Conal Kennedy, Head of Practice Consulting, writes: In Practice Consulting, we often take calls and emails from members about difficulties and challenges that arise in practice. One of the most common queries surrounds the rights and obligations of the various parties when there is a change of professional adviser. When a client decides to move from one accounting firm to another, both parties should cooperate to make the transition as smooth as possible. However, complications and difficulties can arise when one of the parties has a grievance. Sometimes, the relationship between the firm and the client may have lasted many years, and its ending can come as an unpleasant surprise to the existing accountant, the worse so if they have not been fully paid for all work done. On the other hand, the new accountant may be very pleased to gain a new client, and may be surprised in their turn by difficulties posed by the incumbent. In some rare instances, incoming accountants do not do all that is required of them under the Code of Ethics, particularly around professional enquiries. In Practice Consulting, we receive communications from members on both sides of the fence. We provide information and guidance to the member, bearing in mind of course that there are two sides to every issue. Let’s look at a typical scenario and discuss some of the issues and possible misconceptions, with the details anonymised but addressing problems that are common enough. As always, we need to concentrate on the key matters in a generalised way, so if you are faced with this scenario yourself, please go to the Sections 320 of the Code of Ethics for the full requirements and guidance. In our example, a firm has made contact with Practice Consulting, explaining that they have recently taken on a new client. The client is a limited company, who needs a non-audit accounts preparation assignment and tax compliance work carried out. The firm has sent the professional enquiry letter to the previous accountant. However, the outgoing accountant has written back to the firm and the client to say that they have not been paid for a certain piece of work, and are withholding clearance and keeping possession of all records until they have been paid in full. What are the rights and obligations of the parties? In the first instance, there is no such thing as “professional clearance” as such. No accounting firm can prevent another accounting firm from working for a client, and therefore no firm can give or withhold clearance. The incoming accountant is obliged to carry out professional enquiries to determine if there is any professional reason why they should not take up the appointment. This is the purpose of the “any professional reason” letter, to which the outgoing accountant should respond, with the approval of the client. The new agent should make their best efforts to obtain responses to the letter, including re-sending the letter by registered mail, if necessary. However, if they do not receive a response following reasonable efforts, and their other enquiries are sufficient to indicate that there is no valid reason not to take up the assignment, then they may proceed. In this instance, the existing accountant would appear to be attempting to take a lien, meaning a right to retain possession over certain documents that they have in their possession until they have been paid. Whilst this right still exists, it is really only applicable in quite narrow circumstances. Firstly, the outgoing accountant is obliged to co-operate with the successor to ensure that the client’s interests are not prejudiced, including the client’s obligation to comply with its legal obligations if there is no other means to do so. This may in effect mean the that the incumbent accountant is obliged to forward any missing information to ensure that tax compliance and filing obligations are met, or other interests are protected, and therefore the right of lien may be largely irrelevant in respect of the core accounting records of the entity. Secondly, in the case of an incorporated client, insofar as any of the documents held by the outgoing accountant constitute the accounting records of the company, then company law requires that these should be returned to the directors of the company. The fact that the outgoing accountant has not been paid does not affect either of the obligations mentioned above. Insofar as the accountant proposes to take a lien, this only applies to documents that have been worked on and for which the accountant has not been paid. In the case above, it would appear that the outgoing accountant is obliged to hand over the key accounting records that it holds, and to separately seek payment of the outstanding fees. The outgoing accountant should also respond to the professional enquiry letter. When we discuss the above rights and obligations with members who contact us, the members occasionally observe that the advantage appears to be with the incoming accountant. In fact, the Code of Ethics cannot override the obligation of the client to comply with legislation, or give the existing accountant rights that contradict company law. The message that members should draw is that their rights to refuse cooperation in the event of non-payment are quite limited, and they should organise their credit control policies accordingly. Many firms have a policy of limiting their exposure to large outstanding fees through direct debit and staged payment arrangements with clients. In the case of audit clients, the incoming auditor has certain rights to access information held by the outgoing auditor. The circumstances in which these rights apply differ slightly between ROI and UK, but are a legal right of the incoming auditor, and the application of them differs somewhat from the ethical obligations discussed above. If you have questions in connection with this issue or other practice related issues or dilemmas, please contact Practice Consulting and we will endeavour to give you the information and guidance that you need.

