A profession brings with it a special reponsibility. This is because, a ‘profession’ is characterised by application of special knowledge, alongwith certain reponsibilities. A profession is opposed from business, because when we speak of a ‘profession’, it means that firstly, there is absence of profit motive; and secondly there is absence of competition. In case of CAs, it means that the motivating factor for the CA in profession is not making profit. To give an example it means, if the CA is taking a fees of Rs. 250 for filing Income Tax return from salaried tax payer, then it does not matter to him whether the salaried client is earning Rs. two lakhs or Rs. ten lakhs as his annual salary, the practicing CA would charge Rs. 250 from both. Two comparisons can be made. Firstly a similar example of a Doctor who charges a fees of Rs. 100 from his patient for the specialised advised given. A second example, but a contrasting one can be in the form of a professional cinema artist. The hero may charge Rs. 50 lakhs from one producer, and Rs. two crore from another one for the same kind of role - depending how much the producer can pay. But then, a cinema artist or a film’s hero does not have to abide by any ethical issue!

The second aspect of ‘absence of competition’ is more tricky to understand. Technically and legally, a profession is a kind of brotherhood (without the gender bias of the english word!). This is because, the CAs dont ‘compete’ among themselves for getting clients. Simply stated, its different from the kind of competition one would find in business. Take for example, a tender process for the contract, where the different businesses are competing among themselves for getting the contract. The business can bid their contract amount and the lowest one would get the contract. In contrast to this, CAs cannot compete among themselves for getting audit assignments - they cannot undercut among themselves!

Ethics simply stated is morally acceptable action. For example, take a very basic example of killing a person. Now, if that killing happens to be in ordinary situation, then it amounts to murder with penal punishment. However, if that killing is in a situation of battlefield, and the person killed is an enemy soldier, then the soldier who killed is decorated with medals of bravery. This is because, the society accepts such behaviour as morally acceptable, while the former action is condemned, eventhough the outcome of both has same result of a life killed.

For a Chartered Accountant, ethical behaviour and ethical action is very much needed - because, CAs as a profession are engaged in a ‘trust’ function. CAs attest the sanctity and reliability of the financial statement and on which third parties entrust their faith. As auditors CAs have high responsibility because their audit opinion is going to be used by a vast variety of users - whether it be government for the tax and other purposes, banks for loans etc, by investors, by employees, by regulatory agencies, and others. If for example, an auditor opines that a business entity’s profit as reflected and the balance sheet gives a true and fair reflection of the financial health of the business and based on that opinion, numerous small investors invest in that business, then its a huge responsibility. If the government relies on the tax audit report for collecting tax from business, then its a huge responsibility. And in performance of such function, the CA has to be guided by the professional ethics and the dignity of the profession.

Even apart from the audit function, CAs work as accountants managing money of businesses, or if s/he is a fund manager for some mutual fund, or manager in a bank and determines whether a loan should be advanced or not - then all these require high degree of responsibile behaviour, as the monies that are being dealt with are monies given in trust by other people, and not the personal money of the CA. All these situation requires high degree of professional ethics - because, to err is human! And if CAs err then the credibility would be lost, and people will not entrust their faith on them. This would bring both professional disrepute as well as social discredit - and even attract legal suit and judicial action.

Also, the professional reponsibilities of CAs are perhaps at a higher scale. This is because, for example, the responsibility of a lawyer is to his immediate client. The responsibility of the lawyer is to defend his client. If the lawyer is able to defend his client successfully in court, then it does not matter whether the client has committed the offence or not. In contrast the CA as auditor receives his remuneration to speak loud and clear where his client has erred! And on the opinion of the auditor would rest the faith of many of the stakeholders.

Its not so that Auditors are always true to their profession or that they have always acted ethically. After all, even the profession itself is ones source of income, and its human to want to have higher levels of income. Also, its natural that some would like to have ‘bigger’ clients. This kind of thing leads to ‘competition’ of the ‘market place’. Such requirements of the market, driven by ‘revenue pressures’ leads to a situation where on certain occasions, Auditors have deviated from their stated duty and professional ethics.

The Audit firms are not just engaged in the Audit work, but also various kinds of consultancies for their clients, whose audit they do. The money from non audit work is much more than the audit work. So the money that one gets from the works like management consultancies, tax works and other non audit work, acts as a revenue pressure to give a clean audit report. This is because, if the problems detected in audit work is reported, its well possible that the client would change the auditor, and with that would also go the money from the non audit work.

Take the case of Arthur Andersen (AA), which was one of the biggest Audit Firms in the USA and also globally. In case of Enron it gave a clean audit report, where infact the accounts of Enron was in deep problems due to use of certain ‘financial engineering’ practices like ‘off balance sheet financing’. The end result was that Enron collapsed. Similarly AA was also the auditors of WorldCom. In case of WorldCom, the company had simply capitalised $ 3.8 billion of routine expenses as Assets. This increased the profits and inflated the Assets - and the Auditors did not find anything suspect! In USA such scandals led to enacting of Sarbans Oxlay Act (SoX) in 2002.

In India various ’safety measures’ relating to Professional Ethics are inbuilt in the Statutes. For example, the Companies Act of India stipulates that any person who is indebted / or given guarantee to the company for a sum as small as Rs. 1000 cannot be the auditor of that company. The person cannot also be the auditor, if he holds shares or any security of that company.

The Chartered Accountants Act (of India), also stipulates conditions that the Auditor cannot charge fees as a percentage of profit of the company, nor fees could be contingent on outcome of certain event.

Similarly there are other stipulations like the Statutory Auditor cannot write books of Accounts of the business entity that he is auditing. Also, the statutory auditor cannot be simultaneously the internal auditor of the business entity. The Reserve Bank of India as well as the CAG also lays down stipulation like the statutory auditor of a bank cannot take any other audit assignment relating to such bank within a period of one year.

However, in the end, the profession also works within the parameters of the economy. While the institute does its utmost to create the ‘brand’ CA, the individual practitioners have to take care of their ‘market share’. Such effects of ‘market pressures’ is also evident on the amendments brought in the Chartered Accountants Act in 2006. According to it, the Chartered Accountants can do limited advertisements for their professional services, which was hitherto banned till now in the statute. Similarly, the ban on undercutting has also been removed. This simply means that now the CAs can bid for contracts relating to professional services whether it be audit work or otherwise.

We thus see that the area of Professional Ethics is an area in continuous evolution. And it is the pressures of the market that is shaping it. Its in the end the professional who has to do the due diligence and take utmost care when s/he expresses professional opinion.

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