CA Professional Code of Conduct: First Schedule Guide

Professional Code of Conduct for Chartered Accountants of India — First Schedule (Improved 2025 Edition) – With emphasis on recent changes, case law touchpoints, real-life illustrations, and international comparisons (IESBA/ICAEW/AICPA).

Purpose and Scope

This practitioner’s article provides a clause-by-clause, practice-oriented analysis of the First Schedule to the Chartered Accountants Act, 1949, updated for 2024–2025 developments. It highlights material recent changes in the Indian regime—especially the Chartered Accountants (Amendment) Act, 2022 (which also amended the disciplinary architecture and empowered action against firms), implementation milestones of the 12th Edition Code of Ethics (effective 1 July 2020, with deferrals and subsequent operationalisation), and the latest Ethical Standards Board (ESB) publications and clarifications. It also contrasts India’s position with the IESBA International Code (2024 handbook), ICAEW’s 2025 Code and guidance in the UK, and the AICPA Code of Professional Conduct in the US.

Core professional concepts—integrity, competence & due care (and how negligence is avoided), confidentiality, and equality of opportunity—are integrated into each analysis. Real-life illustrations and short numerical are used where relevant. This document is intended for qualified chartered accountants, engagement partners, ethics partners, and senior finance leaders.

Recent Important Changes (Executive Snapshot)

• Amendment Act 2022: Recast of the disciplinary architecture (Board of Discipline and Disciplinary Committee composition and timelines), a Coordination Committee across the three institutes, powers to proceed against firms, and register/registration of firms. These have practical effects on enforcement behaviour and risk for both individuals and firms (PRS Bill Summary; ICAI President’s note, May 2022).
• Code of Ethics (2019/2020, 12th Edition) operationalised w.e.f. 1 July 2020 with specified deferrals; notably, NOCLAR (Sections 260/360), Fees—Relative Size (410.3–R410.6), and Taxation Services to Audit Clients (604) were deferred initially and later brought into effect (effective 1 October 2022 for NOCLAR as per announcements). Firms must align internal protocols accordingly.
• Website/Advertising Guidelines consolidated in Code of Ethics Vol. II (2020) and related ESB pages (updated 2020–2023): India continues to maintain a restrictive stance on solicitation and promotional claims, though tender responses remain permissible. Discussions continue in the public domain on whether to further liberalise advertising controls, but as of September 2025, the formal Code and Guidelines remain restrictive.
• International movements that shape expectations: IESBA’s 2024 Handbook (including the revised definition of Public Interest Entity—PIE—effective for periods beginning on/after 15 Dec 2024), ICAEW’s latest guidance on fees (R410.6 emphasis) and NOCLAR (Sections 260/360), and enduring AICPA rules that allow advertising provided it is not false, misleading, or deceptive. These bear upon Indian firms that service global clients or collaborate cross-border.

Method and Citations

Primary legal text and institutional guidance have been referenced as endnotes within this document. Users should always confirm current versions on the ICAI website and India Code portal before relying on a particular procedural detail.

Part I — Professional Misconduct in relation to Members in Practice (Clauses 1–12)

Preamble

A chartered accountant in practice is deemed guilty of professional misconduct if any of the specified acts are committed. The deeming provision is strict in operation; once the factual matrix fits a clause, the member’s intent is generally irrelevant except where a specific exception or Council recognition exists.

Compliance perspective for 2025: The 2022 amendments did not rewrite the text of the First Schedule clauses themselves; however, they strengthened the disciplinary machinery that applies to these clauses (e.g., composition and timelines). This increases the enforcement velocity and the likelihood that misconduct—particularly in areas of solicitation, fee-sharing with unapproved persons, and signature governance—will be acted upon.

Clause (1): Allowing Non‑Members to Practise in One’s Name

Essence

Do not allow any person to practise in your name unless that person is a chartered accountant in practice and is your partner or employed by you.

Important terms and expectations

• “Practise in his name” includes use of your firm’s name, letterhead, email domain, DSC, or infrastructure in a manner that causes the public to believe services are rendered under your authority.
• “Employed by him” entails a formal employment relationship under your direction; you remain vicariously responsible.

Ethical anchors: Integrity and competence. Permitting unregulated practice deceives users and elevates risk of negligent work.

Recent emphasis: With the 2022 amendments empowering action against firms, partner‑in‑charge oversight of employment status, authorisation matrices, and DSC custodianship should be re‑papered and re‑trained annually.