As people across the world condemn the attack by Russia on Ukraine, they also want to show their support through donations and using their influence for humanitarian intervention. Professional accountants will find themselves in positions of influence with many stakeholders including clients, employers, employees, and local communities.  Níall Fitzgerald, Head of Ethics and Governance outlines some practical considerations for accountants and business leaders in this context:    Fundraising for humanitarian or other reliefs People and organisations are looking to help the millions of Ukrainians displaced by the invasion by donating directly or running fundraiser events. Be aware of fraud risk and recommend controls that ensure the safeguard of any monies raised and that they are used for the purpose for which they were raised. Ensure the necessary licences are obtained for any public fundraising activity. Be clear on the purpose for the funds and how they will be channelled to the beneficiaries. Ensure compliance with national charity law and check that charitable donations are only made to a properly registered charity in your jurisdiction. Social media Understandably, many people and corporates are sharing their views on Russia's  invasion of Ukraine via social media. The distinction between when a view is a personal view or that of the organisation where a person works is not always clear. If you are an officer of a company, e.g. a director, chief executive, or the public relations officer, and you are commenting on a matter related to your area of responsibility, then it is very difficult to separate your view from the corporate view. For this reason, many organisations will have clear corporate social media policies in place and that is the first reference point if in doubt. However, before reacting to a colleague's personal post, it is important to also consider their right to hold and express an opinion. There can be a cultural aspect to this within an organisation, especially where respect, tolerance, diversity and inclusion, and psychological safety are highly valued. The specific circumstances of the person expressing the view might also be taken into account, for example their emotional proximity to the issue.  Developing corporate positions Many organisations are using their influence for good by publicly denouncing the invasion of Ukraine, with some going further to withdraw from investments and business operations in Russia, and any dealings with Russian state-owned entities. These decisions are not always the most straightforward to implement. Legal and other expert advice should be sought to consider how an organisation can address contractual obligations, restructure, and relocate operations. Many Russian citizens are against the actions of the Russian Government, and Russian employees, contractors, etc., should receive fair treatment and not be discriminated against. Reporting progress and being transparent on these positions, including any setbacks, is very important as corporates will be held to account by stakeholders and members of the public to honour their commitments. Careful thought should be given before making any wide-sweeping statements. The global economy, with its complex interconnected markets, creates practical difficulties when seeking to divest of everything connected to Russia.   Whistleblowing and speaking up Clearly defined and well-communicated whistleblowing and speaking-up policies and procedures can increase an organisation’s awareness of any weaknesses in it’s internal controls and practices relating to sanctions, anti-money and anti-bribery and corruption compliance. Communicating to employees the organisation’s position in relation to this crisis and reminding them about whistleblowing and speaking-up policies and procedures, promotes a safe environment in which individuals feel comfortable to raise any concerns about the organisation’s actions, or inactions. Corporate reporting While the scale of the impact of this crisis on organisations will differ, it will dwarfed by the impact on millions of Ukrainians. Organisations have important social obligations and responsibilities to corporate stakeholders. Accountants should ensure transparency and accountability in corporate reporting by highlighting the impact of the crisis on the organisation’s operations, asset valuations and exposure to liabilities. Examples of the sources of this impact include: supply-chain disruption; the cost of ceasing operations in Russia or the conflict/invasion zones; rising commodity prices; inaccessibility of certain markets due to trade or travel restrictions; difficulty maintaining required levels of capital reserves; and loss of key customers. Accountants will have a central role in collecting, measuring, and reporting the necessary information and ensuring it is reported in accordance with legal and regulatory requirements and relevant reporting frameworks. They should also understand the limitations to their expertise and call for the involvement of experts where necessary. Directors and senior management will need to consider expert advice when making highly judgemental decisions on values and estimates and in determining the future implications for the organisation.    Boundaries between personal life and professional life Negative emotions, such as anger and fear, increase the risk of self-defeating behaviours. The developing situation in Ukraine will understandably evoke such emotions in many. In this context, it is useful to refer to guidance issued by the CCAB bodies, in July 2021, to help accountants consider and distinguish if their personal behaviour could be viewed as conduct that might discredit the profession. While the facts and circumstances of every situation will differ, the CCAB guidance provides some examples of such behaviours, including the use of seriously offensive or threatening language causing distress, or threatening behaviour, towards a client or a member of the public outside of the work environment.  This non-exhaustive list of considerations may need to be reconsidered as the crisis in Ukraine develops. In many situations, increasing ethical awareness or the ability to address an ethical dilemma requires reflection. Professional accountants may find it useful to refer to, or circulate to professional accountancy staff, the Chartered Accountants Ireland Ethics Quick Reference Guide available from our Ethics Resource Centre. This article was adapted for members overseas from an article written by Níall Fitzgerald on the Institute’s Ethics Resource Centre.

