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.
This article covers the remaining items of the Second Schedule. In Part I, item (8) is about expressing an opinion without sufficient information and item (9) about not drawing attention to a material departure from audit procedure. In Part II, items (3) to (5) cover false particulars given to the Institute's bodies, defalcation or embezzlement, and acting as company auditor in breach of the Companies Act, 2013. Part III covers a conviction for an offence punishable with imprisonment exceeding six months. 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).
Part I, items (8) and (9): a chartered accountant in practice is guilty if he fails to obtain sufficient information to express an opinion, or fails to invite attention to a material departure from the generally accepted procedure of audit. Part II, items (3) to (5): any member is guilty if he includes particulars he knows to be false in a submission to the Institute's bodies, defalcates or embezzles money received in a professional capacity, or acts as an auditor of a company in contravention of the Companies Act, 2013. Part III: a conviction for an offence punishable with imprisonment exceeding six months is "other misconduct". Part II, item (5) was inserted in 2022 and is in force from 10 May 2022.
How these items fit
Section 22 treats the acts in the Second Schedule as misconduct (our article on sections 21C, 21D and 22 explains it). A Second Schedule matter goes to the Disciplinary Committee under section 21(3) as in force, and the Committee may reprimand, remove the name from the Register permanently or for such period as it thinks fit, or fine up to five lakh rupees under section 21B(3) as in force. See our article on section 21B. The Schedule's heading reference in the 2022 edition is enacted but not yet in force; the reference in force is "21(3), 21B(3)". A later commencement notification should be checked.
If an audit file, a return to the Institute or a company appointment is in question, you may want an early view before replying. Our legal dispute resolution team can read the allegation against these items.
| Part | Applies to | Label | Items covered here |
|---|---|---|---|
| I | A chartered accountant in practice | Professional misconduct | (8), (9) |
| II | A member, whether in practice or not | Professional misconduct | (3), (4), (5) |
| III | A member, whether in practice or not | Other misconduct | The whole Part |
Part I, item (8): not enough information
A member in practice is guilty if he fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion.
There are two limbs: (a) the information obtained is not sufficient for the opinion; or (b) the exceptions are sufficiently material to negate the expression of an opinion. In the second case, the exceptions are so material that no opinion could properly be expressed. The item does not say how much information is "sufficient"; that is a matter of professional judgement on the facts.
Part I, item (9): material departure from audit procedure
A member in practice is guilty if he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances.
The duty is to "invite attention". The item does not forbid every departure. It requires that a material departure from the generally accepted procedure of audit be brought to notice. The text does not say where or to whom the attention is invited.
The Part I items that have their own posts are item (1), on client confidentiality, item (7), on due diligence and gross negligence, and item (10), on client money and the separate account. Items (2) to (6) are in our article on certifying forecasts, substantial interest and disclosure.
Part II: members generally
"A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he -"
Item (3): false particulars. Includes in any information, statement, return or form to be submitted to the Institute, the Council or any of its Committees, the Director (Discipline), the Board of Discipline, the Disciplinary Committee, the Quality Review Board or the Appellate Authority any particulars knowing them to be false.
The test is knowledge. A mistaken entry made without knowing it to be false is not within the words. The bodies listed are the same as those in Part III, item (2), of the First Schedule, which deals with failing to supply information. Our article on the First Schedule Parts II to IV explains that item.
Item (4): defalcation. Defalcates or embezzles moneys received in his professional capacity. The item covers money "received in his professional capacity", not a member's private funds.
Item (5): auditing in breach of the Companies Act, 2013. Acts as an auditor of the company in contravention of the provisions of the Companies Act, 2013. This item was inserted by the 2022 Amendment Act and is in force from 10 May 2022.
Item (5) refers to the provisions of the Companies Act, 2013 without naming them. It therefore links the Institute's disciplinary process to the company-law rules on auditors. Our guides on who can be appointed auditor and on auditor rotation under section 139(2) explain those rules in their own terms. The two provisions are connected: First Schedule, Part I, item (9) is about the check before accepting an appointment, and this item is about acting in contravention.
Part II, items (1) and (2) of the Second Schedule have their own posts: contravening the Act, regulations or guidelines and an employed member's duty of confidence.
Part III: other misconduct
"A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, if he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term exceeding six months."
This is the counterpart of First Schedule, Part IV, item (1), which covers offences punishable with imprisonment not exceeding six months. The dividing line is the length of imprisonment the offence is punishable with, not what the court actually imposes.
| Offence punishable with imprisonment | Schedule | Forum under section 21(3) as in force |
|---|---|---|
| Not exceeding six months | First Schedule, Part IV, item (1) | Board of Discipline |
| Exceeding six months | Second Schedule, Part III | Disciplinary Committee |
A worked example
CA Tarun Bose signs a tax-related audit opinion without receiving a key set of records, and the missing records are material enough that no opinion could properly be given. That is item (8). Separately, in a form submitted to the Institute he states that he completed a course that he did not, knowing it to be false: Part II, item (3). A company appoints him auditor in a manner that contravenes the Companies Act, 2013, and he acts: Part II, item (5). If a criminal court holds him guilty of an offence punishable with imprisonment of two years, Part III applies.
Need help with an allegation under the Second Schedule?
These items often arise together: an audit file, a form submitted to the Institute and a company appointment. Our legal dispute resolution practice can help assess the allegation and prepare the reply for the Disciplinary Committee stage.
Key takeaways
- Item (8): a member must not express an opinion without sufficient information, or where the exceptions are so material that they negate the opinion.
- Item (9): a material departure from the generally accepted procedure of audit must be brought to notice.
- Part II: knowingly false particulars, defalcation or embezzlement, and acting as company auditor in contravention of the Companies Act, 2013 (item (5), in force from 10 May 2022).
- Part III: a conviction for an offence punishable with imprisonment exceeding six months.
Read next
- Second Schedule, Part I items (2) to (6): forecasts, substantial interest and disclosure
- First Schedule Parts II to IV: members in service, members generally and other misconduct
- Section 21B: the Disciplinary Committee
- Contravening the Act, regulations or guidelines: Second Schedule, Part II, item (1)
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.