CA Jatin is auditor of XYZ Pharma, his brother-in-law's Partnership Firm. His family relationship creates a conflict of interest that could unduly…

(i) In the given case, CA Jatin's family relationship creates a conflict of interest that could unduly influence his professional judgment. This indicates that “Objectivity” principle is being violated. The principle of objectivity requires an auditor not to compromise professional judgment because of bias, conflict of interest or undue influence of others. It requires that a professional accountant shall not undertake a professional activity if a circumstance or relationship unduly influences the accountant's professional judgment regarding that activity. (ii) In the instant case, CA Jatin did not check the latest provision of the Income-tax Act while preparing return of income-tax, which allows for a major new deduction resulting in the client overpaying income tax. This indicates “Professional competence and due care" principle is being violated. A professional accountant shall comply with the principle of professional competence and due care, which requires an accountant to attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organization receives competent professional service, based on current technical and professional standards and relevant legislation; and act diligently and in accordance with applicable technical and professional standards. Diligence includes responsibility to act carefully, thoroughly and on a timely basis in accordance with requirements of an assignment. (iii) In the given situation, CA Jatin's client instructs him to intentionally understate the sales figures to reduce the tax liability. It violates "integrity” principle. A professional accountant shall comply with the principle of integrity, which requires an accountant to be straightforward and honest in all professional and business relationships. Integrity implies fair dealing and truthfulness. A professional accountant shall not knowingly be associated with reports, returns, communications or other information where the accountant believes that the information contains a materially false or misleading statement; contains statements or information provided negligently or omits or obscures required information where such omission or obscurity would be misleading.