrepute continue to apply.

The fee-sharing prohibition is the one that catches practices with informal referral arrangements. A member paying a commission to a consultant who introduces clients, or splitting a fee with a non-member who did part of the work, is inside the prohibition regardless of how commercially normal the arrangement feels. Multi-disciplinary partnerships with members of recognised professions are the sanctioned route for genuinely shared practice, and they carry their own conditions.

Communication With the Previous Auditor

This deserves separate treatment because it produces so many avoidable cases. Before accepting a position previously held by another chartered accountant, the incoming member must communicate with the outgoing member in writing. The purpose is protective: the outgoing auditor may know something about the client, a disagreement over an accounting treatment or unpaid fees or pressure applied, that the incoming auditor should hear before taking on the engagement.

The requirement is to communicate, not to obtain consent, and an outgoing auditor cannot veto the appointment by staying silent. But the communication must genuinely be made and must be capable of being proved, which is why members send it by a method that produces evidence of delivery rather than by ordinary email alone. The common failure is a member who accepts an appointment under time pressure, intends to write, and never does. That omission is a First Schedule matter on its own, entirely independent of whether the audit that followed was any good.

Other Occupation and Ceilings

A member in practice may not engage in any business or occupation other than the profession of accountancy without the permission of the Council. Some occupations are permitted generally, others require specific permission, and employment is the case that arises most often, typically where a member wants to keep a salaried role while building a practice. Seeking permission is straightforward; not seeking it is a disciplinary exposure that sits quietly until something else brings the member's affairs into view.

Separately, there are ceilings on how much attest work a member may accept: limits on the number of company audits under the Companies Act, and limits on tax audits under ICAI's own guidelines. These are per-member limits rather than per-firm, and in a partnership they are computed with reference to the partners. Firms that grow quickly sometimes discover they have distributed signing across partners without tracking the totals, which is a straightforward compliance problem to prevent and an awkward one to explain afterwards.

None of this is a reason for anxiety in ordinary practice. Members who take engagements on merit, write to the outgoing auditor, keep their fee arrangements inside the profession, and disclose what they do besides practice will not encounter the Schedules at all. The cases arise almost entirely from members who assumed a commercially normal arrangement must be professionally acceptable, and did not check.