Money makes the world go round, but it can land chartered accountants in hot water when the cash belongs to clients.
Wine may taste better when someone else is buying, but it pays to be extremely careful if you’re handling client monies. Breach the rules and the penalties can be stiff.
Chartered accountants are generally moving away from holding client funds and being signatories on client bank accounts, says Rebecca Stickney, NZ Conduct Leader for Chartered Accountants ANZ in New Zealand. Nonetheless, there are still circumstances in which client monies are held. Among them are tax payments due to be passed on to revenue authorities and, conversely, tax refunds held for clients, where the CA is acting as a tax agent. Other examples include situations where the member is acting as a payroll agent on behalf of the client or as a signatory to a client bank account to make payments to creditors of a business.
Regardless of the situation, there are overarching principles that CAs need to abide by in regards to client monies, says Kate Dixon, Stickney’s counterpart in Australia. On either side of the Tasman, the fundamental requirements are encapsulated in Section 270 of the Code of Ethics. This provides that a member in public practice shall not assume custody of client monies or other assets unless permitted to do so by law and in compliance with any additional legal duties imposed on a member holding such assets. The section also notes the threat to compliance with the fundamental principles (including a self-interest threat) resulting from the holding of client assets. It also sets out the key requirements of separation from personal or firm assets, use of such assets only for the purpose for which they were intended, the need to be able to account for such assets and the requirement to comply with all relevant laws and regulations. In Australia, the specific standard is APES 310 Dealing with Client Monies. In New Zealand, PS-2 Client Monies plays much the same role.
There is a strong expectation of compliance, and disciplinary bodies can come down firmly on departures from acceptable standards. Rebecca Stickney NZ Conduct Leader, Chartered Accountants ANZ