Do cats know when they are doing something wrong?

Cats don't understand right or wrong; they exist in the present. When a cat is told "No," he believes it means "Don't let the human see me do this.

You control the cat's behavior through diversion — you can either offer him something he prefers (such as a catnip filled scratcher by the couch he prefers to scratch) or by instituting a deterrent (such as a noisemaker that will go off when he leaps onto the counter.)

However, a cat will not usually cease doing something when you are not present just because you disapprove of what he is doing.