Chartered Accountants (Amendment) Ordinance 1983

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ORDINANCE XV OF 1983

CHARTERED ACCOUNTANTS (AMENDMENT) ORDINANCE, 1983

An Ordinance further to amend the Chartered Accountants Ordinance, 1961

[Gazette of Pakistan, Extraordinary, Part I, 19th June, 1983]

**No. F. 17 (1)/83-Pub.-**The following Ordinance made by the President is hereby published for general information:-

Whereas it is expedient further to amend the Chartered Accountants Ordinance, 1961 (X of 1961), for the purposes hereinafter appearing;

And whereas the President is satisfied that circumstances exist which render it necessary to take immediate action;

Now, therefore, in pursuance of the Proclamation of the, fifth day of July, 1977, read with the Provisional Constitution Order, 1981 (C. M. L. A. Order No. 1 of 1981), and in exercise of all powers enabling him in that behalf, the President is pleased to make and promulgate the following Ordinance :-

SCHEDULE I

[See section 20-A]

PART I

Professional misconduct in relation to chartered accountants in practice

A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he-

(1) allows any person to practise in his name as a chartered accountant, unless such person is also a chartered accountant in practice and is partner ship with, or employed by, him ;

(2) pays or allows or agrees to pay or allow, directly or indirectly, any share, commission or brokerage in the fees or profits, of his professional business to any person other than a member of the Institute or a partner or a retired partner or the legal representative of a deceased partner;

**Explanation.-**In this clause, "partner" includes a person residing outside Pakistan with whom a chartered accountant in practice has entered into partnership which is not in contravention of clause (4) of this Part ;

(3) accepts or agrees to accept any part of the profits of the profes sional work of a lawyer, auctioneer, broker, or other agent who is not a member of the Institute ;

(4) places his professional service at the disposal of, or enters into partnership with, an unqualified person or persons to a position to obtain business of the nature in which chartered accountants engage by means which are not open to a member of the Institute:

Provided that this paragraph shall not be construed as prohibiting a member from practising in a country outside Pakistan in association with a person who is entitled under the law in force in that country to perform functions similar to those a member of the Institute is entitled to perform in Pakistan ;

(5) solicits clients for professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means ;

(6) advertises his professional attainments or services, or uses any designation or expression other than chartered accountant on professional documents, visiting cards, letter heads or sign boards, unless it be a degree of a University established by law in Pakistan or recognised by the Federal Government or the Council ;

(7) accepts a position as auditor previously held by another member of the Institute without first communicating with him in writing ;

(8) accepts an .appointment as auditor of a company without first ascertaining from it whether the requirements of subsection (6) of sec tion 144 of the Companies Act, 1913 (VII of 1913), in respect of such appointment have been duly complied with ;

(9) charges or offers to charge, accepts or offers to accept in respect of any professional employment fees which are based on a percentage of profits or which are contingent upon the findings or results of such emp loyment, except in cases which are permitted under any law for the time being in force or by an order of the Government ;

(10) engages in any business or occupation other than the profession of chartered accountants unless permitted by the Council so to engage:

Provided that nothing contained herein shall disentitle a chartered accountant from being a director of a company, unless he or any of his partners is interested in such company as an auditor ;

(11) accepts a position as auditor previously held by some other char tered accountant in such conditions as to constitute undercutting ;

(12) allows a person not being a member of the Institute or a member not being his partner to sign on his behalf or on behalf of his firm, any balance sheet, profit and loss account, report or financial statements ; or

(13) gives estimates of future profits for publication in a prospectus or otherwise, or certifies for publication the statements of average profits over a period of two years or more without, at the same time, stating the profits or losses for each year separately.

