Advanced Auditing, Assurance and Professional Ethics · Professional Ethics & Liabilities of Auditors

Professional Misconduct under the Chartered Accountants Act

Updated 5 October 2026

Professional misconduct under the CA Act, 1949 means an act or omission listed in the First or Second Schedule, as provided in Section 22. You solve a case by spotting the act, matching it to the right Schedule, part and clause, and then naming who is liable: a member in practice, a firm, or a member in service.

Understand Professional Misconduct under the Chartered Accountants Act

The CA Act, 1949 does not define professional misconduct in one line. Section 22 says it includes any act or omission provided in the First Schedule or the Second Schedule. So your job in the exam is to match facts to a listed clause.

The First Schedule and the Second Schedule list different acts of misconduct. On a complaint, the Director (Discipline) first forms a prima facie opinion. If the opinion is that the member is guilty only of First Schedule misconduct, the case goes to the Board of Discipline. The Board decides after hearing the member. If it is of the opinion that the case is not fit to be decided by itself, it may refer the case to the Disciplinary Committee. If the opinion is that the member is guilty of Second Schedule misconduct or other misconduct, the case goes to the Disciplinary Committee. Both Schedules are divided into parts that decide who is covered.

The parts work by the status of the person. Each Schedule has four parts. In the First Schedule, Part I covers a chartered accountant in practice, Part II covers members of the Institute in practice, Part III covers a member in service, and Part IV covers other misconduct of members generally. In the Second Schedule, Part I covers a chartered accountant in practice, Part II covers a member in service, Part III covers professional misconduct of members generally, and Part IV covers other misconduct of members generally, such as conviction by a court for an offence punishable with imprisonment above six months. Always read who the person in the case is before choosing the part.

The name lending clause, Clause (1) of First Schedule Part I, says a chartered accountant in practice is guilty of professional misconduct if he allows any person to practise in his name as a chartered accountant, unless that person is also a chartered accountant in practice and is in partnership with or employed by him. This is the classic rule against name lending, where an outsider uses the member's name and signature.

The key idea behind the Schedules is that the profession's name and signature carry public trust. Misconduct clauses protect that trust. Know the heading of the clause (such as name lending, fees, advertising, confidentiality, or negligence) and you can usually recall the clause itself.

Do not mix up the clauses. Name lending sits in Clause (1) of Part I of the First Schedule. Disclosure of confidential information, and certifying or submitting a report on financial statements without the examination being made by the member, his partner or employee, or another chartered accountant in practice, are separate clauses with their own conditions. Do not run them together with name lending. Quote the Schedule, part and clause for them only if you are certain, and otherwise describe the act in words.

Section 22 deals with professional or other misconduct. It treats any act or omission in the Schedules as misconduct, and it does not limit the power to inquire into a member's conduct in other circumstances. Other misconduct, such as conduct arising from a conviction, is also dealt with in Section 22. Section 21 deals with the procedure for inquiry, Section 21A with the Board of Discipline, and Section 21B with the Disciplinary Committee, including its powers to impose penalties. Use the clause text given in your question.

Key rules to remember

Meaning of professional misconduct: Professional misconduct = any act or omission provided in the First Schedule or the Second Schedule (Section 22); Start every answer by stating this. The Schedules, not general ideas of ethics, decide whether there is misconduct.
Name lending clause (First Schedule Part I, Clause (1)): CA in practice allows another person to practise in his name, unless that person is a CA in practice and is his partner or employee = misconduct; The exception is narrow. The other person must be a chartered accountant in practice and also a partner or an employee.
Who the part applies to: First Schedule: Part I = CA in practice; Part II = members of the Institute in practice; Part III = member in service; Part IV = other misconduct of members generally. Second Schedule: Part I = CA in practice; Part II = member in service; Part III = professional misconduct of members generally; Part IV = other misconduct of members generally; Check the status of the person in the case before quoting the part. Both Schedules have four parts.
Schedule choice: Director (Discipline) forms a prima facie opinion; First Schedule matters = Board of Discipline (which may refer a case to the Disciplinary Committee if it thinks the case is not fit to be decided by itself); Second Schedule or other misconduct matters = Disciplinary Committee; Quote the Schedule, the part and the clause number only when you are sure. Otherwise describe the act in words.

How to solve Professional Misconduct under the Chartered Accountants Act questions

Use the same step-by-step method for any case on professional misconduct. It keeps your answer in provision-facts-conclusion form.

1Read the case and mark the person: member in practice, firm, or member in service.
2Identify the exact act or omission, such as name lending, advertising, fee sharing, or breach of confidence.
3Match the act to the Schedule and part. State the clause number only if you are certain, otherwise name the clause in words.
4State the rule in plain words, including any exception or condition in the clause.
5Apply the rule to the facts one by one, noting who did what and whether the exception applies.
6Conclude clearly: guilty of professional misconduct or not, under which Schedule, and who is liable.
7If the case allows it, add the consequence: the Director (Discipline) forms a prima facie opinion; First Schedule matters go to the Board of Discipline (which may refer a case to the Disciplinary Committee if it thinks the case is not fit to be decided by itself), Second Schedule or other misconduct matters go to the Disciplinary Committee, and then the possible penalties apply.

