By Michelle Stevenson

CA ANZ frequently receives complaints about members engaged in a variety of family circumstances, such as working for multiple family members, working as a trustee or executor under a will, or long-standing engagements with older clients who may be relying more on their adult children.

Kate Dixon and Rebecca Stickney – leaders of the CA ANZ professional conduct teams in Australia and New Zealand respectively – advise that there are a number of key factors you need to consider:

• Have you properly identified your clients?
• Do you have the necessary documents that give you the ability to act on your clients’ behalf (such as a trust deed or power of attorney), and do you understand them? Do your clients have the required authority to act?
• Do you understand your legal obligations? If not, should you get legal advice?
• Have you evaluated any conflicts and threats to objectivity and safeguards to ensure compliance with your professional obligations?
• Are you regularly re-evaluating your clients’ relationships to one another?
• Have you considered whether you need to update your engagement letters and conflict of interest disclosures/safeguards?
• Have you addressed any future issues (such as succession planning for elderly clients to ensure you continue to have authority to act)?

Identifying your client is crucial

In relation to regularly re-evaluating clients’ relationships to one another, a common trap for accountants is failing to identify whether they have appropriate authority from all parties for whom they’re acting.

For example, a client’s child turns 18, making them an adult and, therefore, a client in their own right. Unless that 18 year old gives you permission to take instructions from their parent, you have to deal directly with them. Dixon recalls two instances in which members who failed to do this ended up in front of the Disciplinary Tribunal (DT).

“[In both cases] the member kept taking instructions from the parent and did not identify that, as the relationship had changed and the child was now an adult, they had to have a separate engagement relationship with that former child,” she says.

“The member kept taking instructions from the parent and did not identify that, as the child was now an adult, they had to have a separate engagement relationship with that former child.”

“[In one instance] the accountant was passing on information back to the parent about the child’s tax affairs, without any authorisation. The member didn’t identify that as a problem because they hadn’t identified that the child was now an adult and therefore a separate client in their own right. If they had made that identification, they would’ve probably thought about terms of engagement, conflict, confidentiality and any other issues which arose.”

In this particular case, the member received a severe reprimand, was required to complete further training, and was ordered to pay more than A$17,000 for the full costs and expenses of the proceedings. The Tribunal also published its decision, the member’s name and locality, on the website and in the journal of CA ANZ.

Be aware of changes to clients’ circumstances

Another common situation is where elderly clients lose their capacity. If you don’t manage these situations appropriately, they can quickly unravel. Stickney recalls one case that went to the DT and even on to the Appeals Council.

“That involved a long-standing older client who was still working in a business but was losing capacity. They were trying to work with their family to get their legal affairs in order, including changing their trusteeship to someone else. The accountant and client were both trustees and the client wanted to retire and appoint another trustee in their place,” says Stickney.

“Unfortunately, the member had some issues with the proposed trustee, as well as the level of involvement of the clients’ children in the process.

“The member didn’t act on the instructions with the necessary degree of rigour and attention to timeliness. And in the intervening period, the older client lost capacity, which meant the appointment of the new trustee would require a court order rather than a resolution of the trustees.

The DT has some really interesting observations about what a case like this involves, which was effectively a ‘changing of the guard’ when clients have passed away or are in declining health and a new generation of the family is becoming more involved.

“The DT considered that in such circumstances, objectivity and communication with all stakeholders is key to enabling a CA to properly carry out their professional obligations. Of course, members will need to balance their usual confidentiality obligations with the needs of their client in these types of situations.”

“Objectivity and communication with all stakeholders is key to enabling a CA to properly carry out their professional obligations.”

In that particular case, the member ultimately had their membership and Certificate of Public Practice suspended for 12 months and was also ordered to pay NZ$115,000 in DT plus appeal costs.

The danger of wearing many hats

An added complication is where you’re undertaking multiple roles. You may be made an executor of a client’s will, or a trustee of a family trust, in addition to being the accountant. It’s critical to understand the legal and ethical obligations of each of these roles and any limitations in, for example, a power of attorney. Otherwise, you might exceed or confuse your role.

“It can be [a case of], ‘Well, how are your fees getting paid?’ or ‘Are these two roles actually in harmony with one another?’” says Stickney, adding it can give rise to potential conflicts of interest or loss of objectivity.

Complaints about CAs undertaking multiple roles often come from beneficiary family members or children of elderly or deceased clients. Frequently, they are unhappy about billing or a lack of information with regard to how the accountant has been carrying out their role.

If you do receive a complaint, the disciplinary bodies will look at your management of perceived and actual conflicts, your level of communication, including explaining fees, whether the engagement terms remain appropriate and if the engagement is being carried out with due care and competence.

For example, if your client has passed away and one of their children is co-executor with you under the client’s will, you should consider updating the engagement terms with the co-executor. If the co-executor queries the fees charged to their parent’s estate, the disciplinary bodies will expect these to be explained. Refusing to do so – on the grounds your client was the deceased parent, not their child – would not be appropriate.

Lay the groundwork early

To avoid problems when acting for families, CAs need to lay the necessary groundwork, including:

• considering all the legal angles
• understanding your duties
• regularly checking in with the client/s
• regularly re-evaluating your role and services
• having the necessary discussions from the outset
• remembering that you’re in a professional relationship (even with long-standing clients).

“It’s about having that kind of enquiring mind where you’re alert to the kinds of issues that can crop up in the future,” says Stickney.

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