PART 2

Professional misconduct in relation to members engaged in management consultancy

A member of Institute engaged in management consultancy shall be deemed to be guilty of professional .misconduct, if he -

(1) advertises or solicits for work or issues any circular, calendar or publicity material ;

(2) issues brochures, except to existing clients or in response to an unsolicited request:

(3) uses designatory letters indicating qualifications of the directors and members of the company on letter heads, note papers, or professional cards except as provided to clause (6) of Part I of this Schedule ;

(4) refers to associated firms of Chartered Accountants on his letter heads or professional cars or announcements ;

(5) adopts a name of associates himself as a partner or director of a firm or a company whose name is indicative of its activities ;

(6) uses the term chartered accountants for his management consultancy firm or company ;

(7) shares profits or remuneration in a manner contrary to clauses (2) and (3) of Part I of .this Schedule, except when he associates with non members as stated in clause (10) of this Part ;

(8) or his partner in any firm accepts auditing, taxation, or other con ventional accounting work from any client introduced to him for manage ment consultancy services by the client's own professional accountant ;

(9) uses the term "Management Consultant (s)" except in respect of a company engaged in management consultancy field ;

(10) associates with non-members for the rendering of various manage ment services except as long as such non-member observes the bye-laws and code of professional ethics of the Institute ;

(11) does not communicate with the existing professional accountant or consultant, if a member of the institute, informing him of the special work he has been asked to undertake in the event of an introduction for manage ment consultancy work other than through the existing professional accountant ; or

  1. under the guise or through the medium of a company or firm does anything which he is not allowed to do as an individual.

PART 3

Professional misconduct in relation to members of the Institute in service

A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he, being an employee of any company, firm or person,-

(1) pay or allows or agrees to pay directly or indirectly to any person any share in the emoluments of the employment undertaken by the member;

(2) accepts or agrees to accept any part of fees, profits or gains from a lawyer, chartered accountant or broker engaged by such company, firm or person or agent or customer of such company, firm, or person by way of commission or gratification ; or

(3) discloses confidential information acquired in the course of his employment except as and when required by law or except as permitted by the employer.

PART 4

Professional misconduct in relation to members of the Institute generally

A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he-

(1) includes in any statement, return or form to be submitted to the Institute any particulars knowing them to be false ;

(2) not being a fellow styles himself as a fellow;

(3) does not supply the information called for by the Institute or does not comply with the requirements asked to be complied with or does not comply with any of the directives issued or pronouncements made by the Council or any of its Standing Committees ;

(4) generally, wilfully maligns the Institute, the Council omits Com mittee to lower their prestige, or to interfere with performance of their duties in relation to himself or others ;

(5) has been guilty of any act or default discreditable to a member of the Institute ; or

(6) contravenes any of the provisions of the Ordinance or the bye-laws made thereunder.

SCHEDULE II

[See sections 20-A and 20-D]

PART 1

Professional misconduct in relation to chartered accountants in practice requiring action by a High Court

A chartered accountant in practice shall be deemed to be guilty, of pro fessional misconduct, if, he-

(1) discloses information acquired in the course of his professional engagement to any person other than his client, without the consent of his client or otherwise than as required by any law for the time being in force ;

(2) certifies or submits in his name or in the name of his firm a report of an examination of financial statements unless the examination of such statements and the related records has been made by him or by a partner or an employee in his firm or by another chartered accountant in practice:

(3) permits him name or the name of his firm to be used in connection with any estimates of earnings contingent upon future transactions in a manner which may lead to the belief that he vouches for the accuracy of the forecast ;

(4) expresses his opinion on financial statements of any business or any enterprise in which he, his firm or a partner in his firm has a substantial interest, unless he discloses his interest in his report ;

(3) fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary to ensure that the financial statement is not misleading ;

(6) fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity ;

(7) is grossly negligent in the conduct of his professional duties ;

(8) fails to obtain sufficient information to warrant the expression of an opinion or his exceptions are sufficiently material to negate the expression an opinion ; or

(9) fails to keep moneys of his client in a separate banking account or fails to use such moneys for purposes for which they are intended.

