Page 181 - Quick Insights Book 2022

Ann. 15 – ICAI Rules of Merger & Demerger of CA Firms

support required to execute the professional Members of ……” (a network of Indian CA firms)
assignments. In such type of network, the common on their professional stationery.
resources may be pooled and exhibited together
before the service user as those belonging to one (iv) Network may work without a Name also.
particular set of professionals.
4. Registration:
(iii) Referal Practice – Referal Practice means a
practice to refer professional work by a firm to (i) A Formal Network is required to be registered with
one of its associate/affiliate either situated at a the Institute in a prescribed Form `B’ (enclosed).
different place or rendering professional services (ii) Referal Practice requires no registration.
not provided by it, to the user of the services. The
pre-dominant objective of such a network is not (iii) It is for each firm to decide whether its affairs and
to pool in their collective resources and exhibit relations with another firm results in creation of a
them as those belonging to one particular set of Formal Network. Network shall evaluate for itself
professionals. whether or not it is a formal network requiring
registration with the Institute.
(iv) Act — Act means The Chartered Accountants Act,
1949. (iv) If different Indian firms are networked with a
common Multinational Accounting Firm (MAF)
(v) Regulations — Regulations means Chartered then irrespective of the presence/absence of any
Accountants Regulations, 1988. `affiliate’ relationship between the Indian firms inter-
(vi) Code of Ethics — Code of Ethics means the Code se, they shall be considered as part of a network.
of Ethics issued by the Institute and decisions of As such, for these firms the registration with the
the Council in this regard. Institute is not mandatory. It is only if these Indian
firms decide to constitute a Formal Network, then
(vii) Institute — Institute means the Institute of Chartered the registration with the Institute is mandatory.
Accountants of India.
5. Ethical Compliance:
(viii) Council — Council means the Central Council of
the Institute. Once the relationship of network arises, whether
registered or not with the Institute, it will be necessary
(ix) Member — Member means a Member in Practice. for such a network to comply with all applicable ethical
Member in Practice means a Member in Practice requirements prescribed by the Institute from time to time
as defined in the Chartered Accountants Act, 1949.
in general and the following requirements in particular: -
3. Name of Network: (a) If one firm of the network is the statutory auditor
of an entity then the associate [including the
(i) The Network may have distinct name which should networked firm(s)] or the said firm directly/indirectly
be approved by the Institute. To distinguish a should not accept the internal audit or book-
“Network” from a “firm” of Chartered Accountants, keeping or such other professional assignments
the words “& Affiliates” should be used after the which are prohibited for the statutory auditor firm.
name of the network and the words “& Co.” /“&
Associates” should not be used. The prescribed (b) The Notification No. 1-CA(7)/60/2002 dated 8th
format of application for approval of Name for March, 2002 (enclosed) in respect of ceiling
Network is at Form `A’ (enclosed). on Non-audit fees is applicable in relation to a
Network as follows: -
(ii) Standards prescribed in Regulations 190 of the
Chartered Accountants Regulations, 1988 shall be i) For a constituent member of a Network
applicable to the name of Network. However, even who is doing statutory audit (including its
if a name is provided and subsequently it is found associate concern and/or firm(s) having
that the same is undesirable then, the said name common partnership), it shall be the same
can be withdrawn at any time by the Institute. The as mentioned in the said notification; and
Institute shall reject any undesirable name and the
provisions in respect of names of companies as ii) For other constituent member(s) of the same
prescribed in the Companies Act, 1956 shall be Network collectively, it shall be 3 times of
applicable in spirit. the fee payable for carrying out the statutory
audit of the same undertaking/company.
(iii) The network should neither be permitted to
advertise nor to use logo. The firms constituting the (c) In those cases where rotation of firms is
network are permitted to use the words “Affiliates/ prescribed by any regulatory authority, no

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