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ICAI Issues Clarification on Acceptance of Fees from Single Client

The Institute of Chartered Accountants of India (ICAI) has clarified that there is no restriction in the revised code of conduct on acceptance of more than 15% fee from a single client.

ICAI has stated that some members have expressed their concern over one of the provisions contained in Article R410.4 of the Revised Code of Conduct of the rectangle on measures to address self-interest hazards resulting from the dependence of a fee from a single client.

ICAI clarified that there is no restriction in the revised code of conduct on acceptance of more than 15% fee from a single client. Disclosure is the only requirement, and taking the safeguards set out therein, if the total gross annual professional fee from the audit client and its associated entities represents more than 15% of the total fee received by the firm expressing opinions on the financial statements . client for two consecutive years.

Accordingly, the audit can be continued during the safe keeping, as mentioned in the above paragraph. ICAI further clarified that this rule would not apply in the case of audit of government companies, public sector undertakings, nationalized banks, public financial institutions, or where appointments are made by the government; Or where the total gross annual fees of the firm does not exceed five lakh rupees.

It is to be noted that the rule applies only where such fees are received from an audit.

 

Announcement:

Announcement

Sub. : Clarification on Fees from a single client

As the members are aware, the revised Code of Ethics will come into effect w.e.f 1st July, 2020.

Some members have expressed their concern on one of the provisions contained in Paragraph R410.4 of the Volume-I of revised Code of Ethics on measures for addressing self-interest threats resulting from dependence of Fees from a single client.

It may be clarified that there is NOT a bar in the revised Code of Ethics on acceptance of more than 15% fees from a single client. There is only requirement of disclosure , and taking safeguards prescribed therein, if the total gross annual professional fees from the audit client and its related entities represent more than 15% of the total fees received by the firm expressing the opinion on the financial statements of the client for two consecutive years.

Accordingly, the Audit may be continued while taking safeguards as mentioned in the said Paragraph.

It may further be clarified that this rule would not apply in Case of audit of Government Companies, public undertakings, nationalized banks, public financial institutions or where appointments are made by Government; OR where the total gross annual fees of the Firm does not exceed five lakhs of rupees.

It may also be relevant to note that the rule applies ONLY where such Fees is received from an AUDIT CLIENT.

TaxClue Team

Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building. TaxClue is a team of young professionals. We started in December 2016 with the mission of knowledge sharing. TaxClue would like to hear your valuable suggestion. Please write to our editorial team at [email protected]

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