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Auditing Theory

Notes have a duty to carry out with care and skill, the instructions of the client or employer in-so-far
as they are compatible with the requirements of integrity, objectivity and in the case of
professional accountants in public practice, independence. In addition they should confirm with
the technical and professional standards promulgated by:-
1. IFAC (e.g. International Standards on Auditing);

2. International Accounting Standards Board;
3. The Member’s professional body or other regulatory body; and
4. Relevant legislation.

Independence

When in public practice, an accountant should both be, and appear to be, free of any interest
which might be regarded, whatever its actual effect, as being incompatible with integrity and
objectivity.

The overriding motto has been ‘pride of service in preference to personal gain’. A code of
professional conduct may have the force of law, as is the case in this country in some matters, as
well as the result of discipline and conventions voluntarily established by the members, any
breach whereof would result in the person being disentitled to continue as a member of the
professional body. In any event, it has a great deal of practical value in so far as it proclaims to
the public that the members of the profession will discharge their duties and responsibilities,
having regard to the public interest. This, in turn, will give an assurance to the public that in the
event of a member straying away from the path of duty, he would be suitably dealt with by the
professional body.

“Other Misconduct”

In this background, the Chartered Accountants Act, 1949 (as amended up to date), was formulated
to regulate the profession of Chartered Accountancy. This Act is being administered through the
Institute of Chartered Accountants of India; which functions and discharges its duty through a
‘Council’. To ensure discipline in the profession, The Chartered Accountants Act along with its
schedules sets out different forms of behaviour, which constitute misconduct under the law. The
definition of misconduct in the Act is only an inclusive one and is not exhaustive. Over and
above this, the council of the institution (ICAI) has also been given powers under the law to
enquire into the conduct of any member of the Institute other than those specified in the Act,
which may in the view of the COUNCIL be not desirable and/or expected of a Chartered
Accountant. This kind of misconduct is known as ‘other misconduct’. The ‘other misconduct’
may not necessarily arise out of professional work. With a view to bring harmony in presentation
of the financial statements and an identical treatment in a particular situation, the ICAI has
brought out various Statements, Auditing and Assurance Standards, Accounting Standards and
Guidance Notes, which are mandatory for a practicing Chartered Accountant to be adhered to
while discharging his professional duty of attestation of financial statements. These sets of
documents necessitate that financial statements are depicted in a definite manner, and give the
required information in the desired manner, which are professionally verified by applying
scientific audit techniques to ensure material correctness to a large extent. The objectivity and
integrity of the financial statements attested by a Chartered Accountant following these sets of
documents, are of a very high degree, and which enhance the credibility and reliability of these
statements to the user. A Chartered Accountant who does not follow these sets of documents in

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