Members of Chartered Accountants Ireland are annually required to confirm that they are aware of their “obligations as set out in the Code of Ethics for members”. Accounting firms are required to indicate in their annual return whether they have “taken steps to ensure that all Principals, Employees and Subcontractors fully comply with the Institute’s Code of Ethics for Members”. A glance at the Regulation section of Accountancy Ireland reveals that non-compliance with the Code of Ethics is a frequent finding leading to disciplinary action against an individual member or firm. So how do you ensure you and all in the firm are familiar with the obligations as set out in the Code of Ethics? While reading the Code of Ethics is a good starting point, the current version is a long read at 202 pages, 261 if you include the obligations applying to insolvency practitioners. Recent research and engagement with accounting professionals on ethics has consistently identified training and illustrative case studies as the preferred supports for increasing familiarisation with the Code of Ethics. Professional accountants have expressed a preference for real-life examples and case studies which allow them to consider ethical dilemmas in a practical way, relevant to their own experience. The recent publication of five sets of ethical dilemmas case studies by the Consultative Committee of Accounting Bodies (CCAB), of which Chartered Accountants Ireland is a member, is a welcome response to this need. The case studies, which are applicable in both UK and Ireland, illustrate how the Code of Ethics can be applied by members working in business, not-for-profits, the public sector, public practice, and as non-executive directors. Each set contains several case studies tailored to reflect ethical dilemmas that can arise in the course of their professional work. They are designed to outline key principles and processes that can be considered when attempting to identify, evaluate and address ethical threats in line with the Code of Ethics. While more than one set of case studies may be relevant to an individual member, members in practice will appreciate the case studies exploring a range of ethical dilemmas tailored for professional accountants in public practice. This set explores the following ethical dilemmas: Case Study 1 explores the dilemma faced by a manager in relation to a very competent junior member of staff whose personal circumstances require her to take regular absences from work. This is having a negative impact on her colleagues, who are vocal about being overworked. Like other case studies in the set, it works through the dilemma in a structured manner, consistent with the conceptual framework outlined in the Code of Ethics, to: consider which of the five fundamental principles (integrity, confidentiality, professional behaviour, objectivity, professional competence and due care) are under threat; consider the relevant facts, which also involves seeking out information rather than solely relying on the information presented prima facie; identify affected parties, including considering the culture and reputation of the firm; determine who should be involved in the resolution and whether to consult with a colleague, external expert, or other trusted advisor; determine a possible course of action and implement, with the advice to document the steps taken in resolving the dilemma in case your ethical judgement is challenged in the future. Case Study 2 presents a dilemma faced by a partner in a three-partner firm. He discovers a client is not recording certain cash sales in their accounts. The case study examines the practical considerations including how to communicate the issue with the client and possible actions to take if the client is not receptive to the news. The commentary includes an outline of a thought process that prioritises the reputation of the firm, the five fundamental principles of the Code of Ethics, and relevant laws and regulations, to decide on the best advice for the client. This case also highlights the importance of considering legal reporting obligations, particularly in relation to anti-money laundering legislation and fraud. Case Study 3 tackles an ethical dilemma facing a sole practitioner who loses a local small business client (Company A) and is subsequently approached to help a local competitor of Company A (Company B) make an offer to buy their former client. This dilemma is compounded by the fact that Company A is struggling financially but this is not common knowledge. Also, the sole practitioner is acting as an alternate/continuity provider for another local sole practitioner, who is convalescing after a medical treatment. Company B is a client of the other practitioner. This case is a good example of how there can be several dimensions to an ethical dilemma, and the benefits of having a structured process in addressing such dilemmas. In Case Study 4, an accountant is advising a medium-sized group on a range of improvements to its operations and systems. After identifying a range of issues and preparing a report estimating the costs, the accountant becomes aware that the director with whom they are liaising has significantly understated these in a separate report to the board. The director does not share the accountant’s report with the board. This case requires consideration of to whom the accountant owes their fiduciary duty, and how they might discharge their duties and effectively manage their professional relationship with the client. Case Study 5 outlines a scenario in which a trainee accountant in a firm has been tasked with completing some complicated work within a very tight deadline in the lead-up to them taking study leave. While there are lessons to be learned for both parties, the case highlights that certain behaviour, which itself may be unethical, may give rise to further unethical behaviour directly impacting the quality of work for clients. In Case Study 6, a three-partner firm has a large audit client to whom it also provides non-audit services. There are substantial fees outstanding from the