Professional misconduct in relation to members engaged in management consultancy requiring action by a High Court

A member engaged in management consultancy shall be deemed to be guilty of professional misconduct, if he -

(1) discloses information acquired in the course of his professional engagements to any person other than his client, without the consent of his client or otherwise than as required by any law for the time being in force ;

(2) is grossly negligent in the conduct of his professional duties ; or

(3) fails to keep moneys of his client in a separate banking account or fails to use such moneys for purposes for which they are intended.

SCHEDULE III

[See sections 20-A and 20-E]

Professional misconduct in relation to the students of the Institute

A student of the Institute shall be deemed to be guilty of professional misconduct, if he

(1) contravenes any of the provisions of the Ordinance or the bye-laws made thereunder ;

(2) does not supply the information called for by the Institute ;

(3) does not comply with any requirements which he is asked by the Institute to comply with ;

(4) does not comply with any of the directives issued by the Council or any of its committees.

(5) discloses confidential information acquired in the course of his training except as and when required by law or except as permitted by his principal ;

(6) includes in any statement or form to be submitted to the Institute, any particulars knowing them to be false ; or

(7) has been guilty of any act or omission discreditable to a student of the Institute.

1. Short title and commencement.-- (1) This Ordinance may be called the Chartered Accountants (Amendment) Ordinance, 1983.

(2) It shall come into force at once.

**2. Amendment of section 1, Ordinance X of 1961.--**In the Chartered Accountants, Ordinance, 1961 (X of 1961), hereinafter referred to as the said Ordinance, in section 1, in subsection (2), after the word "Pakistan", the words and comma "and shall apply to all members, wherever they may be" shall be added.

**3. Amendment of section 2, Ordinance X of 1961.--**In the said Ordi nance, in section 2,-

(a) in subsection (1),-

(i) after clause (c), the following new clause shall be inserted, namely:

"(cc) "fellow" means a fellow member of the Institute"; and

(ii) after clause (g), the following new clause shall be inserted, namely:-

"(gg) "student" means a person who is or has been a trainee under a training contract with a member of the Institute entitled to train students under this Ordinance and the bye-laws made thereunder, and has not successfully completed the examination of the Institute; and"; and

(b) in subsection (2) in the Explanation, for the words "articled clerks" the word "student" shall be substituted.

**4. Amendment of section 4, Ordinance X of 1961.--**In the said Ordi nance, in section 4, in subsection (1), in clause (iii), for the proviso the following shall be substituted, namely:-

"Provided that, in the case of any such person, the Council may, with the approval of the Federal Government, impose such conditions as it may deem fit."

**5. Amendment of section 5, Ordinance X of 1961.-**In the said Ordi nance, in section 5, for subsection (3) the following shall be substituted, namely:-

"(3) An associate member who has been in practice for at least five years or an associate member of the Institute for a period of not less than ten years shall, on payment of the prescribed fee, have his name transferred to the Register of Fellows of the Institute and, on having his name transferred to the Register of Fellows, he shall be entitled to use the letters F. C. A. after his name to indicate that he is a fellow member of the Institute.

**Explanation.-**For the purpose of this subsection, two years as a non-practising associate shall be counted as one year practice of such associate."

**6. Amendment of section 6, Ordinance X of 1961.--**In the said Ordi nance, in section 6, in subsection (1),-

(a) for the colon a full-stop shall be substituted; and

(b) the proviso shall be omitted.

**7. Amendment of section 9, Ordinance X of 1961.--**In the said Ordi nance, in section 9,-

(a) for subsection (2) the following shall be substituted, namely:-

"(2) The, Council shall be composed of the following persons, namely:-

(a) the prescribed number of persons, not being less than twelve, elected from the two prescribed regional constituencies by the members of the Institute belonging to such constituencies from among such members of at least five years' standing, the number of members to be elected from each such constituency being such as may be prescribed:

Provided that each such regional constituency shall consist of two Zones, to be known as Zone "A" and Zone "B", having the prescribed limits:

Provided further that at least one member shall be elected from each of the aforesaid Zones; and

(b) not more than four persons nominated by the Federal Govern ment."; and

(b) subsection (3) shall be omitted.

