Acting For More Than One Client

The Abacus Claims Committee has become aware of the following situations:

Arranging Loan Finance

Accountants can find themselves in difficulty if they are arranging loan finance from one client to another of the accountant’s clients.

Apart from possible professional indemnity claim implications, there is the question of whether such activity by the accountant forms part of normal accounting professional services.

Dissolution of Client Partnerships

Accountants can also face difficulties where a client partnership is dissolved, particularly if the dissolution is not harmonious. The accountant must decide which party he can act for, or whether he should withdraw from the case altogether. Once the decision has been made, all parties involved must be advised accordingly.

Avoiding Conflicts of Interest

Chartered Accountants Australia and New Zealand in the July 2014 edition of their magazine acuity, published the following article:

“At a meeting of the Professional Conduct Committee of the New Zealand Institute of Chartered Accountants held in private in Wellington, New Zealand on 28 May 2014, in respect of Member X (name and locality withheld), a chartered accountant, the Committee found that the member had failed to comply with disclosure of conflict of interest and objectivity principals of the Code of Ethics (2003), namely:

  • in recommending the services of a client, Company B (a finance company) to another client, Company A (a property developer);
  • in failing to inform Company A that he had subsequently become a trustee of a family trust which was the majority shareholder of Company B: and
  • in continuing to advise Company A about its options to address its financial difficulties, including insolvency and refinancing with Company B, when the member could not give or be seen to give objective advice in light of the client relationship and fiduciary obligations of the family trust.

The Committee found that various provisions of the Code of Ethics had been breached, including Rules 5: Disclosure of Conflicts of Interest and 3: Objectivity.

With the consent of the member, the Committee ordered that the member be severely reprimanded, that he pay a sum of $7,500 to the Institute, that he pay costs of $2,000 and that he engage an advisor at his own expense to review his client relationships, specifically trusteeships and any instances where he is acting for more than one client who are in business together, to ensure that any conflicts of interest and those relationships are managed appropriately.”

Members should give careful consideration to potential conflicts of interest should the situation arise.