Illustration

A non‑CA tax agent sits in your office, uses your email address, and issues advisory memos. Even with ‘review’ by a partner post‑facto, the public impression is that the firm endorsed the work. This is misconduct under Clause (1).

Clause (2): Sharing Fees or Profits with Unapproved Persons

Essence

Fee/profit sharing is prohibited except with members/partners/retired partners/legal representatives of deceased partners and with recognised professionals/qualified persons as prescribed by the Council/Central Government.

Key compliance

• “Share, commission or brokerage in fees or profits” captures percentage‑based payouts tied to your firm’s revenue or a particular mandate.
• Payments to allied professionals must be structured as service fees at arm’s length with a clear scope of work, not as a share of audit fees.

Recent note

Recognition lists under Council resolutions should be verified and retained on file prior to onboarding allied partners, especially cross‑border. This due diligence has become more salient post‑2022 due to firm‑level accountability.

Numerical illustration

Audit fee ₹10,00,000. Paying 20% to a business introducer (non‑CA) is prohibited. Paying an actuary or valuer for defined specialist procedures on a cost‑plus basis is typically permissible.

Clause (3): Accepting Profits of Non‑Members’ Professional Work

Essence

A mirror prohibition: you may not accept any part of the profits of a non‑member’s professional work (save permitted collaborations).

Ethical rationale

Integrity and independence: silent revenue interests in unregulated practice create conflicts and mislead users.

Practice tip

Convert informal ‘revenue shares’ into formal joint mandates with recognised professionals, or decline.

Clause (4): Partnerships with Non‑CAs (Recognised Bodies/Qualifications)

Essence

Partnership is permissible with CAs and with members of recognised professional bodies/qualified persons (as prescribed), including certain foreign qualifications recognised by the Council/Central Government.

Update watch‑outs

• Confirm recognition status from the latest ICAI page and related notifications before admitting a foreign‑qualified partner.
• Maintain documentary proof (printouts/snapshots) in the firm’s governance binder.

International alignment

This clause enables multidisciplinary practice (MDP) while upholding competency and oversight standards.

Clause (5): Securing Professional Work by Means Not Open to CAs

Essence

You must not obtain professional assignments through means not open to chartered accountants or through non‑employees, save the exceptions in Clauses (2), (3), and (4).

Practical meaning

Kickbacks, success‑commissioned ‘introducers’, and lobbying through intermediaries are impermissible routes.

Equality of opportunity

The clause preserves a fair market and deters ‘pay‑to‑play’ dynamics.

Illustration

Engaging a commission‑based marketing agent to cold‑call CFOs for statutory audits is impermissible and often co‑implicates Clauses (6) and (7).

Clause (6): No Solicitation of Work (Two Key Allowances)

Essence

Direct or indirect solicitation is prohibited (circulars, advertisements, personal communication, interviews, or otherwise). Two allowances: (i) seeking work from another CA in practice; (ii) responding to tenders/enquiries issued by users of professional services.

Recent developments

• India continues to take a restrictive stance compared with UK/US regimes. ESB’s website guidelines (updated around 2020) remain the baseline, and tender participation is squarely permitted.
• Public discourse in 2025 suggests possible liberalisation; until any official change is notified, members must adhere to the existing prohibition.

International deviation (highlight)

ICAEW and AICPA allow advertising if it is not false, misleading, or deceptive; India’s position is materially stricter on solicitation and promotional claims.

Illustrations

1) Permissible: Responding on GeM to an internal audit RFP with factual profiles and fees.

2) Non‑compliant: Mass emails to industry groups claiming ‘#1 forensic firm—guaranteed recovery’.

Clause (7): Advertising and Use of Designations

Essence

No advertising of professional attainments/services. Use only ‘Chartered Accountant’ as designation on professional documents, with permitted degrees and recognised titles. A factual write‑up is allowed subject to Council guidelines.

Recent emphasis

• Website content must be neutral and factual; testimonials, client logos, comparative or superlative claims are disallowed.
• Ensure alignment with Code of Ethics Volume II website guidelines (2020) and any subsequent ESB clarifications.

International deviation (highlight)

UK/US counterparts generally allow advertising with truthfulness and dignity requirements—India remains more constrained.

