- There is an obligation to stay up to date with assurance standards and relevant legislative frameworks.
- Using out-of-date templates can lead to significant problems.
- Completing engagements outside your area of competency is a risk, even if you are well intentioned.
By Michelle Stevenson
“Know your limits” may seem like a simple instruction, but for CAs, it’s not always straightforward.
As a CA ANZ member, you’re expected to comply with the fundamental principles of the Code of Ethics, and one of those principles is professional competence and due care. This means you’re required to attain and maintain professional knowledge and skills based on current standards and legislation, and to act in accordance with applicable technical and professional standards.
“There is an obligation to stay up to date,” says Kate Dixon, who heads the CA ANZ professional conduct team in Australia. “This also requires members to be very thoughtful about the choices they make in terms of … taking on work in [particular] areas.”
The traps in audit and insolvency engagements
CA ANZ has investigated a number of complaints about auditors who have not stayed up to date with assurance standards and relevant legislative frameworks. For example, the regimes that apply to SMSF audits in Australia and statutory audits in New Zealand require accreditation as a Qualified Auditor.
Issues have been identified when auditors’ work is reviewed by the Australian Securities and Investments Commission (ASIC), the Australian Taxation Office (ATO) or CA ANZ/NZICA’s own teams. Some members are upfront about the fact they only undertake audits from time to time. However, a failure to stay up to date with legislative changes or relevant assurance standards is not an adequate excuse and can lead to disciplinary sanctions.
“Similarly, we have dealt with complaints about members taking on occasional insolvency engagements and failing to comply with legislative requirements,” notes Rebecca Stickney, leader of CA ANZ’s professional conduct team in New Zealand.
“Some of the breaches seen include failing to comply with duties such as holding creditors meetings, filing obligations and independence requirements. Given the regulatory changes being introduced with the new Insolvency Practitioners Regulation Act 2019, members need to understand the new licensing requirements and don’t risk taking on work they are not supposed to do.”
Says Dixon: “[This is] one reason to be very cautious about moving into an area that’s either new or an area in which you don’t work very often. Because if you just assume it’s the same as it was five years ago, you may well be wrong.”
“If you just assume it’s the same as it was five years ago, you may well be wrong.”
The peril of using old templates
To ensure you’re up to date in all areas of your practice, be very careful the templates you use are not out of date. This includes templates for work papers or reports, such as an audit or compilation engagements.
“We sometimes see complaints where members have relied on an old template, perhaps which they’ve been given or which they have developed themselves a long time ago and it’s not kept up to date with amendments in the assurance standards,” explains Stickney. “That can cause quite significant problems because the report may be misleading or they’ve failed to attest to the appropriate matters.”
The same sort of problem can arise if you decide to undertake quasi legal work (which in itself can be a breach of the fundamental principle of professional competence and due care), such as drafting trust deeds for your clients.
“So it may be that, years ago, the member came across a template or had a lawyer draft an initial trust deed template. However, if it is not updated or appropriately tailored for the particular client, it might not be fit for purpose,” Stickney says.
Understand that benevolence can backfire
Another area where you can run into trouble is when you agree to do some work to be benevolent, but it’s inappropriate because it’s outside your competency.
Says Stickney: “An issue that we sometimes get complaints about involves members who are not in public practice, but work in other sectors or may be retired, and take on work as a favour or for charitable reasons and fail to comply with relevant standards, or may not understand the statutory regime applicable to the work.
“There can be a lot of pressure on the member to help, particularly where they get approached [by someone who says], ‘Hey, you’re a chartered accountant. Would you please do the audit work for our local club or charity?’
“There might be financial pressures and the entity doesn’t want to pay for a specialist. This is an area of risk. It is important that members give back to their community but they need to be careful about taking on work they are not qualified to do. Members need to take care to identify their own areas of expertise and their own limitations before agreeing to take on work outside their usual remit.”
“Members… need to be careful about taking on work they are not qualified to do.”
This issue also tends to crop up in relation to friends and family members, who may wrongfully assume – or simply expect – that, as a CA, you can complete a particular task for them. You need to be firm about what you can and can’t do, legally as well as competency wise.
One of the most effective ways to do this – in relation to all clients, not just friends and family – is via an engagement letter that should clearly outline the work to be completed.
“Then, if something else gets thrown into the mix, you can go back to your client and say, ‘Well, my engagement was for X and you’re now asking for Y.’ You can then address whether that is something you can or can’t do,” says Dixon.
Be extra vigilant during unprecedented times
Any CA can attest to the time and effort needed to stay on top of changing rules and regulations. And the pandemic has prompted changes in a number of key areas, including tax and superannuation. There have also been regulatory changes regarding how businesses can work.
While some of these changes are temporary, some of them may be longer term. “When things are changing rapidly and there’s a lot for members to get on top of, that is a risk factor,” says Dixon.
“Because members really want to help their clients, they may not appreciate the full raft of changes. And while that’s understandable where the changes are coming thick and fast, it’s a risk area as a professional.
“This is because you should only be working in areas in which you have the appropriate competence and knowledge levels to provide advice.”
According to Stickney, you can safeguard against this by upskilling or seeking advice. In terms of the COVID-19-related changes, CA ANZ can help you navigate this new environment, with on offer.
Find out more:
Tools and resources most used by members in practice. Go to bit.ly/caanz-tools
Updates on tax, assurance and audit, insolvency, reporting and more. Go to bit.ly/caanz-technical
Independence Guide – Fifth Edition (the Guide)
An essential tool for auditors, the Guide reflects all the recent changes to the Code of Ethics and has almost 50 independence scenarios. Go to bit.ly/independence-guide
Your CA ANZ regional contacts are here to support you. Go to bit.ly/caanz-regional-contacts