From CPABC’s Ethics Department
“Well, I don't know why I came here tonight
I got the feeling that something ain't right
I'm so scared in case I fall off my chair,
And I'm wondering how I'll get down those stairs
Clowns to the left of me, jokers to the right,
Here I am, stuck in the middle with you.”
– Stealers Wheel
When Gerry Rafferty co-wrote and sang these words from Stealers Wheel’s hit song “Stuck in the Middle with You” in 1972, it’s fair to assume that he wasn’t referring to client relationships. But here at CPABC, we’ve witnessed a number of circumstances in which professionals have found themselves stuck in the middle of emotional and bitter disputes between business partners or family members who’ve devolved into warring parties as a result of changing circumstances.
The two fictionalized examples below are loosely based on actual complaints made to CPABC’s Investigation Committee and to our legacy bodies. Names and circumstances have been changed to preserve anonymity.
Typical “in-the-middle” complaints
The most common in-the-middle situations involve family disputes. Where once there was togetherness, now there is discord. Here are two examples illustrating the types of challenges involved in these situations:
- A CPA practitioner prepared the annual tax returns for a client. After this client married, the CPA practitioner began preparing the annual tax returns for both spouses. In time, the couple became equal shareholders of a company for which the CPA was engaged to provide accounting services.
Unfortunately, the marriage broke down and acrimony ensued. Naturally, the shareholder relationship also deteriorated. The CPA decided to continue performing both the corporate and personal tax engagements, but failed to co-operate with numerous requests for financial information from one of the shareholders, even though the party had the right to this information. Eventually, the “neglected” shareholder complained to CPABC that the CPA had improperly withheld financial information and, in so doing, had acted unprofessionally.
- A CPA practitioner provided tax and accounting services to a wealthy family, including its members who resided overseas. A dispute ultimately arose among the family as to whether the CPA had accurately allocated and reported declared dividends. The family members living overseas complained to CPABC that the CPA was not treating each person equitably and professionally, and favoured the family member who paid the CPA’s fees.
In the real cases that formed the basis for these two examples, the Investigation Committee (or predecessor equivalent) found that there were grounds to support the complaints, and that a breach of the CPABC Code of Professional Conduct (the CPA Code) (or predecessor equivalent) had occurred. In addition to the inconvenience of having to participate in the investigation process, the members involved in these cases had to pay fines and investigation costs and accept a reprimand.
What are the rules breached in the two case examples?
Rule 202.1 (Integrity and Due Care) of the CPABC Code of Professional Conduct (CPA Code) states: “A registrant shall perform professional services with integrity and due care.” Additionally, Rule 202.2 (Objectivity), which was recently amended, states: “A registrant shall not allow his or her professional or business judgment to be compromised by bias, conflict of interest or the undue influence of others.” In matters involving assurance services, Rule 204 (Independence) must also be taken into consideration.
Moreover, as stipulated in the guidance to the CPA Code, objectivity and integrity are two of the five fundamental principles of ethics. All members require objectivity to exercise professional judgment and act with integrity whether they work in public practice or in any other field.
A third principle of ethics must also be considered: confidentiality. According to the CPA Code, CPAs must “protect confidential information acquired as a result of professional, employment and business relationships,” and must not disclose such information without proper and specific authority. While this may sound obvious, CPABC and its legacy bodies have dealt with several cases in which professional accountants have disclosed confidential information to one party about another, without proper authority. In situations involving relationship breakups, it can be particularly difficult to determine what information each party is entitled to, as there are some grey areas.
Usually a “no-win” situation
Getting caught in the middle of a dispute often leads to defending against an ethics complaint—especially if one of the disputing parties wishes to apply pressure on the other(s)—and even the most diligent of CPAs, acting with the best of intentions, can get caught in the crossfire.
When one client splits into two, it can be a high-risk proposition to continue serving both parties, particularly if the issue that led to the split involves a family dispute. There is no rule that says a CPA practitioner cannot continue to serve both parties, but common sense would suggest that it would be challenging to maintain some of the key principles underlying professional behaviour—namely integrity and due care, objectivity, and confidentiality—in doing so.
Professionals should avoid acting for opposing parties when a relationship—whether familial or corporate—is unravelling. At such times, clients can act irrationally, and make complaints based more on emotion than on logic.
Communication is the key
There are situations in which a CPA can’t avoid dealing with parties involved in a dispute, such as when a conflict arises between corporate shareholders. Even when there is confidential information that cannot be shared among all parties, it is crucial that all parties believe the CPA is acting objectively and fairly, with integrity and due care. In such circumstances, the CPA must take extra care in communicating with disputing parties—not only in terms of content, but also in terms of tone and frequency.
What are the potential consequences?
CPABC’s bylaws provide the Investigation Committee with a range of sanctions for breaches of the CPA Code. Potential sanctions include a reprimand, fines, the cost of the investigation, and publication of the outcome. In serious cases, the Disciplinary Committee may also consider other remedies, including determining whether a CPA’s continued membership in CPABC is appropriate.
If your clients split up, you must take great care if you plan to continue providing services to one or both of the parties. Recognize, however, that even if you take the utmost precautions, you can’t guarantee that one party won’t lodge a complaint with CPABC just to put pressure on the other party.
CPABC has professional standards advisers who are here to help. You can call them for confidential guidance to ensure that you stay compliant with the CPA Code when navigating difficult situations. Stella Leung, CPA, CA, can be reached at 604-488-2609, and Brigitte Ilk, CPA, CGA, can be reached at 604-629-8363. Both can also be reached using our toll-free number at 1-800-663-2677.
You can review the CPA Code on our website at bccpa.ca/members/regulatory/cpabc-act,-bylaws-rules.
Comments or questions about this article?
Contact the ethics department at email@example.com.