Despite conflicts of interest being a key part of the code of ethics – and the topic attracting increasing attention from the public, regulators and the profession in general – the CA ANZ and NZICA disciplinary committees are continuing to see members falling foul of the rules and being the subject of complaints.

Kate Dixon and Rebecca Stickney, leaders of the CA ANZ professional conduct teams in Australia and New Zealand respectively, discuss the issues to consider when working for family and most importantly, how to avoid conflicts of interest.

Eyes wide open

Dixon says it’s understandable that people want to help their families and friends, and while it is permissible under the code of ethics, it has to be managed very carefully. Stickney says before agreeing to help, members need to consider their ethical obligations including the risk of actual or perceived conflicts of interest and objectivity threats and, if so, whether safeguards can be employed to address those risks.

She urges members to take the time to re-read the code of ethics to ensure their understanding of the standards is up to date.

“Take extra care to document the conflict and proposed safeguards in a file note, letter or similar, ensuring that the conflict and safeguards are appropriately disclosed to the person they are intending to perform the work for and offering the opportunity to take independent advice. The work should be appropriately documented in an engagement letter, which can also be used as the medium for disclosure of the conflict and obtaining written, informed consent to act.”

Rules of engagement

“Engagement letters and/or conflict disclosures need to be specifically tailored to suit the circumstances,” Dixon says. “Having clear professional boundaries protects you and helps you manage family relationships and expectations. There can be a lot of pressure on accountants to help their families, and family members may not be aware that their request puts members at professional risk.”

Regardless of their level of experience, when it comes to identifying conflicts of interest, members can develop a ‘blind spot’ when working for family.

“The code of ethics is clear about this. Nobody should be surprised that working for family and friends presents an inherent threat to your objectivity,” Stickney says. “If members overstep ethical boundaries all might appear to be fine initially, but it can go awry for various reasons and very quickly, often as a result of relationship break-up, trustee or estate disputes, when circumstances change such as an elderly parent going into care, or when money is involved.”

Problem areas

Dixon says care also needs to be taken when performing work independently of your firm.

“Consider your employment contract because you might be prevented from doing private work on the side,” she says. “Also, check your insurance arrangements as you could be putting yourself at risk.”

Stickney says areas where members get into trouble often include when they are acting for family members who are spouses that are going through a marital break-up or where the member is undertaking a fiduciary role (such as a trustee, executor or director) and also has a beneficial interest (directly or indirectly) and is also undertaking the accounting work.

“These types of situations create a number of hats and different types of competing obligations. Members need to understand the threats of conflict from all angles and be alert to changes in circumstances. Matrimonial and business disputes can change the dynamic very quickly.

“In these scenarios, you need to ask yourself, is it still appropriate for me to continue to act? Do I have the right kind of safeguards in place? Would these family members be better served by getting independent advice? Ethically, is it more appropriate to discontinue the accounting engagement?”

Dixon adds, “If the member has decided to continue acting, they should re-evaluate the adequacy of their documentation and consider redisclosing the conflict, updating safeguards and getting fresh written informed consent to continue acting.”

Revisit the code

If a member is the subject of a complaint, Dixon urges them to refresh their understanding of the code of ethics, so they can respond appropriately to the Professional Conduct Committee.

“If a member does not recognise an obvious conflict of interest, it escalates the seriousness of the matter because the disciplinary bodies want to understand that they recognise the breach of ethics.”

Three golden rules when working for family

1. Prepare appropriate documentation to assess possible conflict

Ensure it is properly disclosed and that written, informed consent to act is given and engagement terms are recorded. Identify all potential, perceived and actual conflicts of interest and objectivity threats. When in doubt, apply the third-party test in the code of ethics, whereby an appropriate person, who could be a senior professional, weighs the relevant facts to ascertain conflicts.

Record the safeguards you are going to use to address those conflicts, such as recognising changing circumstances or relationships, considering if independent people will be used to perform certain tasks, or in what circumstances it will no longer be appropriate for you to continue acting.

Define the work with the engagement letter and be specific. Help manage expectations by identifying and defining the services you will perform and those you will not. Either in the letter of engagement or separately, disclose the conflict and proposed safeguards, including noting that it may be in the best interests of your family member to get independent advice and obtain their written consent to act. Ensure the engagement letter is a living document and that safeguards are regularly evaluated.

2. Work within your area of expertise

Consider whether you are taking on work outside your expertise. Ask yourself, do I have the necessary skills, and if not, do I have a duty under the code of ethics to upskill? Do I need to decline this family member’s request? For example, are you taking on a professional trusteeship role or working as a professional executor of a will, when you are not experienced or trained in this field?

3. The usual rules apply

Even though you are working for family or you consider it ‘work on the side’, the usual rules apply, whether that includes addressing conflicts of interest, the terms of engagement, or competency. You may be working for no charge – for your parents, or outside your usual professional role – but you still need to apply high ethical standards and professional competencies to your work.\

Take aways