Misconduct Misconceptions

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Robert Mudge, ICAS’ Director of Investigations, addresses some misconceptions over the complaints made against CAs, with an important message for all ICAS Members.

When I was offered a position in ICAS’ Investigations Department in 2009, I wondered about my ability to assess complaints made against Chartered Accountants. While all lawyers must complete a mandatory accounts module before qualifying, I assumed the investigations undertaken by ICAS would involve complex technical deliberations extending far beyond the scope of my limited accountancy training.

I was surprised and relieved to discover that technical accounting complaints – normally framed as ‘professional incompetence’ – represent a relatively small percentage of the complaints received by ICAS (only 17% in 2016). Far more common are allegations of misconduct, with most complaints grounded in one of the five fundamental principles in the ICAS Code of Ethics.

Having been at ICAS for eight years, I realise now that I was not alone in misunderstanding the profile of complaints made against CAs. Some misconceptions seem to be quite widespread. In the hope that a better understanding of the business of the Investigations Department will make our Members more ‘complaints conscious’, this article addresses some of the more common misconceptions.

It isn’t just office work

Every year, we investigate behaviour which took place outside normal working hours. While it won’t surprise most people that ICAS takes a serious view of criminal convictions involving financial matters, such as embezzlement, our interest extends to practically all criminal offences. Previous investigations have covered everything from smoke bombs, to serious and minor assaults, down to public urination.

Our consideration of such offences reflects the fact that Chartered Accountants wear their CA badge all the time, representing both ICAS and the profession of accountancy. Clients engage CAs not just for their technical knowledge, but also because of their character and strong sense of ethics.

If you have been charged with a criminal offence, we strongly recommend that you report to ICAS at the earliest opportunity. As these matters will come to our attention eventually, self-reporting will at least demonstrate transparency and respect for your professional body.

Financial problems

For readers outside of Scotland, there is a saying that the cobbler’s bairns (children) wear the worst shoes; and so it can sometimes be with a small number of Chartered Accountants, who capably look after the finances of hundreds of clients, but face financial difficulty themselves.

Unfortunately, each year, a small number of CAs are removed from ICAS Membership after signing a trust deed / IVA, or following bankruptcy. The reasons are usually no different from the thousands of other personal insolvencies across the UK – credit card debt, failed investments, family issues etc.

While most CAs are not surprised that ICAS takes strong action on personal insolvency, it seems to be less understood that an insolvent accountancy practice may also have consequences for the CAs involved. This is an area where it is important to consider not only the high ethical standards to which our Members are held, but also the public perception of a failed accountancy practice.

Particular concerns may sometimes arise where the accountancy business has been transferred to a different trading entity for little or no consideration, in the absence of external professional advice. While the CAs involved rely on their own financial knowledge and experience, they face questions over independence and transparency, often finding themselves in dispute with the liquidator over fair value for assets and prejudice to creditors (commonly HMRC).

If your practice is in serious financial difficulty, we recommend that you contact our Practice Support Team at the earliest opportunity on 0131 347 0249.

I was only following my client’s instructions

This may be the most common defence heard by our Case Officers. While it might be appropriate in some cases, it finds no favour where the CA did something for the client which the CA knew (or ought to have known) was wrong. Client instructions should never compromise professional ethics. A CA always has the option to withdraw from acting (taking account of any statutory reporting obligations which may apply).

CAs who rely on this defence often accept that they felt something wasn’t right. We strongly advise all our Members to think very carefully before disregarding this initial gut feeling, taking external advice where necessary.

There are two related issues which arise more frequently than might be expected. One is the client who wants to pay a special bonus for a job well done. While the concerns with this should be clear in audit engagements, we have also seen issues in general practice where the extra payment has gone to one principal (or that person’s family members) without the knowledge of the other principals. The other issue is the client who offers a loan to assist the CA through a difficult period. This is expressly prohibited by the Code of Ethics in nearly all circumstances, as a breach of the fundamental principle of objectivity.

The message to all CAs

The three categories above contain examples of some of the more serious conduct-related issues that are sometimes considered by the Investigations Department.

What tends to be a common factor across these categories, and all other misconduct cases, it that the CAs involved did not set out to do anything wrong. The individuals we interview at CA House are not a breed apart – they are usually very much like the thousands of CAs who spend their whole careers without so much as a letter from me or my team.

It can be any number of things which sets an individual on the path to misconduct: personal circumstances, financial pressures, perhaps a single moment of weakness. What is important for all CAs is not to fall into complacency, thinking that disciplinary sanctions are things you read about on the website, and in CA Magazine, that can only happen to someone else.

For the avoidance of doubt, this message applies equally to Affiliates, CA Student Members and Firms, all of which may be subject to investigation and discipline.

In closing

I will finish on a more positive note. While it is understandable that people are often shocked when they read the latest disciplinary notice on ICAS.com, please remember that the vast majority of CAs are standard-bearers for professional ethics. With approximately one complaint received each year for every 250 Members, the evidence suggests that our Members compare very favourably to members of other regulated professions.

If you have questions over either your own conduct, or the conduct of a fellow CA, please contact the Investigations Department on 0131-347-0271 to speak to one of our Case Officers.

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