ICAEW publishes its Audit Monitoring Report 2020 –what can you can learn from it?
In October the ICAEW updated its Guidance on the Duty to Report Misconduct. The ICAEW first issued Guidance on this topic way back in 1993. While amendments have been made since then to update references to legislation, bye-laws and guidance, this is the first wholesale re-issue. So what’s changed? The fundamental principle that it’s in the public interest to report matters which, if left unreported, could adversely affect the reputation of the profession, remains the same . However, there are some quite significant changes to the detail of what should be reported, reflecting a shift in attitudes since 1993 in the requirements and expectations of professionals.
There’s a large degree of overlap in the types of allegation which should be reported, but the new Guidance broadens these categories and adds some entirely new types of conduct. Notably, ICAEW members are now required to make a report when another member has been charged with and/or convicted of “a criminal offence”. Appendix 2 of the new Guidance provides further guidance on this, referring to “convictions, or accepting a caution, for any other criminal offence except minor motoring offences” (our emphasis). This is significantly broader than the previous Guidance, which only mandated the reporting of specific offences (those involving dishonesty, fraud or cheating, certain imprisonable offences and offences for which the perpetrator had received a custodial sentence).
Just as significant is the fact that the old Guidance only required a report to be made where specific offences had been “committed”, or there had been a conviction. Whilst the meaning of the word “committed” was ambiguous, there was no explicit requirement to make a report where a person had accepted a caution, and certainly not when they had only been charged with an offence, and there was therefore no finding against them. Appendix 2 gives as an example of potential misconduct simply being charged with various criminal offences, including those involving discrimination or sexual misconduct.
These changes reflect a change in the approach of regulators to misconduct in a professional’s private life, particularly since the #metoo movement. Whereas previously the ICAEW, in common with other financial regulators, was focused on significant criminal issues or financial impropriety, it now considers that wider issues of integrity fall within its remit, such as sexual offences and discrimination.
Similarly, the broad “catch all” provision is wider under the new Guidance. Previously, there was a requirement to report “a serious breach of faith in a professional respect” or a “serious financial irregularity”. The new Guidance is much broader, referring to “committing any act or default, whether in the course of carrying out professional work or otherwise, likely to bring discredit on the member, the profession of accountancy or ICAEW or so as to fall significantly short of the standards reasonably expected of a member / firm”. This again is not restricted to acts carried out in a member’s professional life, or to financial matters.
The new Guidance contains specific examples of potential misconduct, something which was lacking from the original Guidance. Appendix 1 of the new Guidance gives examples of matters relating to a member’s professional life or work environment. These include falsifying or wrongfully backdating documents, knowingly or recklessly breaching AML requirements and harassment of a colleague or client. Appendix 2 sets out examples of matters which relate to a member’s personal activities. These are reflective of society’s progress since 1993 and specifically include inappropriate use of social media/ electronic communications and verbally or physically abusive behaviour.
These lists are helpful in putting meat on the bones of the types of allegations which are reportable. They also contain examples which you may not realise could amount to misconduct (such as aggressive or abusive behaviour in correspondence that may be unrelated to professional activities).
Much of the detail within the two Guidance documents remains the same. However, there are some additions which reflect changes in society since 1993. For example, the fairly recent focus on the need to protect whistleblowers is reflected in some completely new wording (“Members must ensure that they do not act in any way to prevent other members with the firm from making a report to PCD in the public interest. Similarly, members with management responsibility must ensure that others within the firm do not suffer professionally or personally following a decision to make a report. PCD will take disciplinary action against members who attempt to prevent others from reporting matters to us, regardless of whether PCD proceeds to investigate and / or take disciplinary action in connection with the report.”)
There is also greater reference to internal investigations and disciplinary processes, which are doubtless more developed and sophisticated than they were 27 years ago. The old Guidance emphasised the fact that there was no requirement to conduct an internal investigation: “It is important to understand that the reporting member does not have to conduct any investigations or to take a decision as to whether a member or provisional member has been guilty of misconduct…” It also emphasised the need to report as soon as possible: “The duty to report arises when a member is aware of facts or matters which should, in light of the information known to that member at that time, indicate that a duty to report has arisen in accordance with this guidance. Any substantial delay in reporting could amount to a failure to report”.
By way of contrast, the new Guidance states that “If an internal investigation or disciplinary process has been started in relation to a matter, a report does not have to be made to PCD until such time as that investigation or process has been concluded….” Similarly, allowing time for an internal investigation to be completed is now a justification for a delay in reporting: “Unless an internal disciplinary investigation or internal disciplinary proceedings are in process in respect of the matter, you should make the report as soon as possible, as any significant delay could lead to you being in breach of the reporting duty in DBL.”
This indicates a change of emphasis: whereas previously the ICAEW required a report to be made as a matter of urgency and didn’t appear to want this to be delayed by an internal investigation, there appears to now be a greater recognition of the value of internal investigations. There may be a practical resource-based reason for this change of emphasis, as internal investigations may reduce the number of matters reported to the ICAEW and the amount of time the ICAEW needs to spend in investigating the matter itself.
The new Guidance deals for the first time with anonymous reporting. Perhaps in the wake of the numerous scandals which have come to light in the last decade, there is a recognition that some individuals may only make a report if they can do so in a way which protects their identity. Clearly, regulatory bodies will want to do all they can to encourage such individuals to make a report.
The new Guidance builds on the original, carrying forward those aspects which remain fundamental, but altering the wording where appropriate to ensure all potential areas of misconduct are caught. The additions reflect the changes in society since the early ‘90s: higher expectations in relation to the behaviour of professionals in their personal lives; a greater focus on sexual propriety as well as financial discipline; an acknowledgement of the potential for misuse of social media; a recognition of the value of internal investigations and the need at times to safeguard the identity of complainants and to protect whistleblowers.
The new Guidance is essential reading for all ICAEW members, who are under a duty to report relevant matters to the ICAEW. If you’re considering whether to make a report, either of yourself or another ICAEW member, don’t make your decision in isolation: speak to a senior colleague or take legal advice.
Julie Matheson is a Partner in the Regulatory team, specialising in defending professionals in the financial and legal fields. She has particular expertise in defending accountants and accountancy firms in regulatory proceedings brought by the FRC, ICAEW, CIMA, CIPFA and ACCA.
Lucy Williams is Legal Counsel in the Regulatory Department with a particular specialism in legal, healthcare and financial regulation. In her defence practice Lucy represents regulated professionals and organisations facing professional disciplinary proceedings.
Skip to content Home About Us Insights Services Contact Accessibility