Accountants' duties to report misconduct

During your career, you may come across conduct by another regulated accountant which you are concerned about. The conduct could be in the accountant’s professional or personal life, and might potentially breach technical or ethical standards. These common dilemmas then arise:  do I have a duty to report this to the accountant’s regulatory body? If I don’t, would it cause me to get into difficulty with my own regulator?
 

Similarly, you may have received a police caution or a conviction for a relatively minor matter, or you may have done something in your professional or personal life which might have fallen below the ethical or technical standards of your regulator. Do you have a duty to disclose these matters to your regulator?

We provide some general guidance on whether you have a duty to report misconduct to your regulator.  Please contact us should you need any further information or advice.

ICAEW

The ICAEW Disciplinary Byelaws state that there is a duty for every member, firm or affiliate to report to the ICAEW any events which may indicate that:

• They may be liable to disciplinary action in accordance with the ICAEW Disciplinary Byelaws or the FRC Accountancy Scheme; and/or
• Another member, firm or affiliate may be liable to disciplinary action in accordance with Disciplinary Bye-laws or the FRC Accountancy Scheme.

The ICAEW’s Guidance on the Duty to Report Misconduct (“the Guidance”) provides guidance on situations where such reporting may be required. This includes circumstances where a member or a firm has:

• committed misconduct, namely by 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;
• been professionally incompetent, namely by performing professional work incompetently to such an extent, or on such a number of occasions, as to fall significantly short of the standards reasonably expected of a member / firm;
• committed a breach of any ICAEW bye-law or regulation;
• been charged with and / or convicted of a criminal offence (whether in the UK or abroad);
• been the subject of a disqualification order or provided a disqualification undertaking under the Company Directors Disqualification Act 1986 (or equivalent legislation abroad);
• carried on activities regulated under statute when not authorised to do so;
• been declared bankrupt or liable to disciplinary action under Disciplinary bye-law 4.2 (financial propriety and insolvency matters); or
• been the subject of an adverse finding in a report by, or proceedings before, another person or body (such as ICAS, CAI, ACCA, CIMA or CIPFA).

Appendix 1 of the Guidance sets out a non-exhaustive list of examples that are likely to constitute misconduct relating to a member’s professional life or work environment. This includes:

• Dishonest actions or statements and/or actions demonstrating a lack of integrity;
• Knowingly providing false or misleading information to a principal, an employer, senior manager, a client, or a regulator;
• Knowing or reckless breach of duty of confidentiality;
• Knowingly or recklessly preparing incorrect documents to be filed/published/relied upon e.g. financial statements, valuations, tax returns, mortgage references etc;
• knowing or reckless breach of AML requirements;
• abusive, intimidatory or threatening conduct directed towards other employees/ managers at place of work or directed towards third parties such as clients, regulators etc; or
• harassment (sexual or otherwise) of another employee / manager at place of work or client.

Appendix 2 of the Guidance sets out a non-exhaustive list of examples of matters that are likely to constitute misconduct relating to a member’s personal activities. This includes:

• being charged with, or convicted of, one or more criminal offences involving dishonesty, fraud, extortion or bribery; discrimination; violence or sexual misconduct; the possession or distribution of child sex abuse images or where the offence is associated with terrorism; money laundering; perverting or obstructing the court of justice or facilitating or concealing serious criminal activity by others;
• convictions, or accepting a caution, for any other criminal offence except minor motoring offences;
• where a member has been removed or dismissed from a position of trust on the basis of dishonest or allegedly dishonest behaviour;
• inappropriate use of social media / electronic communications;
• verbally or physically abusive behaviour towards work colleagues or other persons outside of the workplace;
• sexual misconduct / harassment of work colleagues or other persons outside of the workplace;
• aggressive or abusive behaviour in correspondence that may be unrelated to professional activities or relate to the member’s own financial affairs.

The Guidance makes clear that the reporting duty does not extend to minor faults of other members or a firm or suspected issues that are not supported by evidence.

The Guidance also makes clear that members are also responsible for reporting their own actions / omissions, if they fall within the category of ‘being liable to disciplinary action.’ If the report results in disciplinary action being brought against a member, the self-report will count in their favour.

