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Unit 4: Section 226, 314 and Code of Ethics

6. In terms of Section 314(1), approval of shareholders by passing a special resolution in Notes
general meeting will be required for appointment of ................; .............. and .................
7. Any office or place of Profit held by the following persons shall be excluded from the
rigors of section 314 ......................; ........................; ................. and ....................

4.3 Auditor’s Code of Ethics

An auditor is a professional who is responsible for evaluating some aspects of a project, business,
or individuals. Auditors often are employed for the task of determining the level of efficiency
present in the production process of a business, the efficient use of labor and other resources
associated with the business, and the veracity of the financial records of the business. Along with
evaluating a project or aspect of a company, an auditor is often expected to make recommendations
regarding the correction of negative conditions that currently impact the organization. Auditors
are also to conduct themselves in a manner consistent with the promotion of co-operation and
good relations between auditors and the sector.

As promulgated by Auditors, Auditing should adopt and uphold the Code of Ethics. The Code
of Ethics states principles and expectations governing behavior of individuals and organizations
in the conduct of auditing. It describes the minimum requirements for conduct, and behavioral
expectations rather than specific activities.

Auditors’ Code of Ethics is a system or code of behavior based on moral responsibility and
obligation to explain how an auditor must behave. Auditors’ Code of Ethic was enacted as a
guide for all audit personnel to enhance the performance and professionalism. Auditor’s General
report helps to improve public management efficiency and effectiveness.

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Caution It is utmost important that the audits produced followed a prescribed standard
based on high work code of ethics to acquire the confidence from the public.
Financial statements of an enterprise depict the wholesome financial situation of the enterprise
for a particular period/at a particular date. The information in these statements are of vital
importance for a large section of the society, which deal with that enterprise. It may be suppliers
of material, customers, investors, Banks, Financial Institutions, Insurers, Government, Tax
Authorities, employees, collaborators and even their competitors.
Keeping in view the importance of these statements and the large section of the society who use
these statements for taking many vital decisions, it is necessary that these statements are attested
by some person who is expert in this field so that the objectivity, integrity, reliability and
credibility of the information is assured to a large extent. This function of attestation is done by
professional accountants, who are Chartered Accountants in our country.
It has been however, observed that there have been a number of cases in banks and financial
institutions wherein due to the erroneous/ambiguous advice tendered by the respective Chartered
Accountants, borrowal accounts have had to face quick mortality resulting in loss for the bank.
Many a time this has also resulted in vigilance cases being initiated with the allegations of
connivance/malafide/gross negligence being attributed to the concerned Bank officials.
For the success of the profession of accountancy a self-imposed Code of Ethics is essential to
command the respect and confidence of the general public. Chartered Accountants in the service
of the affairs of others have responsibilities and obligations to those who rely on their work.

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