Ethical dilemmas: Due care and diligence
QUICK TAKE
- Due care and diligence issues are among the most common themes of complaints for 2022–2023.
- Complaints include allegations of untimely work practices, poor communication with clients and inadequate terms of engagement.
- Members facing ethical dilemmas are advised to seek help.
The vast majority of CA ANZ members meet the highest standards of professionalism and performance, but some have been found to fall short. CA ANZ and NZICA collectively received about 420 complaints over the 2022–2023 financial year and, while many were dismissed by the Professional Conduct Committee (PCC), issues of due care and diligence continue to be a common theme.
CA ANZ members are obligated to fulfil their commitment to their relevant code of ethics. This requires them to uphold the profession’s core values of integrity, objectivity, confidentiality, professional competence and due care, and professional behaviour.
Kate Dixon, CA ANZ Australian conduct leader, says that to fulfil their commitment, members are required to attain – and maintain – a level of professional knowledge and skill to ensure that a client receives competent professional activities.
“They must also act diligently and in accordance with applicable technical and professional standards,” she says. “Members are also required to take reasonable steps to ensure that those working in a professional capacity under their authority have appropriate training and supervision, and they must make their clients aware of limitations inherent in the services they’re providing.”
Uptick in complaints
The concept of due care and diligence is a fundamental principle under the codes of ethics applicable for all members, irrespective of their area of practice or employment.
However, Dixon says this is the area where many complaints have arisen over the past year. Complaints include allegations that work has not been done on a timely basis or with appropriate care. Poor or inadequate communication with clients is also a source of complaint, along with inadequate terms of engagement.
“We’ve seen an uptick in complaints relating to due care and diligence,” says Dixon. “Perhaps it is due to a hangover from COVID, where members saw an increase in workload. Talent shortages have also affected some members and, like much of society, they may be feeling stress and pressure that may impact their productivity and resilience at work.
“However, members have ethical obligations and if they think they’re at risk of breaching them, it’s important that they seek help.”
Failure to comply
A breach of due care and diligence can take many forms. Rebecca Stickney, CA ANZ New Zealand conduct leader, cites the example of an audit complaint, which may arise if a member fails to adhere to relevant standards.
“In some instances, there may be a failure to obtain sufficient appropriate audit evidence to support one of the elements of the audit, or a failure to adequately document the evidence obtained or procedures performed,” she says.
“If there is a failure of an audit under the audit standards, that will often also give rise to a failure to act with professional competence in due care.”
Stickney cites another complaint scenario around untimely work practices.
“This can occur with BAS assignments, for example, where a member has undertaken their work in an untimely way such that the client has ended up with late filing penalties or use of money interest due to tax arrears.”
Dixon agrees that missing lodgement dates is a common scenario.
“We had a case that went to the tribunal last year where a member had failed to pass on a document from ASIC [Australian Securities and Investments Commission] to their client,” she says. “This led to a A$300 penalty for the client, which the member volunteered to pay, but then they simply stopped communicating. It started with a diligence issue and then expanded into a much bigger issue around being non-communicative.”
Breaches of due care and diligence often go beyond audit and tax, adds Dixon.
“We’ve seen members give attestations for clients, without checking the underlying information and documentation that they’re attesting to,” she says.
Lack of clear communication with clients can also lead to breaches of due care and diligence, says Stickney.
“If a member doesn’t communicate deadlines to clients, or if they don’t clearly explain the information that a client is required to provide, this can lead to a breach of due care and diligence because you are required to communicate clearly and act in the best interests of your clients,” she says. “We get a lot of complaints where communication is at the heart of the issue.”
Meeting your obligations
If you are feeling overwhelmed by your workload or any other factor that may compromise your ability to meet your ethical obligations, Dixon advises that you seek help.
“Members can speak to their peers for advice and support,” she says.
The CA Advisory Group provides counselling and support for chartered accountants facing ethical dilemmas or weighing career decisions.
This year, CA ANZ released the Chartered Accountant’s Commitment, which is a statement of intent about the standards of professionalism and behaviour that the public can expect from a chartered accountant. It reinforces members’ commitment to meet their ethical obligations.
“Members will need to attest to it when they do their annual membership renewal and at various new-member ceremonies,” says Stickney.
“A bit like the Hippocratic oath, members will attest their commitment to uphold the standards and to comply with their obligations as a chartered accountant. It leaves no question about the requirements of due care and diligence, in addition to the other fundamental principles.”
This article was first published by Acuity Mag at the following URL: https://www.acuitymag.com/business/ethical-dilemmas-for-accountants