Illustration

Replace ‘Best fraud auditors in India—100% win rate’ with a factual service catalogue and partner profiles without claims of superiority.

Clause (8): Communication with the Previous Auditor

Essence

Before accepting an audit, communicate in writing with the previous auditor.

Negligence control

This reduces acceptance risks and flags independence/fee disputes or scope disagreements.

Good practice

Use email + registered post; document attempts and wait a reasonable period before acceptance if no response is received.

Clause (9): Appointment as Auditor of a Company—Companies Act Compliance

Essence

Ascertain compliance with Sections 139–141 (appointment, eligibility, rotation, and disqualifications) before acceptance.

Recent compliance pressure

Given enhanced disciplinary timelines and firm‑level exposure, acceptance checklists (including ADT‑1, rotation, and independence threats) should be signed off by an ethics partner.

Checklist

Board/AGM minutes; ADT‑1 filing; Sec. 141 eligibility; rotation applicability; conflict checks.

Clause (10): Contingent or Percentage‑Based Fees

Essence

Prohibited, except where specifically permitted by regulation.

International contrast

ICAEW/AICPA treat contingent fees as creating threats to objectivity; they may be allowed for certain non‑assurance services with safeguards, but are prohibited for audit/assurance. India’s First Schedule positions a broad prohibition for members in practice.

Illustration

Decline a ‘5% of tax saving’ arrangement; propose fixed/time‑based fees with transparent out‑of‑pocket terms.

Clause (11): Engaging in Other Business/Occupation Without Council Permission

Essence

Prohibits engaging in any other business/occupation without Council permission; non‑executive directorships are allowed, but you/your partners cannot audit that company.

Governance

Obtain prior permission for entrepreneurial ventures; reassess COP and independence if taking executive roles.

Post‑2022 significance

Firm‑level scrutiny means conflicts arising from side businesses can expose the partnership as a whole.

Clause (12): Signing by Non‑Member/Non‑Partner

Essence

Do not allow any non‑member or member who is not your partner to sign balance sheets, reports, or financial statements on your or your firm’s behalf.

Controls

Maintain signatory registers; secure DSCs; implement dual‑review for high‑risk reports.

Liability lens

Signature implies responsibility; defective signatory controls often correlate with systemic quality failures.

Part II — Professional Misconduct in relation to Members in Service (Clauses 1–2)

Clause (1): Sharing Emoluments

A member in employment must not pay or agree to pay any share in the emoluments of employment to any person. This addresses kickback‑type arrangements and protects organisational integrity.

Clause (2): Accepting Profits/Commissions from Engaged Professionals or Related Parties

An employee‑member shall not accept any part of fees/profits/gains from a lawyer/CA/broker engaged by the employer or from agents/customers by way of commission or gratification. This also intersects with confidentiality and anti‑corruption statutes. Firms should reinforce zero‑tolerance training and conflict‑of‑interest declarations annually.

Part III — Professional Misconduct in relation to Members Generally (Clauses 1–3)

Clause (1): Pretending to be a Fellow

Using ‘FCA’ without entitlement is a straightforward integrity violation; periodically review letterheads and digital profiles for accuracy.

Clause (2): Non‑Compliance with ICAI/Authority Information Requirements

Failure to respond fully and in time to Council/Director (Discipline)/Disciplinary Committee/Quality Review Board/Appellate Authority is misconduct. The 2022 amendments’ focus on timelines makes docket management and legal liaison essential.

Clause (3): False Information while Inviting Work/Responding to Tenders/Advertising via Permitted Write‑ups

Accuracy is paramount. Inflating partner count, locations, or empanelments in an RFP creates direct misconduct exposure.

Part IV — Other Misconduct (Clauses 1–2)

Clause (1): Conviction for an Offence Punishable with Imprisonment up to Six Months

‘Other misconduct’ extends beyond professional work; reputational harm to the profession is the touchstone.

Clause (2): Acts that Bring Disrepute to the Profession/Institute

Wide in scope—online behaviour, discriminatory conduct, or harassment can qualify. Firms should run respectful‑workplace programmes and social‑media policies.

Material Recent Changes — What Actually Shifted (2020–2025)

1) Disciplinary Architecture (Amendment Act, 2022)

• Reconstitution of the Board of Discipline and Disciplinary Committee; timelines for proceedings; greater transparency; and the ability to proceed against firms. Practical impact: faster movement of cases and broader locus of accountability (individual + firm).
• Coordination Committee across CA/CMA/CS institutes to address common issues and improve consistency.