**8. Amendment of section 10, Ordinance X of 1961.--**In the said Ordinance, in section 10, for subsection (2) the following shall be substituted, namely:-

(2) Where any dispute arises regarding any such election, the matter shall be referred by the Council to a Tribunal appointed by the Presi dent of the Council in this behalf and the decision of such Tribunal shall be final:

Provided that in case the President of the Council in office is himself a party to such dispute or is unwilling to make such appointment, the immediate past President of the Council shall appoint the Tribunal:

Provided further that no such reference shall be made except on an application made to the Council by an aggrieved party, within thirty days from the date of the declaration of the result of the election.".

**9. Substitution of section 11, Ordinance X of 1961.--**In the said Ordi nance, for section 11 the following shall be substituted, namely:-

"11. ++Nomination in default of election++.-(1) If the members of the Institute referred to in clause (a) of subsection (2) of section 9 fail to elect the required number of members which they are empowered under that section to elect from a Zone of a constituency, the members declared elected from that Zone shall nominate the number of members not elected who shall be deemed to be members of the Council as if they had been duly elected.

(2) Where the members of the Institute referred to in clause (a) of subsection (2) of section 9 do not at all elect any member, the Council shall nominate the required number of members from the respective regional constituencies and such members shall be deemed to be the members of the Council as if they had been duly elected."

**10. Amendment of section 12, Ordinance X of 1961.--**In the said Ordinance, in section 12,-

(i) for the colon a full-stop shall be substituted; and

(ii) the proviso shall be omitted; and

(b) in subsection (3), for the full-stop at the end a colon shall be subs tituted and thereafter the following proviso shall be added, namely:-

"Provided that, notwithstanding the expiry of the term of their office, the President and the Vice-President or Vice-Presidents of the Council, shall continue to hold office till such time as their successors are elected."

11. Amendment of section 13, Ordinance X of 1961.-In the said Ordi nance, in section 13, in subsection (3), in the proviso, for the words "Federal Government after consultation with the President of the Council" the word "Council" shall be substituted.

12. Amendment of section 14, Ordinance X of 1961.-In the said Ordi nance, in section 14, in subsection (1),-

(a) for the word "three" the word "four" shall be substituted; and

(b) for the full-stop at the end a colon shall be substituted and there after the following proviso shall be added, namely:-

"Provided that the duration of the Council existing immediately before the commencement of the Chartered Accountants (Amendment) Ordinance, 1983, shall be three years."

13. Amendment of section 15, Ordinance X of 1961.- In the said Ordi nance, in section 15, in subsection (2),-

(a) for the word "duties" the word "functions" shall be substituted:

(b) in clause (b), for the words "articled and audit clerks" the word "student" shall be substituted; and

(c) after clause (m), the following new clause shall be inserted, namely:-

"(mm) the constitution of an Investigation Committee consisting of such members as may be prescribed;"

**14. Amendment of section 17, Ordinance X of 1961.-**In the said Ordi nance, in section 17,-

(a) in the short title, for the word "Council" the word "Institute" shall be substituted; and

(b) for the word "Council"; occurring for the second and third times the word "Institute" shall be substituted.

**15. Amendment of section 19, Ordinance X of 1961.--**In the said Ordi nance,-

(a) section 19 shall be re-numbered as subsection (1) of that section and in subsection (1), re-numbered as aforesaid,-

(i) in clause (d), for the full-stop at the end the semi-colon and word "; or," shall be substituted; and

(ii) after clause (d), amended as aforesaid, the following new clause shall be added, namely:-

"(e) against whom an order has been passed under this Ordinance removing him from the membership of the Institute.";

(b) after subsection (1), re-numbered and amended as aforesaid, the following new subsections shall be added, namely :-

"(2) The Council may, on an application made to it by a person whose name has been removed from the Register for a specified period, restore his name if he is otherwise eligible to such membership:

Provided that he shall have paid before such restoration the admission fee for the year during which his name is restored; and, if his name has been removed under clause (b) or clause (c) of subsection (1), all arrears on account of annual membership fee subject to maximum of five years of annual membership fee according to the scale applicable to him.

