Alaap Ltd.'s directors press the CA to provide projected cash flows to a bank that DON'T meet the bank's DSCR > 10 requirement, falsely claiming they do. The CA has recently joined and "cannot afford to lose his job". Under the ICAI Code of Ethics, the CA's response should be:
ADECLINE — the CA must put the company's interests and professional ethics first; provide honest projections to the bank; raise the issue with appropriate management/governance. Knowingly providing false projections breaches INTEGRITY + OBJECTIVITY + PROFESSIONAL COMPETENCE and constitutes Professional Misconduct under Clause 1 Part II Second Schedule
BProvide both honest and "adjusted" projections; let the bank choose
CComply with the directors' request — directors have authority and the CA is an employee
DResign immediately without informing the bank
Answer & Solution
Correct answer: A. DECLINE — the CA must put the company's interests and professional ethics first; provide honest projections to the bank; raise the issue with appropriate management/governance. Knowingly providing false projections breaches INTEGRITY + OBJECTIVITY + PROFESSIONAL COMPETENCE and constitutes Professional Misconduct under Clause 1 Part II Second Schedule
Self-interest threat (CA's financial pressure) cannot override fundamental principles. Knowingly disclosing incorrect information breaches Integrity + Objectivity + Professional Competence. The CA must (i) prepare honest projections, (ii) communicate corrective actions to directors, (iii) escalate to non-executive directors if necessary, (iv) document their position. If the CA provides false projections, they face Clause 1 Part II Second Schedule misconduct + potential criminal liability for misrepresentation to the bank.
Related questions
Under the ICAI Code of Ethics, when complying with one fundamental principle CONFLICTS witUnder the Chartered Accountants Act 1949, OTHER MISCONDUCT (different from professional miUnder the Code of Ethics, a Chartered Accountant must conduct themselves so that they do NUnder the ICAI Code of Ethics, when a CA in service IDENTIFIES a CONFLICT OF INTEREST, theUnder the Chartered Accountants Act, 1949 SECOND SCHEDULE Part I, a CA in practice is GUILUnder the ICAI Code of Ethics, a Chartered Accountant in service preparing or presenting iRustom Ltd. has an obligation to dismantle an oil rig at end of 10-year useful life (₹100 Disclosure of confidential information by a Chartered Accountant is PERMISSIBLE / REQUIRED