Second Schedule explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Second Schedule lists the graver acts of professional misconduct. In Part I, items (2) to (6) deal with signing off work that was not examined, lending a name to a forecast, giving an opinion on a business in which the member or his firm has a substantial interest, and failing to disclose or report material facts in a financial statement. Matters in the Second Schedule go to the Disciplinary Committee. This article follows the text as per the Act as printed in the ICAI edition of 2022 (amended up to the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Act, 2022).
A chartered accountant in practice is deemed guilty of professional misconduct if he certifies a report of an examination he did not make or have made by his own side, permits his name to be used with an earnings forecast in a way that suggests he vouches for it, expresses an opinion on a business in which he, his firm or a partner has a substantial interest, or fails to disclose or report a material fact or misstatement known to him in a financial statement he is concerned with. In item (3), the words "or his firm" are enacted but not yet in force.
How the Second Schedule works
Like the First Schedule, the Second Schedule is a list of acts and omissions that section 22 treats as professional or other misconduct (our article on sections 21C, 21D and 22 explains it). The difference is the forum and the penalty. Under section 21(3) as in force, where the Director (Discipline) is of the opinion that a member is guilty of misconduct in the Second Schedule, or in both Schedules, he places the matter before the Disciplinary Committee. Under section 21B(3) as in force, the Committee, after giving the member an opportunity of being heard, may reprimand him, remove his name from the Register permanently or for such period as it thinks fit, or impose a fine which may extend to five lakh rupees. Our articles on section 21 and section 21B explain the route and the 2022 version that is enacted but not yet in force.
If you sign reports, certificates or attest financial information, these five items shape how you plan your engagements. Our financial legal due diligence team works with the documents and disclosures these items are concerned with.
The commencement trap
| Point | In force | Enacted in 2022, not yet in force |
|---|---|---|
| Heading cross-reference | "21(3), 21B(3)" | "21(6), 21B(5) and (6)" |
| Item (3), words used | "belief that he vouches for the accuracy of the forecast" | "belief that he or his firm vouches for the accuracy of the forecast" |
The ICAI edition prints the new words in brackets and states that they are not yet in force; S.O. 2184(E) dated 10 May 2022 left them out. A later commencement notification should be checked. Items (2), (4), (5) and (6) are in force as printed.
Item (2): certifying what you did not examine
A member is guilty if he certifies or submits in his name, or in the name of his firm, a report of an examination of financial statements unless the examination of such statements and the related records has been made by him or by a partner or an employee in his firm or by another chartered accountant in practice.
The permitted examiners are four: the member, a partner, an employee of the firm, or another chartered accountant in practice. The item covers both the statements and "the related records".
Item (3): lending a name to a forecast
A member is guilty if he permits his name or the name of his firm to be used in connection with an estimate of earnings contingent upon future transactions in a manner which may lead to the belief that he vouches for the accuracy of the forecast.
Two things matter: the estimate depends on future transactions, and the use of the name may lead to a belief that the member vouches for accuracy. The test is the effect on the reader, "may lead to the belief". The item does not ban forecasts as such. The words "or his firm" after "he" are the 2022 words not yet in force; today the item reads "belief that he vouches".
Item (4): substantial interest
A member is guilty if he expresses his opinion on financial statements of any business or enterprise in which he, his firm, or a partner in his firm has a substantial interest.
The text names three persons: the member, his firm and a partner in his firm. "Substantial interest" is not defined in the Schedule and the item gives no percentage.
Item (5): failing to disclose a material fact
A member is guilty if he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity.
The fact must be material, known to the member, undisclosed, and necessary to the statement, and the member must be concerned with it in a professional capacity.
Item (6): failing to report a material misstatement
A member is guilty if he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity.
| Item | What the member must not do | Key words |
|---|---|---|
| (2) | Certify or submit a report of an examination he did not control | Made by him, a partner, an employee or another CA in practice |
| (3) | Allow his name to be used with a forecast so that he seems to vouch for it | "may lead to the belief that he vouches" |
| (4) | Give an opinion where he, his firm or a partner has a substantial interest | "substantial interest" |
| (5) | Fail to disclose a known, material, necessary fact | "known to him" |
| (6) | Fail to report a known, material misstatement | "known to him" |
The items that have their own posts
- Item (1), disclosing information acquired in the course of a professional engagement, is explained in client confidentiality under the Second Schedule.
- Item (7), due diligence and gross negligence, is explained in due diligence and gross negligence.
- Item (10), client money in a separate bank account, is explained in client money and the separate account.
Items (8) and (9) and the rest of the Schedule are in our article on the Second Schedule, Part I items (8) and (9), Part II and Part III.
A worked example
CA Kavita Rao is asked by a start-up, Greenleaf, an invented business, to allow its investor deck to carry "Reviewed by Kavita Rao & Co." beside a five-year profit estimate. The estimate depends on future orders, and the investor reading the deck may think she vouches for it. Item (3) is engaged. Separately, her audit team finds that a related-party transaction known to her is missing from the notes. If she signs without disclosing it, item (5) is engaged. If the statement shows a figure she knows to be wrong and she does not report it, item (6) is engaged.
Need help with disclosures and attestation work?
A forecast, a certificate or a disclosure note is easier to defend when the working file shows how the conclusion was reached. Our financial legal due diligence team can support the review of the financial and legal documents behind your work.
Key takeaways
- The Second Schedule goes to the Disciplinary Committee, which can reprimand, remove the name permanently or for a period, or fine up to five lakh rupees (section 21B(3) as in force).
- Item (2): certify only an examination made by you, a partner, an employee or another chartered accountant in practice.
- Item (3): do not let your name be used so that a forecast seems vouched for; "or his firm" is enacted but not yet in force.
- Items (5) and (6): known material facts must be disclosed and known material misstatements reported.
Read next
- Second Schedule, Part I items (8) and (9), Part II items (3) to (5) and Part III
- Section 21B: the Disciplinary Committee
- First Schedule, Part I items (9) and (12)
- Client confidentiality under the Second Schedule
Disclaimer: Based on the Chartered Accountants Act, 1949 as printed in the ICAI edition of 2022 (amended up to Act 12 of 2022), read with S.O. 2184(E) dated 10 May 2022, which brought only part of the 2022 amendments into force, as consulted on 3 October 2026. Regulations, rules, Council guidelines, later amendments and commencement notifications should be checked. This article is general information, not legal advice; check the official text before acting.