(3) The restoration of the name of a member shall be notified in the official Gazette and in such journal or journals as the Council thinks desirable and shall also be communicated in writing. to the person con cerned."

16. Amendment of section 20, Ordinance X of 1961.-In the said Ordi nance, in section 20, in subsection (1), for the words "specified by the Federal Government" the word "prescribed" shall be substituted.

17. Insertion of Chapter V -A, Ordinance X of 1961.-In the said Ordinance, after Chapter V, the following new chapter shall be inserted, namely :-

"CHAPTER VA-.-MISCONDUCT

20-A Facts, etc., to be laid before the Investigation Committee.--(1) The Secretary of the Institute shall, and any member or any aggrieved person may, lay before the investigation Committee any fact indicating that-

(a) a member of the Institute has prima facie been guilty of any professional misconduct specified in Schedule I or Schedule II ; or

(b) a student has prima facie been guilty of any professional misconduct specified in Schedule III,

(2) Where a complaint is received by the Institute that any member of the Institute or student is guilty of professional misconduct referred to in subsection (1), the complaint shall, with relevant and necessary facts, be laid before the Investigation Committee.

20-B. Enquiry by the Investigation Committee:-(1) If on considering the facts or complaint laid before it under section 20-A, the Investigation Committee is of opinion that such facts or complaint require investigation, it shall, after giving a notice to the member of the Institute or student whose conduct is in question, hold an inquiry.

(2) A member of the Institute or student whose conduct is in question shall be given au opportunity of being heard and, if such member or student so desires, the Investigation Committee shall permit such member or student to be represented before it by a Council by a member of the Institute.

(3) After the conclusion of inquiry, the Investigation Committee shall report the result of the inquiry to the Council.

20-C. Member or student not found guilty.-If, on receipt of the report under section 20-B, the Council finds that the member of the Institute or student,, as the case may be, is not guilty of any professional misconduct, it shall record its finding accordingly and direct that the proceedings or, as the case may be, the complaint be filed.

20-D. Orders by the Council if member found guilty.-(1) If, on receipt of the report under section 20-B, the Council is of opinion that the member of the Institute has been guilty of any professional misconduct specified in Schedule I, it may, after affording such member an opportunity of being heard, either personally or through counsel or another member of the Institute, make any of the following orders, namely :-

(a) reprimand or warn such member ;

(b) impose such penalty as it may deem necessary not exceeding one thousand rupees ; and

(c) remove the name of such member from the Register for a period not exceeding five years:

Provided that, where it appears to the Council that the case is one in which the name of such member ought to be removed from the Register for a period exceeding five years or permanently, it shall not make any order but shall refer the case to the High Court with its recommendations thereon.

(2) If the Council is of opinion that the member of the Institute is guilty of a professional misconduct specified in Schedule II, it shall refer the case to the High Court with its recommendations thereon:,

**20-E. Orders by the Council if students found guilty.-**If, on receipt of report under section 20-B, the Council is of opinion that the student is guilty of any professional misconduct specified in Schedule III, it shall, after affording such student an opportunity of being heard, ether personally or through a counsel or a member of the Institute, make any of the following orders, namely :-

(a) reprimand or warn the student ; or

(b) suspend the student, from training, or extend the period of training of the student, for such period as 4 may deem fit ; or

(c) debar the student from training.

20-F. Hearing of case by the High Court.-On receipt of a reference under section 20D, the High Court shall fix a date for the hearing of the reference and cause notice of the date so fixed to be given to the member of the Institute and the Council, and shall, after affording such member and the Council, either personally or through counsel or a member of the Institute, an opportunity of being heard, make any of the following orders, namely :-

(a) direct that the proceedings be filed or dismiss the complaint, as the case may be ;

(b) reprimand such member ;

(c) remove him from membership of the institute either permanently or for such period as it may deem fit ; or

(d) refer the case to the Council for further inquiry and report.

