Under the ICAI Code of Ethics, a Chartered Accountant in service preparing or presenting information must NOT:
AExercise discretion in classifying items in the financial statements
BUse unrealistic estimates with the intention of avoiding violation of a contractual or regulatory requirement (e.g., understating provisions to avoid breaching a debt covenant)
CPrepare information in accordance with the company's group accounting policies
DUse any estimate at all — facts must be measured precisely or not at all
Answer & Solution
Correct answer: B. Use unrealistic estimates with the intention of avoiding violation of a contractual or regulatory requirement (e.g., understating provisions to avoid breaching a debt covenant)
Ind AS Code of Ethics + Preparation and Presentation of Information section — discretion in making professional judgments is permitted, but using DISCRETION TO MISLEAD or to influence contractual/regulatory outcomes INAPPROPRIATELY is prohibited. Example: deliberately understating provisions to avoid breaching a debt covenant. Using estimates is fine when based on reasonable assumptions; misleading estimates aren't.
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