Mr. Paul H. Ling - January 14, 2008
January 14, 2008
A complaint was filed with the Association alleging that former member Paul Ling of Surrey, B.C. promoted an "African investment" opportunity to a client while in a conflict of interest situation. All payments were made from the complainant's companies to a corporation that Mr. Ling controlled. Mr. Ling failed to provide the complainant with documents to support accounting entries. Upon investigation, it was alleged that Mr. Ling provided public practice services through a corporation not registered with CGA-BC's public practice division. These services were not covered by professional liability insurance and the files were not subject to the practice review process. Furthermore, Mr. Ling failed to produce working paper files, engagement or representation letters when requested by the investigator. In addition, it was alleged Mr. Ling did not disclose his lack of independence on Notice to Reader communications. Finally, it was alleged that Mr. Ling was associated with misleading financial information.
The Appeals Committee found the former member was in breach of CGA-BC’s Code of Ethical Principles and Rules of Conduct (in effect as at September 21, 2002) as follows:
- 1st Ethical Principle – Responsibilities to Society and Rules R516 – Registration, R517 – Practice Review and R518 – Professional Liability Insurance as Mr. Ling was providing public accounting services to clients through a corporation that was not registered with CGA-BC and hence was not subject to the regulations governing public practice;
- 2nd Ethical Principle – Trust and Duties as Mr. Ling used his privileged position with the complainant to convince him to invest funds in an "investment" scheme that he knew carried considerable risk. He was in a conflict of interest position as he was also an investor, was unable to continue funding the "investment" opportunity on his own and had immediate access to pre-signed blank cheques destined for Canada Revenue Agency and payroll deductions. Furthermore, Mr. Ling included the "investment" amount as an expense on the complainant's financial information and failed to provide documentation to support the amount claimed;
- 3rd Ethical Principle – Due Care and Professional Judgement as Mr. Ling filed GST returns for the complainant's company when he knew, or ought to have known, that certain information was false or misleading. Furthermore, Mr. Ling failed to explain the consequences of using the pre-signed blank cheques for "investing" purposes rather than payroll remittances for the complainant's companies.
- 4th Ethical Principle – Deceptive Information as Mr. Ling reported an expense on a financial statement without supporting documentation. Furthermore, Mr. Ling failed to disclose the related and associated companies' status on corporate income tax returns. In addition, engagement letters were issued under his proprietorship name and financial statements were issued under the corporate entity that was not registered. In addition, he filed false and misleading information when registering with CGA-BC by not disclosing client services performed under the corporate entity for practice review purposes. Finally, Mr. Ling knew, or ought to have known, that the information he provided to the complainant respecting the "African investment" opportunity was false or misleading.
- 5th Ethical Principle – Professional Practice as Mr. Ling provided public accounting services to clients through an unregistered corporate entity and not covered by professional liability insurance. The files prepared for these clients were also not subject to CGA-BC's practice review process. Furthermore, Mr. Ling failed to provide a receipt to support "investment" funds received from the complainant's companies.
- 6th Ethical Principle – Responsibilities to the Profession as Mr. Ling was unable to provide his working paper files for the client's companies for the 2002, 2003 and 2004 fiscal years, as Mr. Ling did not maintain a backup system for his paperless files. Furthermore, he would be unable to meet the requirement of the Association to provide his working paper files to a practice reviewer or other authorized third party user for work performed prior to 2006;
- R205 – Information Used for Personal Advantage as Mr. Ling solicited the complainant and other clients for funds as he clearly stood to gain financially if the "investment" opportunity came to fruition and, conversely, stood to lose significantly if he could not find funds to continue investing;
- R304(a) and (c) – Adherence to Acknowledged Principles and Standards of Professional Practice as Mr. Ling failed to provide working paper files for any of the complainant's companies as his computer crashed and he did not maintain a backup. Mr. Ling also admitted that he currently has no backup strategy for his working paper files. Furthermore, he admitted he did not obtain representation letters. Finally, Mr. Ling failed to disclose his lack of independence in the Notice to Reader communication for his personal corporations;
- R305(a) – Terms of Engagement as the former member did not obtain engagement letters from the complainant for work performed. Furthermore, financial information was prepared on letterhead chosen in an arbitrary manner, without regard for the firm actually engaged or completing the work.
- R306 – Sufficient Information and R401 – Communication Issued in Connection with Financial Information as Mr. Ling prepared an income statement that was misleading as a significant amount of "investment" funds advanced were expensed, even though half of these funds were not received until after the fiscal year-end of the complainant's company. Furthermore, he overstated an expense by not reducing the amount for an agreed upon repayment. Finally, Mr. Ling failed to provide documentation and/or receipts, related to the "investment" opportunity, for funds received from the complainant's companies.
- R402 – Association with Financial Information as Mr. Ling filed corporate income tax returns for a group of companies that were related and associated for tax purposes and did not prepare the required tax schedules. Mr. Ling knew, or ought to have known, that the corporate tax returns were misleading;
- R509.1(a) – Misleading Name of Firm or Style of Practice and R510(a) – Name of Practice as Mr. Ling issued financial information using letterhead of a corporate entity with a non-personal name that was not registered with CGA-BC.
- R521 – Right to Take Cognizance as Mr. Ling failed to provide the complainant with a receipt for the monies advanced by one of the complainant's companies. Furthermore, should the complainant's firms be subject to a tax audit, Mr. Ling will be unable to provide the auditors with his working paper files prior to early 2006 as his hard drive crashed and he had no backup system in place;
- R604(c) – Admittance to Membership as Mr. Ling discussed the "African investment" opportunity with at least four of his clients but he was not registered as an "adviser" as defined by the Securities Act (British Columbia). The complainant and one other client invested in the opportunity. Furthermore, Mr. Ling's corporation was engaged in the practice of public accounting. The corporation was not registered with CGA-BC. He did not make his client files related to the corporation available to the CGA-BC practice review process and he did not maintain professional liability insurance related to this corporation. Finally, Mr. Ling took advantage of his professional relationship, trust and special knowledge of his clients when he approached at least four other clients requesting that they advance him funds to invest in the African investment opportunity. In this capacity, he was in a conflict; and
- R605 – Responsibility for Firm as Mr. Ling owned a corporation engaged in the practice of public accounting and that corporation was not registered in public practice.
- expelled from membership;
- fined $10,000;
- assessed costs of $12,910; and
- prohibited from registering in public practice as either a member or a firm engaged in the practice of public accounting