ACCA

The ACCA Byelaws direct that it is the duty of every member to bring promptly to the attention of the ACCA any facts or matters indicating that a member, relevant firm or registered student may have become liable to disciplinary action. This includes self-reporting when you have engaged in conduct which falls below one of the prescribed categories.

Under the ACCA’s Byelaws, a number of types of conduct are listed as being the types of issue which would lead to a member being liable to disciplinary action. Some examples include:

• being guilty of misconduct in carrying out his professional duties or otherwise;
• in connection with professional duties, the member has performed their work, or has conducted themselves or their practice, erroneously, inadequately, inefficiently or incompetently;
• they have committed any breach of the ACCA’s Byelaws;
• they have been disciplined by another regulatory body;
• they have become insolvent or have entered into an agreement with creditors;
• they have failed to satisfy a judgment debt without reasonable excuse for a period of two months;
• they have pleaded guilty to, been found guilty of, or accepted a caution in relation to any offence discreditable to the ACCA or the accountancy profession; or
• they have been, before a UK court or elsewhere, in any civil proceedings where they have been a party or a witness, found to have acted fraudulently or dishonestly.

The Byelaws also make it clear that a member must report him or herself if they have engaged in conduct which would lead to them being liable for disciplinary action.

CIMA

CIMA’s Byelaws set out a fairly contained set of requirements for matters which must be disclosed to it. The disclosure must be made within 30 days of the event in question.

The Byelaws state that a member or registered student must make a disclosure where he/she:

• sustains a disciplinary sanction before any body or tribunal;
• is found guilty of an offence by any court;
• is declared bankrupt or made subject to a bankruptcy restrictions order or undertaking;
• enters into an individual voluntary arrangement with creditors or is subject to a debt relief order; or
• is disqualified from acting, or gives an undertaking not to act, as a director or trustee.

CIPFA

Under CIPFA’s Byelaws, it is the duty of every member, affiliate member, associate member and registered student to, where it is in the public interest to do so, bring to the attention of CIPFA any facts or matters which indicate that a member, former member, affiliate member, former affiliate member or current or former student may have become liable to disciplinary action.

The conduct which might cause to become liable to disciplinary action are fairly varied. This may include circumstances where:

• a complaint has been made about the individual’s professional competence or professional conduct;
• he / she appears to have breached one or more of the guides to conduct, principles or rules prescribed by the Council;
• he / she has conducted him or herself in such a way as to prejudicially affect the status, reputation or welfare of CIPFA;
• he / she may be guilty of misconduct. 

Under the CIPFA Byelaws, ‘misconduct’ includes:

• any act / default which has brought or is likely to bring discredit upon him / herself, his / her employer, CIPFA or the accountancy profession;
• he / she has received a conviction in any proceedings in which a sentence of imprisonment may be imposed;
• he / she has been subject to a finding in civil or criminal proceedings that he / she has acted dishonestly or fraudulently;
• he / she has become bankrupt, or has entered into an arrangement with his / her creditors generally.

ICAS

The ICAS Investigation Regulations set out that it is the duty of each member, student member or affiliate member to report to ICAS any facts or matters which, in their reasonable opinion, indicate that:

• a member, student or affiliate may be guilty of professional misconduct or unsatisfactory professional conduct;
• a member, student, affiliate or firm may be guilty of professional incompetence;
• a firm may have committed any serious act or default, in the course of carrying out professional work or otherwise likely to discredit the firm, ICAS or the profession of accountancy;
• a firm may have failed to adhere to the rules, regulations or other guidance governing the regulation of firms.

The ICAS Reporting Guidance defines professional incompetence, professional misconduct, and unsatisfactory professional conduct, namely:

• Professional incompetence – the performance of professional work, whether as a principal, director, employee or as an individual, incompetently to such an extent or on such a number of occasions as to fall significantly short of the standards expected of a member, student member, affiliate or firm.
• Professional misconduct – any serious act or default, whether in the course of carrying out professional work or otherwise, likely to bring discredit to himself, ICAS or the accountancy profession, or any serious departure from the standards to be expected of a member, student member or affiliate.
• Unsatisfactory professional conduct – any act or default, whether in the course of carrying out professional work or otherwise, which falls below the standards to be expected of a member, student member, or affiliate but which does not amount to professional misconduct.

It also confirms that a member has an equivalent duty to self-report their own conduct when it might fall into one of the above categories.