Your Duty to Report Conduct to CPABC – Including Your Own

From CPABC’s Ethics Department

During your professional working career, you may encounter a situation in which you discover that a fellow CPA might have breached the high ethical standards that we, as a self-regulated profession, have set. To maintain the good reputation of the profession, it is vital that we be vigilant regarding the conduct of our fellow professionals to ensure that public confidence in our profession is both warranted and maintained.

Some readers may not be aware that all CPABC members and students [1] (“you” in this article) are required to report breaches of the CPA Code of Professional Conduct (CPA Code) to CPABC. In addition to reporting breaches committed by other CPAs and students, this also includes self-reporting your own conduct.

Conduct of others: What must be reported?

Rule 211 of the CPA Code requires you to report to CPABC’s registrar any information concerning an apparent code breach and/or any information that raises doubt as to the competence, reputation, or integrity of another CPABC member or student.

The guidance to rule 211 makes it clear that the rule is not intended to require the reporting of minor perceived faults, as each mistake is not necessarily a breach of the CPA Code. In deciding to report, you should believe that the matter raises doubts as to the competence, reputation, or integrity of the individual in question.

Exceptions to reporting

There are a few exceptions to rule 211. You do not have to report breaches of the CPA Code if:

• Reporting would result in a breach of solicitor-client privilege;
• The matter has already been reported to CPABC;
• The matter is trivial, as mentioned in the previous paragraph;
• You are specifically exempted by the CPABC board (for example, if you are a CPABC practice review officer or professional standards advisor); or
• You have a statutory duty of confidentiality, such as a statutory requirement of confidentiality contained in the Income Tax Act or the Securities Act.

Note that the exception regarding statutory confidentiality does not include civil non-disclosure agreements. For example—subject to the discussion that follows—even if you’ve signed an employment agreement or a commercial/professional agreement that requires confidentiality, you must still report any suspected breaches of the CPA Code to CPABC, regardless of the terms of those agreements.

We recognize that the CPA Code requirements might create a dilemma for you—in the absence of an exemption, employers or clients might assume that you will not disclose any information without their consent and might resist your obligation to report about a CPA’s conduct (including your own). Some might even be reluctant to engage you because of the reporting obligation. Since reporting to CPABC without an employer’s knowledge or consent could result in a claim against you, be careful about the terms of any employment agreement you sign; in fact, you should consider obtaining legal counsel before signing employment agreements. In client situations, you should inform your client that while you will seek their consent to report the information, the CPA Code obliges you to report even if their consent is not forthcoming. Moreover, you should make it clear that your obligation to the public and to the profession must prevail.

Rule 211 also contains exceptions for those involved in litigation support engagements that are criminal or civil in nature. If you are engaged in a civil or criminal investigation, you do not need to report the matter to CPABC until:

• The client or your employer consents to the release of information;
• You become aware that third parties (other than legal advisors) are aware of the information; or
• It becomes apparent to you that the information will not become known to third parties, other than legal advisors.

One last exception: You are not obligated to report matters that you know have already come to CPABC’s attention. Please note, however, that the guidance to rule 211 makes it clear that you must report matters if you know certain facts have been concealed, distorted, or otherwise not reported to CPABC.

What if you aren’t sure about someone’s conduct?

According to the guidance to rule 211, it is not enough to simply have a suspicion that professional misconduct has occurred. While you are not required to carry out your own investigation or reach a decision as to whether the CPA Code has been breached by another member or student, you are required to report the facts as they are known to you, along with any supporting documentation. When in doubt: report.

Your own conduct: What must be self-reported?

Rules in both the CPA Code and the Bylaws articulate the fact that serious misconduct must be reported to CPABC’s registrar.

CPA Code of Professional Conduct

As per rule 101.2 of the CPA Code, if you identify that you have breached the CPA Code, you must:

• “Take whatever action might be appropriate or required by law, as soon as possible, to satisfactorily address the consequences of any such breach.” Appropriate action may include notifying those who have been affected by the breach.
• “Evaluate whether the breach is such that it needs to be reported to CPABC, and if so, report it promptly.” For example, if the breach diminishes the reputation of the profession and/or fails to serve the public interest, you should notify the registrar.

Unlawful activity

Rule 213 of the CPA Code requires that you not engage in unlawful activity of any kind. Therefore, if you breach any law, you should consider whether it should be self-reported as required by rule 101.2 discussed above.

Other breaches that require self-reporting:

Several additional situations require self-reporting to CPABC. Refer to rule 102 (Matters to be reported to CPABC) for information on the following:

• Breaches of the Income Tax Act;
• Breaches of any Securities Act;
• Problems with other regulatory bodies, including other CPA organizations in Canada; and/or
• Resignation from a regulatory body in the face of discipline.

Bylaws

Bankruptcy

CPA bylaws 408 and 511 require you to self-report in the event of bankruptcy, including when you make an assignment in bankruptcy and when a receiving order is granted against you. This also includes when you file a proposal under the statutory provisions for insolvent debtors.

Criminal convictions

Bylaw 511 also requires you to self-report any and all criminal convictions to CPABC’s registrar, regardless of the nature of the offence or the jurisdiction in which it took place. Additionally, you must self-report a criminal conviction even if you receive an absolute or conditional discharge from the court.

You do not need to self-report the laying of criminal charges against you.

An example of self-reporting

The following fictionalized example is loosely based on an actual situation in which a member self-reported to one of CPABC’s legacy bodies. Names and circumstances have been changed to preserve anonymity.

Susan is a CPA. Her good friend, Bill, asked her to act as executrix for the estate of his mother, Mary. In her will, Mary left her entire estate to Bill, even though she had several other children. These other children launched a court action to challenge the will and alleged, in court filings, that Susan had been negligent in carrying out her duties as executrix. In its decision, the court criticized Susan for inaccurate probate filings, incomplete asset calculations, and late filing of the estate tax returns—all of which had incurred unnecessary expenses for Mary’s estate. Local media reported the court’s ruling.

Susan obtained legal counsel and self-reported the court’s criticism to CPABC. The investigation committee determined that Susan had breached rule 201 of the CPA Code(Maintenance of the good reputation of the profession), because it believed the court’s criticism and Susan’s actions had brought the profession into disrepute. The committee also determined that Susan had breached rules 202.1 (Integrity and due care) and 212.1 (Handling of trust funds and other property).  It recommended that Susan pay a fine of $2,500 and the costs of the investigation, and it also recommended that she accept a reprimand. The fact that Susan self-reported was a mitigating factor in the committee’s recommendations.

Do you know someone who hasn’t self-reported? Do you need to self-report?

Again, rule 211 spells out the duty to report breaches of the CPA Code. If you know someone who has breached the CPA Code but has not self-reported to CPABC, you must report the matter—otherwise, you will be in breach of the CPA Code yourself.

You should report or self-report all matters as discussed in this article to CPABC’s registrar at ethics@bccpa.ca.

Do you need guidance?

CPABC has professional standards advisors who are here to help. You can contact them for confidential guidance to ensure that you stay compliant with the CPA Code when navigating difficult situations:

• ProfessionalAdvisory@bccpa.ca

They can also be reached using our toll-free number at 1-800-663-2677. In complex cases, you may also want to consider obtaining independent legal counsel.

The Chartered Professional Accountants Act, Bylaws, Bylaw Regulations, and CPA Code of Professional Conduct can be accessed online at here.

Comments or questions about this article?

Contact the ethics department at ethics@bccpa.ca.

Footnotes

1. Note: “Students” here refers to both candidates (those in the CPA Professional Education Program) and students (those in CPA preparatory courses or the Advanced Certificate in Accounting and Finance).