client and significant going-concern issues arise. Several issues are explored in this case, including that the audit planning section was not appropriately reviewed, that key information was missed, and that there is pressure to provide the bank with a clean audit opinion so it can extend the company’s overdraft facility. This is a situation in which more than one set of ethical obligations require consideration, in this case the Code of Ethics and the Ethical Standards for Auditors. Case Study 7 addresses suspected non-compliance with laws and regulations (NOCLAR), including bribery and cover-up of breaches of environmental laws and regulations, and considers any legal reporting obligations for the firm. The case highlights real issues that can arise, including dealing with pressure from clients to disregard any suspicions of noncompliance, desire to disassociate from illegal or unethical activity, deciding whether to override client confidentiality and report suspicions to the appropriate authorities, and balancing duties to the client with the public interest with safeguarding the reputation of the firm. CCAB’s Ethical Dilemma Case Studies provide an interesting and illuminating way to engage with the Code of Ethics while also increasing awareness of some threats to ethical conduct that can arise in an accountancy firm. Members are encouraged to use, read and apply them, and they can also be used by firms and/or training providers provided they are appropriately referenced. The case studies and other resources that can assist members in considering ethical dilemmas can be found on the Chartered Accountants Ireland Ethics Resource Centre. Níall Fitzgerald FCA Head of Ethics & Governance at Chartered Accountants Ireland

Members of Chartered Accountants Ireland are annually required to confirm that they are aware of their “obligations as set out in the Code of Ethics for members”. A glance at the Regulation section of Accountancy Ireland reveals that non-compliance with the Code of Ethics is a frequent finding leading to disciplinary action against an individual member or a member firm (who are also required to ensure that all working for the firm fully comply with the Institute’s Code of Ethics for Members). So how do you ensure you and all in the firm are familiar with the obligations as set out in the Code of Ethics? While reading the Code of Ethics is a good starting point, the current version runs to 202 pages (261 if you include the obligations applying to insolvency practitioners). Recent research and engagement with accounting professionals on ethics has consistently identified training and illustrative case studies as the preferred supports for increasing familiarisation with the Code of Ethics. Professional accountants have expressed a preference for real-life examples and case studies which allow them to consider ethical dilemmas in a practical way, relevant to their own experience. The recent publication of five sets of ethical dilemmas case studies by the Consultative Committee of Accounting Bodies (CCAB), of which Chartered Accountants Ireland is a member, is a welcome response to this need.  Each set contains either six or seven case studies tailored to reflect ethical dilemmas that can arise in the course of their professional work in Ireland and UK. They are practical and explore common issues that can arise in professional life. They are designed to outline key principles and processes that can be considered when attempting to identify, evaluate and address ethical threats in line with the Code of Ethics. More than one set of case studies may be relevant to an individual member. The following sets are available: Professional accountants in business Professional accountants in public practice Professional accountants working as non-executive directors Professional accountants working in the not-for-profit sector Professional accountants working in the public sector Members are encouraged to use, read, and apply the learnings from these case studies. They can also be used as training material by firms, training providers, schools or colleges and universities provided they are appropriately referenced, and use abides by the publications copyright terms and conditions. The case studies and other resources that can assist members in considering ethical dilemmas can be found on the Chartered Accountants Ireland Ethics Resource Centre. Níall Fitzgerald FCA Head of Ethics and Governance at Chartered Accountants Ireland

The Consultative Committee of Accountancy Bodies in Ireland (CCAB-I) and in the UK (CCAB) have issued statements to the accountancy profession following recent and ongoing developments in Ukraine. The statements: remind accountants of their legal and professional obligations, including ethical considerations, relating to the sanctions regimes and in managing their duties to clients, employers, and other stakeholders to cope with consequent disruptions; collate links to sanction lists, guidance and government advice in the UK, Ireland and the EU; highlight risks presented by current developments in the context of compliance with anti-money laundering legislation, the potential impact on professional indemnity insurance for members in practice, and the fast-moving nature and complexity of the situation and need to obtain specialist advice; refer to requirements in the Code of Ethics for Professional Accountants of particular relevance when an accountant is confronted with a dilemma or difficult situation concerning compliance with financial and trade sanctions and other restrictions. As people across the world condemn the attack by Russia on Ukraine, they also want to show their support through donations and using their influence for humanitarian intervention. Professional accountants will find themselves in positions of influence with many stakeholders including clients, employers, employees, and local communities.  