By Michelle Stevenson

Often it’s not intentional when a person makes a false and misleading statement, but it’s an issue that can see CAs lose their footing and something Chartered Accountants Australia and New Zealand (CA ANZ) takes very seriously.

Kate Dixon and Rebecca Stickney, who head up the CA ANZ professional conduct teams in Australia and New Zealand, outline some of the traps that can give rise to making a false or misleading statement.

What Code of Ethics principles apply?

The key fundamental principles of the Code of Ethics that are relevant here are integrity and professional behaviour.

The principle of integrity requires that a member is straightforward and honest in all professional and business relationships. That includes not knowingly being associated with reports or other information that contain a materially false or misleading statement (this could be due to information being omitted or not being properly checked).

The principle of professional behaviour is more broad. It requires members to comply with relevant laws and regulations and avoid any conduct that might discredit the profession.

“Also relevant are provisions in the By-Laws and New Zealand Institute of Chartered Accountants (NZICA) rules that make it a breach of those requirements if the member has provided information to CA ANZ or NZICA which is false or misleading,” Dixon adds.

How you can unintentionally be false or misleading

Stickney notes that sometimes members can make false and misleading statements through carelessness. They may issue accounts or other financial information that omit critical information and, as a result, are misleading.

CA ANZ also receives complaints about members certifying financial information as part of their clients’ bank applications, immigration applications or similar, where it later transpires the information or the CA’s attestation is misleading.

Often the problem arises because the CA hasn’t taken enough time to check if something is correct. In other cases, the accountant themselves may have been misled or even been under pressure to provide or verify information.

And, unfortunately, some CA ANZ members may not understand the gravity of the attestation or their obligation to ensure its veracity.

Stickney says complaints are also received about misleading disclosures to CA ANZ or NZICA such as in practice information questionnaires, mandatory declarations or applications.

“Members have failed to declare that they perform assurance engagements in responding to practice questionnaires as part of quality reviews or in their mandatory declarations,” she says. “Care needs to be taken, particularly if one partner is responding on behalf of the firm.”

Where a CA discovers they may have made a misleading statement, either to CA ANZ or NZICA or in connection with work for a client, they need to decide if it’s appropriate to withdraw or amend their report or attestation or take some other action. They should also consider confidentiality and NOCLAR obligations.

If you find yourself in that situation and are unsure what to do, remember you can always seek support and advice from CA ANZ.

What are the consequences of issuing a false or misleading statement?

Where a CA has knowingly issued a false or misleading statement, and/or failed to remedy the situation, sanctions could include further ethics training, a fine, the issue of a censure, suspension or, in extreme cases, termination of membership.

In a recent case, a CA ANZ member made an error in carrying out client work. In court proceedings, the judge found the member’s evidence was evasive and untruthful, and that they acted dishonestly.

Although the member subsequently cooperated with CA ANZ’s investigation, their membership of CA ANZ was terminated, reflecting the seriousness of their failure to own up to the error.

“In another case, a member was suspended for two years for providing misleading accounts to a liquidator to assist a client whose matrimonial home was exposed,” says Stickney. “While the conduct did not benefit the member directly, the Disciplinary Tribunal considered the behaviour an egregious breach of integrity requirements.

“A member was suspended for two years for providing misleading accounts to a liquidator to assist a client whose matrimonial home was exposed.”

“By a thin margin they were not struck off as they had expressed contrition at an early stage and had prospects of rehabilitation.”

Why you should front up rather than cover up

When a false or misleading statement has been issued, the advice is “front up rather than cover up”. In other words, acknowledge your mistake or any wrongdoing and take steps to remedy the situation as best you can, rather than lie about it.

An attempted cover-up will only exacerbate the problem, do more harm to your professional reputation, and cause you a lot more stress. And any potential sanction you face is likely to be worse.

Says Dixon: “The disciplinary bodies do take the member’s insight into account because part of their role is to consider protection of the public.

“If you’re showing appreciation and understanding of the problem – and you can demonstrate you have learned from the situation and put things in place to make sure this wouldn’t happen again – it does impact how the disciplinary bodies approach any potential sanction.”

“If you can demonstrate you have put things in place to make sure this wouldn’t happen again – it does impact how the disciplinary bodies approach any potential sanction.”

Need help? Call CAAG or check CA ANZ’s resources

The CA Advisory Group provides counselling and support for chartered accountants facing ethical dilemmas or weighing career decisions.

Local panels of experienced CAs offer guidance for fellow members, and can provide you with advice and support on a range of professional and ethical matters.

The CA Advisory Group service is free and all discussions are strictly confidential.
Visit: charteredaccountantsanz.com/member-services/mentoring-and-support/ca-advisory-group
Call: 1300 137 322 (Australia) or 0800 4 69422 (New Zealand)