The Member provided public accounting services as a sole practitioner, while concurrently the Chief Executive Officer and minority shareholder of a mortgage investment corporation (MIC). A mortgage was issued by the MIC to the Complainants, who were also accounting clients of the Member. The Complainants experienced increased interest expenses when they failed to respond to several notices from the MIC that the mortgage had matured.
The issuance of the mortgage placed the Member in a conflict of interest. However, the Committee did not conclude that the Member’s conduct lacked objectivity in the provision of the professional services and noted that the Complainants’ losses for the increased mortgage interest were caused by their failure to respond to the MIC’s communications with them, not by the actions of the Member.
The Investigation Committee determined the Member contravened Rules 210.1 & 210.2 (Conflicts of Interest) of the CPABC Code of Professional Conduct.
The Committee recommended the Member accept a warning to avoid future conflicts of interest and ensure adequate safeguards are in place and documented if conflicts of interest arise.