The following are some considerations for accountants in this context: Fundraising for humanitarian or other reliefs People and organisations are looking to help the millions of Ukrainians displaced by the invasion by donating directly or running fundraiser events. Be aware of fraud risk and recommend controls that ensure the safeguard of any monies raised and that they are used for the purpose for which they were raised. Ensure the necessary licences are obtained for any public fundraising activity. Be clear on the purpose for the funds and how they will be channelled to the beneficiaries. Ensure compliance with charity law and check that charitable donations are only made to a properly registered charity (Register of Charities: Charities Regulator (Republic of Ireland) and The Charity Commission for Northern Ireland).   Social Media Understandably, many people and corporates are sharing their views on Russia's invasion of Ukraine via social media. The distinction between when a view is a personal view or that of the organisation where a person works is not always clear. If you are an officer of a company, e.g. a director, chief executive, or the public relations officer, and you are commenting on a matter related to your area of responsibility, then it is very difficult to separate your view from the corporate view. For this reason, many organisations will have clear corporate social media policies in place and that is the first reference point if in doubt. However, before reacting to a colleague's personal post, it is important to also consider their right to hold and express an opinion. There can be a cultural aspect to this within an organisation, especially where respect, tolerance, diversity and inclusion, and psychological safety are highly valued. The specific circumstances of the person expressing the view might also be taken into account, for example their emotional proximity to the issue.   Developing Corporate Positions Many organisations are using their influence for good by publicly denouncing the invasion of Ukraine, with some going further to withdraw from investments and business operations in Russia, and any dealings with Russian state-owned entities. These decisions are not always the most straightforward to implement. Legal and other expert advice should be sought to consider how an organisation can address contractual obligations, restructure, and relocate operations. Many Russian citizens are against the actions of the Russian Government, and Russian employees, contractors, etc., should receive fair treatment and not be discriminated against. Reporting progress and being transparent on these positions, including any setbacks, is very important as corporates will be held to account by stakeholders and members of the public to honour their commitments. Careful thought should be given before making any wide-sweeping statements. The global economy, with its complex interconnected markets, creates practical difficulties when seeking to divest of everything connected to Russia.   Whistleblowing and Speaking Up Clearly defined and well-communicated whistleblowing and speaking-up policies and procedures can increase an organisation’s awareness of how it may be exposed to the issues highlighted in the CCAB/CCAB–I statements referred to above. Communicating to employees the organisation’s position in relation to this crisis and reminding them about whistleblowing and speaking-up policies and procedures, promotes a safe environment in which individuals feel comfortable to raise any concerns about the organisation’s actions, or inactions.   Corporate Reporting While the scale of the impact of this crisis on organisations will differ, it will be dwarfed by the impact on millions of Ukrainians. Organisations have important social obligations and responsibilities to corporate stakeholders. Accountants should ensure transparency and accountability in corporate reporting by highlighting the impact of the crisis on the organisation’s operations, asset valuations and exposure to liabilities. Examples of the sources of this impact include: supply-chain disruption; the cost of ceasing operations in Russia or the conflict/invasion zones; rising commodity prices; inaccessibility of certain markets due to trade or travel restrictions; difficulty maintaining required levels of capital reserves; and loss of key customers. Accountants will have a central role in collecting, measuring, and reporting the necessary information and ensuring it is reported in accordance with legal and regulatory requirements and relevant reporting frameworks. They should also understand the limitations to their expertise and call for the involvement of experts where necessary. Directors and senior management will need to consider expert advice when making highly judgemental decisions on values and estimates and in determining the future implications for the organisation.   Boundaries between Personal Life and Professional Life Negative emotions, such as anger and fear, increase the risk of self-defeating behaviours. The developing situation in Ukraine will understandably evoke such emotions in many. In this context, it is useful to refer to guidance issued by the CCAB bodies, in July 2021, to help accountants consider and distinguish if their personal behaviour could be viewed as conduct that might discredit the profession. While the facts and circumstances of every situation will differ, the CCAB guidance provides some examples of such behaviours, including the use of seriously offensive or threatening language causing distress, or threatening behaviour, towards a client or a member of the public outside of the work environment. This non-exhaustive list of considerations may need to be reconsidered as the crisis in Ukraine develops. In many situations, increasing ethical awareness or the ability to address an ethical dilemma requires reflection. Professional accountants may find it useful to refer to, or circulate to professional accountancy staff, the Chartered Accountants Ireland Ethics Quick Reference Guide available from our Ethics Resource Centre. Níall Fitzgerald FCA, Head of Ethics and Corporate Governance Update: Chartered Accountants Ireland have created a dedicated page collating key information on sanctions in response to the crisis in Ukraine.