Quickest way: Who, what, which Schedule

When to use it: Use this when you have under five minutes for a short case or an MCQ.

Underline the person's status in the case.
Underline the single act that looks wrong.
Ask if an exception saves the member, such as the other person being a CA in practice who is a partner or employee (the name lending clause of First Schedule Part I).
Write the rule, one line of facts, and a one-line conclusion naming the Schedule.

Common mistakes in Professional Misconduct under the Chartered Accountants Act

Quoting the clause number from memory when unsure
Students think a number earns marks by itself.
Fix: Describe the clause in words and quote the number only if you are certain. A correct rule with no number still scores.
Ignoring the exception in the name lending clause
Students remember only that name lending is misconduct.
Fix: Always test whether the other person is a CA in practice and is a partner or employee. If so, there is no misconduct.
Mixing up the parts of the Schedules
The parts look alike, and both Schedules have four parts.
Fix: Fix the status first: practice, service, or member generally. Then choose the part for that Schedule.
Calling every unethical act misconduct
Students use general ethics instead of the Schedules.
Fix: Start from Section 22. If the act is not in a Schedule and not covered by the other misconduct provisions, say so.
Forgetting to conclude
Students describe the rule at length and run out of time.
Fix: End with a one-line verdict naming the Schedule and who is liable.

Worked examples

Example 1

CA Ravi, a chartered accountant in practice, lets his brother Suresh, who is a commerce graduate and not a chartered accountant, sign audit reports on Ravi's letterhead and take up audit work in Ravi's name. Suresh is not employed by Ravi. Is Ravi guilty of professional misconduct?

Show the solution

Provision: Under Section 22, misconduct includes an act in the First or Second Schedule. The name lending clause, Clause (1) of First Schedule Part I, says a CA in practice is guilty if he allows any person to practise in his name as a chartered accountant, unless that person is a CA in practice and is his partner or employee.
Facts: Ravi is a CA in practice, so Part I applies. Suresh is not a chartered accountant. He is also not a partner or employee.
Application: Suresh is practising in Ravi's name, and the exception does not apply because Suresh is neither a CA in practice nor a partner or employee.
Conclusion: Ravi has allowed a person to practise in his name.

Answer: Yes. Ravi is guilty of professional misconduct under the name lending clause, Clause (1) of First Schedule Part I of the CA Act, 1949.

Example 2

CA Meera, a chartered accountant in practice, has CA Anil, another chartered accountant in practice, as her salaried employee. Anil signs some audit reports in Meera's firm's name with her knowledge. Is Meera guilty under the name lending clause, Clause (1) of Part I of the First Schedule?

Show the solution

Provision: The name lending clause makes it misconduct to allow another person to practise in your name, unless that person is a CA in practice and is your partner or employee.
Facts: Meera is a CA in practice. Anil is a chartered accountant in practice and is her employee.
Application: The exception applies, because Anil meets both conditions: he is a CA in practice and he is employed by Meera.
Conclusion: The clause is not breached on these facts. Other duties such as proper quality control still apply.

Answer: No. Meera is not guilty under the name lending clause, Clause (1) of First Schedule Part I, because Anil is a CA in practice employed by her, which falls within the exception.

Exam tips

Open with Section 22 in one line, then go to the Schedule. It sets up the answer and costs little time.
Always test the exception in a clause. Examiners build cases around exceptions.
In MCQs, check the status of the person first. A member in service is judged under a different part from a member in practice.
Do not guess clause numbers. Describe the clause in words if you are not sure.
End each case with a clear yes or no verdict. Marks go to the conclusion as well as the rule.

Practice questions from Professional Ethics & Liabilities of Auditors

Professional Misconduct under the Chartered Accountants Act: frequently asked questions

What is the difference between the First Schedule and the Second Schedule?

Both list acts of professional misconduct under Section 22 of the CA Act, 1949. After the Director (Discipline) forms a prima facie opinion, First Schedule matters go to the Board of Discipline, which may refer a case to the Disciplinary Committee if it thinks the case is not fit to be decided by itself. Second Schedule or other misconduct matters go to the Disciplinary Committee. Name lending is in Clause (1) of First Schedule Part I.

What does the name lending clause of First Schedule Part I say?

Clause (1) of First Schedule Part I says a chartered accountant in practice is guilty of misconduct if he allows any person to practise in his name as a chartered accountant. The only exception is where that person is a chartered accountant in practice who is his partner or employee.

Do I need to remember clause numbers for the exam?

Know the key clauses well, such as the name lending clause, Clause (1) of Part I of the First Schedule. For the rest, state the rule accurately in words. An accurate rule with a clear application usually matters more than a number.

Does Section 22 cover only acts in the Schedules?

Section 22 deals with professional or other misconduct. It treats acts and omissions in the First and Second Schedules as misconduct, and it also covers other misconduct, such as conduct arising from a conviction. Section 21 deals with the procedure for inquiry, Section 21A with the Board of Discipline, and Section 21B with the Disciplinary Committee and its powers to impose penalties. Read the question for what it asks.