CA Ratan, a member in practice, is invited to join the Board of Directors of Sathi Co-operative Bank Ltd. as an Independent Director. The Bank…

As per the recent decision taken by the Ethical Standards Board of ICAI, a member in practice may be a non-executive/independent director in a Co-operative Bank, provided he is not involved into day to day activity of the organisation, nor he or any of his partners are interested in the Bank as an auditor. In the present case, CA Ratan, a member in practice, has been invited to join Sathi Co-operative Bank Ltd. as an Independent Director, and the position is honorary with no involvement in daily management. This is permissible, subject to the condition that neither he nor his partners undertake the audit of the same bank. However, the Bank's management has approached CA Mihir, a partner of CA Ratan, to conduct the statutory audit of the same Bank for the current year. As per abovementioned recent decision of Ethical Standards Board, if any partner of the firm is appointed as auditor, the member cannot simultaneously hold the position of independent/non-executive director in that same entity. In view of the above, CA Ratan cannot accept or continue as an Independent Director if his partner, CA Mihir, accepts the statutory audit of the same Co-operative Bank. Conversely, if CA Ratan accepts directorship, the firm must decline the statutory audit assignment. Thus, both positions cannot be held simultaneously, and the firm should choose between the directorship and the audit engagement in order to comply with the decision of Ethical Standards Board of ICAI.