2) Code of Ethics Implementation (12th Edition; effective 1 July 2020 with phased elements)

• Immediate effect from 1 July 2020 for most provisions; initial deferral of NOCLAR (Sections 260/360), Fees—Relative Size (410.3–R410.6), and Taxation Services to Audit Clients (604) owing to pandemic circumstances. Subsequent announcements operationalised NOCLAR effective 1 October 2022; firms should evidence rollout (policies, training, documentation).
• Website Guidelines consolidated in Volume II (2020) with continued restrictions on testimonials, comparative claims, and solicitation.

3) International Ethical Developments with Indian Relevance

• IESBA 2024 Handbook: revised PIE definition (including ‘publicly traded entity’ in place of ‘listed entity’) effective for periods beginning on/after 15 Dec 2024; firms auditing Indian subsidiaries of multinational PIEs should consider upstream expectations (fees, independence, long association) when coordinating group audits.
• ICAEW 2025 guidance emphasises that the audit fee must not be influenced by other services (R410.6) and reiterates NOCLAR responsibilities (Sections 260/360).
• AICPA Code continues to permit advertising and commissions/referral fees under specific controls (disclosure; no false or misleading content), which is a notable deviation from India’s stricter solicitation stance.

4) Enhanced Transparency and Enforcement

• ICAI’s disciplinary directorate and Board of Discipline communications stress active investigation and publication of outcomes, aligning with the Amendment Act’s objectives of credibility and timeliness.

Material Deviations from Other Professional Bodies (Comparative View)

A. Solicitation and Advertising

• India (First Schedule, Clauses 6–7; ESB website guidelines): Prohibits solicitation and advertising beyond factual write‑ups; testimonials and comparative claims are restricted.
• UK (ICAEW): Advertising is permitted so long as legal, decent, honest, truthful, and clear; dignity of the profession must be preserved. ICAEW issues granular helpsheets on marketing and fees.
• US (AICPA): Advertising and solicitation are allowed provided they are not false, misleading, or deceptive; commissions and referral fees are regulated by disclosure rules.

Impact for Indian Firms: India’s position is materially stricter. Cross‑border collaborations must ensure that any joint publicity complies with Indian restrictions to avoid domestic misconduct.

B. Contingent Fees

• India: Broad prohibition for members in practice (Clause 10), with limited regulatory exceptions.
• UK/US: Contingent fees are prohibited for audit/assurance engagements but may be allowed for certain non‑assurance services subject to safeguards and transparency.

C. NOCLAR

• India: NOCLAR was formally deferred at the 1 July 2020 rollout and implemented subsequently (effective 1 Oct 2022).
• IESBA/ICAEW/AICPA: NOCLAR provisions have been embedded for years (IESBA effective 15 July 2017). UK guidance is extensive; US has analogous obligations through laws/regulations and ethical interpretation.

D. Fees—Relative Size and Influence of Other Services

• India: The deferred ‘Fees—Relative Size’ provisions (410.3–R410.6) and related guidance now demand proportionate safeguards in high‑concentration scenarios.
• UK: New R410.6 emphasis that other services to an audit client must not influence audit fees; clear articulation of safeguards.

E. Multidisciplinary Practice (MDP) and Partnerships

• India: Clause (4) allows partnerships with recognised professionals/qualifications, with a formal recognition gateway.
• UK/US: MDPs are common; the focus is on managing independence, competence, and transparency. India’s recognition gate is a unique compliance checkpoint.

Case‑Law Touchpoints and Institutional References (Selective)

• L.K. Ratna v. ICAI (SC, 1986): Procedural fairness in disciplinary processes.
• Vipin Malik v. ICAI (Delhi HC, 2014): Advertising/solicitation context; stresses intent and effect.
• S. Sukumar v. ICAI (SC, 2018): Recognition under Clause (4) and international affiliation context.
• ICAI President’s May 2022 note summarising Amendment Act highlights; PRS India legislative brief on the 2022 Amendment Act.
• ESB announcements on applicability of Code of Ethics (2020) and deferrals; subsequent activation of NOCLAR from 1 October 2022.

