M/s PT & Co., a firm of Chartered Accountants, engages Mr. Rahul, who is not a Chartered Accountant, to assist in administrative coordination,…

CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · May 2026
M/s PT & Co., a firm of Chartered Accountants, engages Mr. Rahul, who is not a Chartered Accountant, to assist in administrative coordination, client communication and liaison activities. The firm pays him a portion of its professional receipts, describing the payment as “legal consultancy and office support charges.” However, Mr. Rahul does not possess any recognised professional qualification prescribed by the Council. In light of the provisions of the Chartered Accountants Act, 1949 and the Schedules thereto, determine whether such payment to Mr. Rahul is permissible.
(A) Permissible as sharing of fees for legal consultancy services.
(B) Constitute professional misconduct under Clause (3) of Part I of the First Schedule to the Chartered Accountants Act, 1949
(C) Constitute professional misconduct under Clause (2) of Part I of the First Schedule to the Chartered Accountants Act, 1949
(D) Permissible if it is disclosed in the engagement letter

Suggested Answer and Working Notes:

Correct Answer: Option (C)

Constitute professional misconduct under Clause (2) of Part I of the First Schedule to the Chartered Accountants Act, 1949

Topics: Professional Ethics & Liabilities of Auditors

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