The Consultative Committee of Accountancy Bodies (CCAB), which Chartered Accountants Ireland is a member of, have published the results of an ethics survey conducted in July and August 2021. This informal survey was designed to take the ethical temperature of the accountancy profession in the UK and Ireland over the last 3 years and as we emerge from the COVID-19 pandemic. Survey respondents included members of Chartered Accountants Ireland, Institute of Chartered Accountants in England and Wales, Institute of Chartered Accountants in Scotland, Association of Chartered Certified Accountants in Ireland and UK and the Chartered Institute of Public Finance and Accountancy. There was a spread of responses across four sectors including members who work in audit or accountancy firms, public sector, commercial sector and charity/non-profit sector. Details of the results are available on the CCAB website and a summary of the key highlights include: 27 per cent of respondents indicated that in the last three years they had been put under pressure or felt under pressure to act in a professionally unethical way. Some respondents indicated the pressure to act in a professionally unethical way was applied by directors, managers, clients or members of a board or council. 28 per cent of respondents identified the “CFO/FD/CEO/or any other director”, and 27 per cent identified “My line manager or their line manager” as the person who applied the pressure. 18 per cent said it was a “client”, 10 per cent cited “the Board/Cabinet/Council”. 54 per cent of respondents felt under threat in some way with some indicating that the pressure had taken a toll on mental health and economic well-being, including feeling isolated, being dismissed, being briefed against, facing false allegations, loss of client, poor performance reviews and future prospects threatened. 80 per cent spoke up to prevent being put under the pressure. 65 per cent did not carry out the unethical task that they were pressured to do. However, 10 per cent did carry out the task fully and 25 per cent did so partially. Commenting on the results, Níall Fitzgerald, Head of Ethics and Governance for Chartered Accountants Ireland and member of the CCAB Ethics Group who co-ordinated the survey, said: “The results highlight the importance of being aware of likely threats to professional ethics and where they can come from. Unless they are appropriately addressed, the unethical pressures can have a negative impact on the professional’s responsibility to act in the public interest and they can have a very real impact on personal wellbeing of the professional accountant.” “The Chartered Accountants Ireland Ethics Resource Centre contains some useful resources that provide insights on ethical issues that can arise in the role of a professional accountant and guides to assist members in addressing ethical dilemmas.” In the CCAB Press release, Iain Lowson, chair of the CCAB Ethics Group, said: “Ethics is at the heart of being a professional accountant and it’s important to regularly take the ethical temperature of the profession. This informal survey provides a useful snapshot of the current context.” “It’s clear ethical pressures are a real problem for a significant number of accountants and it’s concerning to see so many reports of a negative impact on mental health.” “On the other hand, it is encouraging that so many accountants feel empowered to speak out against unethical pressures and practices and that so many respondents say they promote an ethics-based culture in their organisations.” “Accountants’ professional membership bodies are useful sources of training, advice and support and each will have their own Code of Ethics based on the International Ethics Standards Board for Accountants (IESBA). We would urge any accountants who feel exposed to ethical pressures to approach their professional body for support and to refresh their knowledge of the relevant code.”

In November 2020, the Irish Auditing and Accounting Supervisory Authority (IAASA) issued a revised ethical standard for auditors,  Ethical Standard for Auditors (Ireland) 2020  (https://www.iaasa.ie/Publications/Auditing-standards). The revisions build on existing changes made to the standards in 2017 which implemented the requirements of the EU Audit Regulation and Directive.    The revised Ethical Standard includes a new requirement for audit firms to make reports of breaches of the Ethical Standard to the relevant competent authority and now explicitly prescribes reporting of breaches to those charged with governance. The purpose of the Technical Release (TR 02/2021) Reporting Breaches of Ethical Standard for Auditors (Ireland) 2020 is to alert members to these new requirements and to provide an example of the report that may be submitted to the Recognised Accountancy Body and IAASA. Please note the revised standard is effective from 15 July 2021.

In November 2020, the Irish Auditing and Accounting Supervisory Authority (IAASA) issued a revised ethical standard for auditors (https://www.iaasa.ie/Publications/Auditing-standards ).  The revisions build on existing changes made to the standards in 2017 which implemented the requirements of the EU Audit Regulation and Directive.  The Institute have issued the attached Technical Alert (TA 02/2021) Guidance on the revised Ethical Standard for Auditors (Ireland) 2020 to highlight to members the key new requirements of the Ethical Standard applicable in Ireland and to add some clarification. In particular we draw attention to the effective date of the revised standard. The Ethical Standard for Auditors (Ireland) 2020 is effective from 15 July 2021. There are limited transition provisions.  These are set out on page 30 of the Ethical Standard and in Section 5 of the Technical Alert. Firms may complete engagements relating to periods commencing before 15 July 2021, in accordance with existing ethical standards, putting in place any necessary changes in the subsequent engagement period. Engagements to provide previously non-prohibited non-audit services entered into before 15 July 2021, and for which the firm has already commenced work may continue until completed in accordance with the original engagement terms, subject to the application of appropriate safeguards.   

