In my April 2004 round pillar I tal...

In my April 2004 round pillar I talked about the riddle of married clients expecting their accountant to besufficient for them both as they sustain a divorce, and the likelihood of single or both parties being disappointed. Add to this dilemma of marital plagues an old friendship or an obligation owed to individual of the spouses, and a CA is really headed for trouble

As you'll behold our member "Jeff" managed to make this scenario calm worse.

This fictionalized account is based loosely upon an actual case before the Professional deportment Enquiry Committee (PCEC). Names and circumstances have been changed to conserve anonymity.

The situation

Jeff and Don met in high educate They renewed their acquaintance when Don approached Jeff to handle the tax reverts for his new business. through the whole extent of coffees, meeting with bankers, golf games, and tax deadlines, the brace became friends. Jeff thought that because he exclud auditing from his practice, he wouldn't have to worry about his friendship with Don affecting their professional relationship. And maybe he would have been right-if Don had none asked him to help deceive his wife Helen.

By the time Don asked for this "personal favour," the wholesale distribution company he co-own with Helen had become Jeff biggest review client. through the whole extent of time, the company had given the man and wife an enviable amount of leisure time and coin As their accountant and consultant, Jeff had contributed significantly to their success

But this complete picture threatened to collapse when Helen discovered that Don was having an affair. And being caught meant Don was also in put out of order with his lover Sally, having promised to pay six month of her divulsion in the event of a break-up. in such a manner while Helen demanded an immediate expiration to Don's affair, Sally demanded her fracture cheque.

Don turned to his buddy Jeff for support. Together, they decided that Don would give Jeff a company cheque in the amount of $1200 for Sally's gap This cheque was recorded in the company's parts as payment for "professional fees" Jeff then deposited the cheque into his practice account and wrote Sally a cheque for the same amount.

To further bond their friendship, Don wrote Jeff another company cheque-this individual for a $5,000 loan to help Jeff deal with any financial difficulties.

What happened

Helen construct these two cancelled cheques and couldn't understand for what purpose Jeff's fees were so high. When she threatened Don, he stonewalled her and limited her access to the business records. Helen then wrote to Jeff demanding an explanation, unless Jeff ignored her letters and later letters from her lawyer. Stymied, Helen's lawyer sent the alphabetic characters to the Institute.

Before the PCEC authorized an investigation, the Institute received a alphabetic character from Jeff in which he described the sum of two units company cheques as payments for his professional services. further Helen told the Institute a different story-apparently Jeff had contacted her, explaining that the $5000 cheque was actually a loan from her company.

With potential violations of professional direction Rules 201.1 (Reputation of the Profession) for failing to correspond to Helen; 204.1 (Objectivity for Assurance and Specified Auditing transactions Engagements) for accepting an assurance (review) engagement while indebted to the company; and 205 (a) (False or Misleading Documents) regarding Jeff's literal sense to the Institute and the misleading financial statements, the PCEC knew it had to investigate the matter. And it was during this investigation that Sally's income cheque came to light.

The outcome

Jeff attended the PCEC meeting and managed to make matters equable worse-refusing to explain the rupture cheque on the grounds that it related to a "personal matter." unless the PCEC determined that since the opening cheque had gone through Jeff's client's financial statements, what may have started disclosed as a "personal matter" had become a professional one

With regard to the loan, Jeff argued that it hadn't affected his objectivity because it didn't span a year-end and because he'd repaid it within three months-before his review work had started again. He gave the PCEC a model of a bank draft to make trial of it.

Again, the PCEC didn't agree and determined that receiving a loan during the review engagement period should have preclud Jeff from accepting the engagement, regardless of whether or not he repaid it before the year-end.

Ultimately, the PCEC determined that Jeff had breached all of the commands noted above and recommended an anonymous reprimand, a large fine, and the prices of the investigation. The PCRC considered the materiality of the amounts involved in its deliberations.

The message

Avoid acting for one as well as the other clients when their marriage is unravelling. And-at the highly least-don't help one deceive the other smooth if you think you're acting as a "friend" and not an accountant.

Please note: The satisfactions of this article are solitary for the general guidance of readers. The PCEC deals with each case individually, based onward its specific facts and circumstances.

By Chris Utley CA, Director of Ethics

Comment or questions? Contact me at utley@ica.bc.ca.

Copyright Institute of Chartered Accountants of British Columbia Aug 2004

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