Operational Toolkit (2025 Refresh)

1) Acceptance & Continuance

• Prior auditor communication checklist (Clause 8) with dispatch proofs; independence and conflict assessments; Companies Act appointment verification (Clause 9).
• Engagement letter templates with non‑contingent fee schedules; explicit scope and deliverables.

2) Collaboration & Partner Admissions

• Recognition verification for Clause (4) partners; file hard copies of recognition lists/screenshots with dates; formal SOWs for allied professionals as service providers (not percentage‑based shares).

3) Communications Governance

• Website and collateral mapped to ESB guidelines: no testimonials/comparisons/superlatives; only factual write‑ups; tender responses are allowed.
• Social media protocol: content review, no client logos without consent, and no superiority claims.

4) Signature & Quality Controls

• DSC custody policy; signatory registers; engagement partner accountability; hot/cold reviews.

5) NOCLAR and Confidentiality

• Internal NOCLAR escalation ladders; contemporaneous documentation; legal counsel engagement triggers; confidentiality safeguards and secure data rooms.

6) Training and Culture

• Annual ethics and independence training; scenario‑based workshops; whistle‑blower channels; respectful‑workplace policy to mitigate “disrepute” risk under Part IV.

Illustrative Scenarios (Updated)

Scenario A: RFP Overstatement (Part III‑3)

Your proposal overstates partner count by including on‑leave consultants as full‑time partners. The client awards the work but later discovers the misstatement.

Outcome: Misconduct under Part III‑3 (false information while responding to tenders). Remedy: Immediate corrective disclosure; internal sanctions; ethics training; potential disciplinary exposure remains.

Scenario B: Success‑Fee for a Tax Appeal (Clause 10)

Client offers 5% of the tax relief achieved. Decline; propose fixed or T&M fee. Document the rationale and the Clause 10 prohibition in the file.

Scenario C: Foreign‑Qualified Partner Admission (Clause 4

Prospective partner is qualified in another jurisdiction. Verify recognition; maintain proof; amend partnership deed; inform clients and regulators as needed.

Scenario D: Predecessor Communication & Appointment (Clauses 8 & 9)

In a compressed timeline, you accept an audit without writing to the predecessor or verifying ADT‑1. Discovery later reveals fee dispute and independence concerns—heightened risk of disciplinary action.

Scenario E: Website Clean‑Up (Clauses 6–7)

Remove testimonials and ‘best‑in‑class’ claims; include factual service lists, office addresses, and partner profiles; link to statutory registrations and policies.

Conclusion

India’s First Schedule continues to encode the profession’s public‑interest mandate in strict rules—especially around solicitation, contingent fees, and gatekeeping who may practise in a CA’s name. The 2022 amendments have accelerated and broadened enforcement, including against firms, while the Code of Ethics roll‑out (post‑deferrals) has embedded NOCLAR and modernised independence safeguards. Cross‑border practice requires careful alignment with IESBA/ICAEW/AICPA expectations—but Indian members must default to India’s stricter requirements when serving Indian clients or operating from India.

The safest path is institutional: embed these requirements into engagement acceptance, collaboration protocols, communications governance, and signature/quality controls—so that professional ideals of integrity, competence, confidentiality, and equality of opportunity are realised by design, not by chance.

Endnotes / References (indicative)

1.First Schedule text (India Code portal): ‘The Chartered Accountants Act, 1949 — First Schedule’.

2. ICAI — Applicability of Revised Code of Ethics (announcement dated 1 July 2020) and deferrals (NOCLAR; Fees—Relative Size; Tax services to audit clients).

3. ESB — Website/Advertisement Guidelines as consolidated in Code of Ethics, 2020 (Vol. II) and ICAI website pages (updated 2020).

4. The Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Act, 2022 — PRS India; ICAI President’s note on key provisions (May 2022).

5. IESBA 2024 Handbook (including revised PIE definition effective for periods beginning on/after 15 Dec 2024); IESBA NOCLAR effective 15 Jul 2017.

6. ICAEW Code of Ethics (latest iteration 1 July 2025); ICAEW guidance on marketing; fees charged to audit clients (R410.6 emphasis); NOCLAR Sections 260/360 guidance.

7. AICPA Code of Professional Conduct (Advertising and Other Forms of Solicitation; Professional Responsibilities resources).

8. Selected case‑law: L.K. Ratna v. ICAI (SC, 1986); Vipin Malik v. ICAI (Delhi HC, 2014); S. Sukumar v. ICAI (SC, 2018).