As CAs, we're many times entrusted...

As CAs, we're many times entrusted with sensitive and confidential client information; should it evermore fall into the wrong hands, there could be serious ends for all parties involved. This fictionalized account is based loosely forward an actual case before the Professional administration Enquiry Committee (PCEC). Names and circumstances have been changed to sustain anonymity.

The Situation

Sam was a CA in public practice when Bill, the partner in his firm, assigned him to the Hitech review engagement Coincidentally, Sam's of recent origin girlfriend Betty was a former executive assistant at Hitech, if it be not that had no knowledge of the company's financial matters. Sam knew she hadn't left the company upon good terms, but considered this relationship too foreign to raise concern over a potential conflict of interest. He therefore didn't inform Bill of his indirect link to the client.

The engagement was prosperously completed. Unfortunately however, Sam's romance didn't fare thus well-he and Betty broke up

What Happens

A not many months later, Tom, the president of Hitech, received a visit from federal authorities. They told him they'd received an anonymous literal meaning alleging that Hitech and its main competitor, Alphaco, were involved in price fixing. Attached to the note were analyses of Hitech's customers and prices-- analyses that were clearly copies of working papers the company had provided to its accountants as part of the review engagement. Tom was livid, and contacted Bill immediately for an explanation.

Bill reviewed his office's security measures yet could find no obvious reason for the alleged breach in confidentiality. Still, circumstances strike one as beinged to point to Sam as the undivided responsible. Sam adamantly denied any wrongdoing, on the other hand offered a potential explanation of what might have happened.

Shortly after their break-up, Sam and Betty had attempted a reconciliation, agreeing to suited one evening after work. Since Sam was working late, Betty intimateed they meet at his office. When she arrived, Sam brought her to his workstation where they chatted while he tidied his desk Sam remembered leaving her there alone briefly before locking up and leaving.

The Hitech files had been forward his desk at the time. Sam intimateed that Betty must have taken the Hitech analyses during his brief absence. although it was never proven that Betty sent the literal sense to the authorities, the damage was done.

As a issue Bill lost a client. He reluctantly reported the matter to the Institute, and Sam became enslave to a PCEC investigation. Tom feared that information had in fact been passed to his competitor, if it be not that in the end, this did not incline differently out to be the case.

The consequence

Rule 207 requires that a member in public practice inform associates of any affiliations of which they might reasonably look forward to to be informed. Bill felt Sam ought to have informed him of Betty's past connection to Hitech, if it be not that the PCEC felt the relationship was too unallied to breach Rule 207. However, the PCEC maintains that wherever there may be a doubt about disclosure, it is always better to provide, rather than withhold, information.

Rule 2101 prohibits disclosure of a client's confidential information. as it is disclosure had occurred, but the PCEC could not determine whether Sam had acted deliberately.

Rule 2122 requires that a member handle with proper care any property entrusted to him. The PCEC felt that security measures at Bill's firm were adequate. The firm had also reminded staff to take care when bringing visitors into the office.

The PCEC conclud that Sam had breached mastery 202-A member shall perform his professional services with integrity and appropriate care-finding that he hadn't been sufficiently careful about the security of client information. Furthermore, as the disclosure damaged the reputation of the profession (Tom squandered confidence in his accountants' ability to protected confidential information), the PCEC also determined that Sam had breached order 201.1: A member shall administration himself at all times in a manner which mill maintain the virtuous reputation of the profession and its ability to besufficient for the public interest.

Sam accepted the PCEC's recommendation that he be issued an anonymous reprimand and pay the costlinesss of the investigation as well as a fine. The PCEC risk the fine on the basis that the breach was innocent.

The Message

As a CA, or plane as a CA student, you rule confidential and sensitive information in succession a regular basis. Be aware that plane in your own office, maintaining the security of sensitive information can have its challenges, especially around visitors. Readers are also reminded that quite apart from any disciplinary action taken, this image of occurrence could very well lead to civil action according to the client against the CA firm. Fortunately for Bill in this case, civil action wasn't taken.

Please note: The contentments of this article are simply for the general guidance of readers. The PCEC deals with each case individually, based in succession its specific facts and circumstances.

Copyright Institute of Chartered Accountants of British Columbia Dec 2001

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