Níall Fitzgerald, Head of Ethics and Governance, writes:  Over 59% of member firms with audit registration on the island of Ireland carry out audits of non-profit organisations, including charities. It is reasonable to expect that an even greater number provide non-audit services to this sector. Many members in practice, and their staff, are also involved in the sector as trustees, volunteers, or donors.  This level of involvement is not surprising given the size of the sector.   According to the Northern Ireland Council for Voluntary Action (NICVA), as of February 2020 there were approximately 6,122 non-profits with total income of £792m in Northern Ireland. In the Republic of Ireland, according to data available at the end of 2019 collated by Benefacts, there were approximately 32,841 non-profits. The total income determinable for 32% of these was €14.2bn (the remaining 68% being mostly smaller local non-profits for which relevant information was not publicly available). Impact of Covid-19 pandemic on the sector The financial impact of the Covid-19 pandemic on non-profits is not yet clear. Many non-profits entered 2020 with low reserves and some have been forced by the pandemic to pause operations, while others have experienced a surge in demand for their services. Accountants are playing an important role in supporting the recovery of this sector, such as assisting with obtaining grants and government supports. In a report published by Benefacts in May 2021, ‘Charities in Ireland 2021’, an uplift of over 10% in government funding was provided to charities in the Republic of Ireland. Some charities also benefited from increases in philanthropic donations. Five key considerations for accountants providing services to the non-profit sector Given the level of commitment of members in practice to the non-profit sector, the following considerations are a useful aide memoir for some of the common matters that can arise: 1. Determine if client is a charity or other non-profit All charities are non-profits but not all non-profits are charities. For example: an owners’ (or residents’) management company may establish as trading for the mutual benefit of its members, but it is not a charity, nor is it a non-profit established for a public benefit; and while a sporting organisation may be established as a non-profit, it may also be registered as a charity. If in doubt, confirm by reference to the registers of charities maintained by the Charities Regulator in the Republic of Ireland or the Charity Commission of Northern Ireland if the non-profit is a registered charity. When accepting a non-profit client, it is important to understand these nuances to determine the type of services you may be requested to undertake and also to understand its various governance structures that may impact on anti-money laundering vetting and other client acceptance procedures. 2. Avoid a principal-agent dilemma Many non-profit organisations are juggling various governance, secretarial, accounting, audit, and finance requirements, in the midst of delivering services. While some of the larger non-profits will have full time staff to manage these requirements, smaller organisations will have fewer resources (sometimes consisting of part time or volunteer staff). The board of trustees/directors bears the ultimate responsibility for the management and control of the organisation, but there is a level of reliance placed on the services of the accountant to fill any gaps in expertise. A principal-agent dilemma can arise in instances where the principal (the non-profit) can have different expectations to those understood by the agent (the accounting firm). This dilemma is more common in casual and informal business relationships, potentially exposing the fiduciary (the accountant) to greater risk. Where the accountant accepts appointment as auditor, they are a principal in their own right. Auditors need in the first instance to maintain their independence, and all additional services should be viewed in this context. Part of the solution is to ensure that a tailored engagement letter is put in place at the start of each business relationship, clearly stating services to be provided and each party’s responsibilities. The letter should be reviewed annually and updated when required. 3. Advising on governance requirements for charities Charities in the Republic of Ireland are required to apply the Charities Governance Code (the ‘Code’). In 2021, charities are required to report for the first time on compliance with the Code. The following key points address some common queries from charities: Charities are required to note in their annual return to the Charities Regulator whether they are compliant with the Code. If compliant with the Code, the charity should disclose this fact in its annual report, for example in the Trustees Report. The Code applies on a ‘comply or explain’ basis: if a Charity has not complied with any part of the Code, it is required to provide an explanation. Charities must annually complete a Charities Governance Code Compliance Record Form, available from the Charities Regulator website. The form is not required to be submitted to the Charities Regulator unless specifically requested as part of a monitoring exercise. The Charity Commission for Northern Ireland has produced guidance, factsheets, and other resources to support charities in maintaining good governance and meeting their statutory responsibilities. The Code of Good Governance, produced by the Developing Governance Group, while not a statutory code, has been widely endorsed as a practical resource for supporting charities in complying with governance best practice and their statutory obligations. Further information on governance requirements is available from the Charities Regulator (Republic of Ireland) and The Charity Commission for Northern Ireland. 