**20-G. Effect of inquiry.-**For the purposes of this Chapter, "member of the Institute" includes a person who was a member of the Institute or, the date of the alleged misconduct but has ceased to be a member of the Institute at the time of inquiry for any reason.

20-H. Council and Investigation Committee to have powers of civil Court.--The Council and the Investigation Committee shall, for the purpose of an Inquiry under this Chapter, be deemed to be a civil Court and shall have the same powers as are vested in a civil Court Linder the Code of Civil Procedure, 1908 (Act V of 1908), in respect of the following matters, namely :-

(a) summoning and enforcing the attendance of any person and examin ing him on oath ;

(b) the discovery and production of any document ; and

(c) receiving evidence on affidavits.

20-I. Publication of findings and decisions.- ---Where a member of the Institute or a student is found guilty, the Council shall cause the findings and decision: given against such member or student, as the case may be, to be published in the official Gazette and in such journal or journals as the Council may deem fit: `

Provided that, where the Council deems necessary, it may omit the name of such member or student from publication.

20-J. Return of certificate.-(1) Where the-name of a member of the Institute is removed from the Register, whether for a specified or perma nently, every certificate of membership or practice held by such member shall be deemed to be cancelled from the date of the order removing his name from the Register and shall stand so cancelled for a said period, or as the case may be, permanently.

(2) The certificate referred to in subsection (1) shall be returned by the member of the Institute to the Secretary of the Council who shall, in the case of a member whose name is removed from the Register for a specified period, return the certificate to the member on the expiration of the said period.

20-K. Appeal and revision.-(1) Any member of the Institute aggrieved by an order of the Council imposing on him any of the penalties referred to in section 20-D may, within sixty days of the date of communication of such order to him, prefer an appeal to the High Court.

(2) The High Court may, on its own motion or on an application made to it, call for the record of any case in which the Council has made an order under section 20-D and may-

(a) confirm, modify or set aside the order ;

(b) impose any penalty or set aside, reduce, confirm or enhance the penalty imposed by the order ;

(c) remit the case to the Council for such further inquiry as the High Court may consider proper in the circumstances of the case ; or

(d) pass such other order as it may deem fit;

Provided that no order of the Council shall be modified or set aside unless the Council has been given an opportunity of being heard and no order imposing or enhancing a penalty shall he passed unless the person concerned has also been given an opportunity of being heard."

18. Amendment of section 21, Ordinance X of 1961.---In the said Ordi nance, in section 21, in clause (i), in sub-clause (b), the comma and words "unless he is a member or any other Institute of Chartered Accountants" shall be omitted.

19. Amendment of section 23, Ordinance X of 1961.----In the said Ordi nance, in section 23, in subsection (1), for the full-stop at the end a colon shall be substituted and thereafter the following proviso shall be added namely :-

"Provided that the members of the Institute shall be permitted to form into a limited company solely for practising as "Management Consultants."

20. Amendment of section 26, Ordinance of 1961.----In the said Ordinance, in section 26, in subsection (1),-

(a) the words "in Pakistan" shall be omitted ; and

(b) after the words member of the Institute", the words "who ordinarily resides in the area served by such office" shall be added.

21. Amendment of section 27, Ordinance X of 1961.---In the said Ordinance, in section 27, in subsection (2),-

(a) for clause (j), the following shall be substituted, namely :--

"(j) the training of the students and suspension of the training of students for misconduct or for any other cause ;"; and

(b) after clause (k), the following new clause shall be added, namely :-

"(kk) the issue of directives to the members of the Institute on professional matters."

22. Addition of Schedules, Ordinance X of 1961.-In the said Ordinance, after section 31, the following new Schedules shall be added, namely :--

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