- The Chartered Accountants Advisory Group (CAAG) provides informal feedback and mentor type assistance to members
- A common challenge for members is the various forms of potential conflicts of interest
- Where the interests of separate clients are no longer common, the relationship with each individual entity or person must be carefully considered.
In these circumstances of a matrimonial separation, whether hostile or otherwise, it is important to think through the interests of the various parties.
The Chartered Accountants Advisory Group fulfils a valuable role in providing informal feedback and mentor type assistance to practitioners when they run into a wide variety of difficult issues in public practice, or in commercial roles.
A common challenge that arises is the various forms of potential conflicts of interest, particularly for practitioners in smaller and regional firms.
The purpose of this article is to outline some typical circumstances that have arisen over the last few years practitioners, and identify the issues that require consideration, before any decision is made to continue to act for any parties.
A relatively common situation arises in a matrimonial dispute, typically where the practitioner is significantly involved in the client’s business activities and has usually dealt with the husband, and the relationship with the wife is more distant. A typical example of the situation arose recently where a practitioner advised that he had a client company, jointly and equally owned by husband and wife directors who had separated in hostile circumstances.
It is common in these circumstances for the husband, usually the partner involved in running the business, and the accountant, to discuss the future role of the accountant and the husband may ask the practitioner to continue to act for the company and for the husband.
In this example, the practitioner was seeking advice from CAAG on whether he could also act for the wife and further, whether he was in a position to give company information to the wife in her capacity as a director. The clients also had a self-managed superannuation fund and the member was enquiring as to whether he could continue to prepare financial statements for the fund.
In these circumstances of a matrimonial separation, whether hostile or otherwise, it is important to think through the interests of the various parties. The parties include the company and each of the directors separately. No longer are the interests of all the separate clients of the practitioner common and the relationship with each individual entity or person must be carefully considered.
In relation to the question of whether the member could continue to act for both the husband and the wife, recognition must be given to the fact that the individuals are likely to have separate and distinct interests, possibly in conflict.
If the practitioner is requested to act for one, the person who would no longer enjoy the services of the practitioner may well feel at a significant disadvantage compared to the other individual, because of the loss of knowledge of the practitioner of their financial affairs. Under those circumstances, it is difficult to act for either individual party, without the other being disadvantaged and consideration should be given to asking both individuals to seek alternate advisers.
In relation to whether the practitioner is in a position to provide information to the wife who may be continuing as a director and a shareholder, the practitioner is not an officer of the company in most circumstances and should only provide information to other parties with the authorisation of the client company. This clearly can cause some difficulty for the clients, the company and the individuals.
A real issue in the circumstances may be the possibility that the company and the superannuation fund lose access to the practitioner’s advice based on a long experience with the client, in addition to the practitioner’s expertise.
One way of continuing an involvement with the client company, which would mean that the company would not lose the services being provided by the practitioner, is for the practitioner to continue to act for the client company (with the consent of both individuals) and the superannuation fund, but not the individuals who should have independent advice. The practitioner should proceed on the basis of agreement that information is provided on a consistent basis to both the former husband and the former wife, or to their advisers as appropriate.
In these circumstances, the company and the superannuation fund do not lose access to the practitioner’s advice, and the individual interests of the former husband and wife are protected.
This has the advantage that the client company retains access to a significant adviser over a period of time and ensures that the individuals are seeking independent advice on a similar basis, i.e. that information is being provided to both parties by the accountant for consideration by their new advisers.