Rajesh is a practicing Chartered Accountant and has struggled in initial days but put in hard work and now has established well in the field of…

Rajesh is a practicing Chartered Accountant and has struggled in initial days but put in hard work and now has established well in the field of Audit and Indirect Taxes. Rupesh, son of Shyam, a close friend of Rajesh has recently qualified his CA Final exam and has obtained certificate of practice and wants to join Rajesh. Shyam discussed his son's desire with Rajesh. Rajesh advised Shyam that it will not be proper for Rupesh to directly join him as a partner as he lacks practical experience and moreover, he wants to add other areas of practice to diversify so that the firm is equipped with providing solution in different fields such as Finance, Direct Tax and Insolvency & Bankruptcy Law under one umbrella. Thus, Rupesh joins Rajesh as a paid assistant to begin with. Rajesh asks him to study new and emerging field in the Profession - Financial planning, Tax planning and Insolvency and Bankruptcy Law with the help of other staff. Rajesh has asked Rupesh to hone his knowledge in these areas. He also tells him that since he is a newly qualified professional, he needs to know the practical aspects of Professional Ethics of CA Profession, though he might have read about it during his studies and therefore, Rajesh suggests Rupesh to discuss the practical aspects of Professional Ethics of CA profession with him as the time permits. Rupesh agrees to abide by the advice of Rajesh and starts working on it. GNT Limited GNT Limited, one of the clients of CA. Rajesh is in the process of buying a machine to support the existing machines and therefore, approached for consultancy. The company informs Rajesh that it is required to choose between two machines A and B. The two machines are designed differently but have identical capacity and do exactly the same job. Machine A costs - 1,70,000 and will last for 3 years. It costs 50,000 per year to run. Machine B is an 'Economy Model' costing only 1,15,000 but will last only for 2 years and costs - 70,000 per year to run. These are real cash flows. The costs are forecasted in rupees of constant purchasing power. Ignore tax. Opportunity cost of capital is 10%. The company wants to know which machine it should buy? Rajesh asks Rupesh to advise the company suitably. Present value factor @ 10% of annuity: for 3 years 2.487 and for 2 years 1.736. Swayam Swayam - an institution having its main object as "advancement of general public utility" approached Rajesh for an advice on the tax consequence of receipt of 32 lakhs in aggregate during the previous year 2023-24 from an activity in the nature of trade carried out in the course of actual carrying out of its object of advancement of general public utility. The total receipts of the institution, including donations were 150 lakhs. It has applied 85% of its total receipts from such activity during the same year for its main object i.e. advancement of object of general public utility. During his tenure of 1 year as an employee, Rupesh would discuss various matters relating to Professional Ethics with Rajesh on various occasions. Rajesh tells him that a professional needs to be integral, confidential, independent, objective, competent & knowledgeable to be successful in his/her respective profession. A Professional Accountant's responsibility is not exclusively to satisfy the needs of an individual client or employer but also acting in the public interest. A Professional Accountant should observe and comply with the ethical requirements of the Code of Ethics applicable on them. This Code discusses the fundamental principles which professional accountants have to observe in order to achieve the objectives of the accountancy profession. Compliance with such principles may potentially be threatened by a range of threats as per circumstances categorized as Self-Interest, Self-Review, Advocacy, Familiarity and Intimidation threats. The nature & significance of these threats may differ depending on whether they arise in relation to the provision of services to a financial statement audit client, a non-financial statement audit assurance client or a non-assurance client. Rupesh understands the reason now why Rajesh having an opportunity, once refused to manipulate information in a prospectus in order to obtain favorable financing to Delta Ltd. Rupesh during his employment with Rajesh, asks Rajesh to practice in his name ITC as Rajesh has allowed Ramesh, his brother-in-law who is not a Chartered Accountant to practice in the name of Rajesh, but Rajesh did not allow Rupesh to do so citing ethics and tells him that it will be a professional misconduct on his part. ABC Limited, one of Rupesh's clients, has displayed their business name along with the GST Act requirements through Glow Sign Boards outside its premises and has claimed the expense as a revenue expenditure income-tax computation. They seek Rupesh's advice as to such claim in income tax computation. RMC Limited RMC Ltd., one of the clients of Rajesh is under Corporate Insolvency Resolution Process (CIRP). Rajesh has been appointed as Resolution Professional (RP) by NCLT and is in the process of constituting Committee of Creditors (COC). The admitted financial creditors are: (a) Bank A 100 lakhs (Secured by I charge on fixed assets) (b) Bank B 200 lakhs (Secured by II charge on fixed assets) (c) Bank C 100 lakhs (Secured by hypothecation of stocks and debtors) (d) Unsecured 150 lakhs (Includes 50 lakhs from related parties) (e) Bank D 250 lakhs (Secured on specific land and decides not to relinquish) Rupesh works for one year as an employee and after one year joins Rajesh as a Partner with full zeal & enthusiasm after having got the relevant experience. Ujjawal Limited Rajesh is having a very big corporate client, Ujjawal Ltd. This year, Rajesh assigns him the audit work of Ujjawal Ltd. for the preparation of their audit report in a timely manner. There has been material usage variance and the production manager of the company has not been able to give the valid reason for the same. The Profit & Loss a/c of Ujjawal Ltd., having business of steel, tubes and other products for the year ended 31.03.2024 shows a net profit of 505 lakhs and other information are furnished as under: (i) A group free air ticket was provided by a supplier for reaching a certain volume of purchase during the financial year 2023-24. The same is encashed by the company for 15 lakhs in April 2023 and credited to General Reserve Account. (ii) A supplier of raw materials agreed for settlement of 7 lakhs against his claim of 10 lakhs for poor quality of material supplied during the previous year, effect of which has not been given in the account of the supplier. (iii) Joya Bank - a scheduled bank, sanctioned and disbursed a term loan in the financial year 2020-21 of 100 lakhs. Interest of 16 lakh was in arrears. The bank has converted the arrear of interest into a new loan repayable in 10 equal installments. During the year, the company has paid 2 installments and the amount so paid has been reduced from funded interest in the Balance Sheet. (iv) The company remitted 6 lakhs as interest to a company incorporated in USA on a loan taken 2 years ago. Tax deducted under section 195 from such interest has been deposited by the company before due date of the filing of the return of income. The said interest was debited to profit and loss account. (v) Pradeep, a sales executive stationed at Head office at Delhi, was on official tour in Bangalore from 31st May 2023 to 18th July 2023 and 28th September 2023 to 15th October 2023 for the business development. The company has paid Pradeep's salary in cash, from its local office at Bangalore for the month of May 2023 (payable on 1st June) and September 2023 (payable on 1st October), amounting to 55,000 and 60,000 respectively (net of TDS and other deduction), as Pradeep has no bank account at Bangalore. These were included in the amount of salary debited to Profit and Loss Account. (vi) The company has contributed - 75,000 by account payee cheque to an electoral trust and the same stand included under the head "General expenses".