Auditing and assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

Mr. Yadav, a Chartered Accountant in practice enters into an agreement with Mr. Puspa Adhikari, an individual who has passed one group of CA final 2 years back. The agreement provides that Mr. Puspa Adhikari shall work in all professional assignments of Mr. Yadav and shall receive 15 percent of fee received from such assignments as remuneration. Explain whether the agreement is in order as per Code of Ethics or any other relevant reference? If remuneration is based on cash flow, does it violate the provisions of the Code of Ethics?

As per section 34(3) of Nepal Chartered Accountants Act, 1997, one shall not share the auditing fees or remuneration or distribute as profit with any person other than a member of the institute and shall not pay any commission, brokerage, etc. out of the professional fees earned to any person or member.

In the above case also, Mr. Yadav a Chartered Accountant in practice enter into agreement to share auditing fees. Accordingly, Mr. Yadav would be held guilty of professional misconduct since he agreed to share the fees to his employee.
Even if remuneration were based on cash flow, it would tantamount to be based on fees received on cash and accordingly Mr. Yadav would be held guilty of professional misconduct.

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