4. Managing conflicts of interest If an accountant is asked to intervene in a dispute arising amongst trustees, staff, or volunteers of a non-profit, or between the non-profit and a third party (other than the accountant), it is important to determine whether there are any conflicts of interest to be managed. Given the often local nature of non-profits, and the level of community commitment and passionate support they receive, accountants should be particularly aware of disputes involving: other clients of the practice; any other partner or staff member in the practice; a close family member or friend of any of the above. In some cases, an accountant may be providing services to a non-profit that they support for personal reasons, e.g. a family member benefits from the service of the non-profit. In such cases, the accountant is encouraged to consider whether they can provide objective advice to resolve the dispute, or whether any preconception or bias may affect professional judgment to the extent they can no longer be objective. Section 310 of the Chartered Accountants Ireland Code of Ethics identifies certain measures that can be taken to safeguard threats caused by a conflict of interest. Some examples of measures include disclosing the conflict, obtaining consent, or resigning from the provision of services. Additionally, auditors have specific responsibilities under Ethical Standards applying to auditors. 5. Promoting transparency and filing full sets of financial statements Many non-profits rely on public funding and/or private donations. Many also rely on broad support networks, including volunteers and other voluntary services. In an era where scepticism is plenty and trust is guarded, accessibility of information and transparency can make a big difference in efforts to attract significant funds and other forms of support. To address this, non-profits who are incorporated should consider publishing and filing full statutory financial statements (e.g. FRS 102 or FRS 102 Charities SORP). Indeed, they may be obliged to do so. Unincorporated non-profits should consider a similar level of transparency regarding their annual accounts. The preparation of financial statements is ultimately the responsibility of the trustees/directors of the non-profit. They have statutory and fiduciary duties to act in the best interests of the organisation and to have regard to its stakeholders. However, they may seek the advice of the accountant who, as a fiduciary advisor, has a responsibility to advise and act in the client’s best interests. Current corporate governance codes and best practice reinforce the importance of accountability and transparency in the non-profit sector and encourage standards that are higher than minimum compliance with the law. It is important to ensure that these requirements are considered in making decisions or providing advice affecting the preparation of financial statements. The Chartered Accountants Ireland Governance Resource Centre contains useful resources for trustees or directors of non-profits, such as the ‘Concise Guide of Ethics and Governance for the Charity and Not-for-profit Sector’ and the recently published ‘Owners’ Management Companies – A Concise Guide for Directors’.  

Entries open until 11 September 2020 The Good Governance Awards recognises and encourages adherence to good governance by charities and other non-profit organisations in Ireland. The 2020 Awards are now open for entries for both the Annual Report Award and the Governance Initiative Award on www.goodgovernanceawards.ie Institute involvement The Institute are proudly supporting the awards for the third year. It is important to recognise good governance and more importantly to recognise the people that are responsible for putting it into practice. Members of our profession are held in high regard by charity and non-profit organisations and many are involved in the sector by direct employment, volunteering, accepting trustee appointments, acting as advisors, accountants, or auditors. Two Award Types Annual Reports: This award recognises annual reports that effectively tell the story of the non-profits its activities, impact, finances and demonstrates adherence to good governance practice.   Governance Improvement Initiative: This award recognises initiatives that have been taken in the last 12 months to improve the quality of the non-profit’s governance. Four great reasons to enter Open for non-profits of all sizes: There are six entry categories ranging from small (annual turnover of less than €50,000) to the very large (turnover of over €15 million).The push this year is for getting smaller non-profits involved Entries reviewed by a first class assessment and judging panel: There is a panel of over 60 assessors and judges and seven accountancy firms who bring great expertise and experience who will review each entry and provide valuable feedback and insight to assist in enhancing each submitting organisation’s governance Organisation reputation is enhanced with stakeholders: Entering the Good Governance Awards demonstrates commitment to adhering to good governance practice and transparency. It also shows willingness to be assessed and receive feedback on how governance can be enhanced Boost team morale and gain valuable PR opportunities: Being shortlisted for a Good Governance Award recognises hard work to adhere to good governance practice. Winning an award boosts credibility and increases awareness of the organisation which can help convince even more people that it is a cause worth supporting. New award category for 2020: very small non profits In this year's Good Governance Awards, there is a new entry category for very small non-profits (annual turnover less than €50,000). As an added incentive to encourage smaller non-profits to enter for the Annual Report award, thanks to the Community Foundation of Ireland, those shortlisted in this category will receive €1,000 with the overall winner receiving an additional €1,000. For more details, see www.goodgovernance.ie Institute supports and services for those involved in the Charity/Non-profit sector (‘the Sector’) The following are examples of key supports and services the Institute have in place for members: Dedicated Charities and Non-profit members group (ROI), co-chaired by Paula Nyland FCA and Tony Ward FCA – See page 50 of 2019 Annual Report) Dedicated Charities and Non-profit members group (NI), chaired by Dr Rosemary Peters Gallagher OBE – See page 23 of 2019 Ulster Society Annual Report) Concise Guide of Ethics and Governance for the charity and not-for-profit sector Northern Ireland: Notification facility for Charities/Non-profit boards seeking expressions of interest from Chartered Accountants to join their board. Click for list of contacts Procedures for Quality Audit for Charities – ROI Procedures for Quality Audit for Charities – NI Online courses relevant to Charity and non-profit sector (click and search) e.g. Auditing and Accounting for Charities – ROI Also, events run by District Societies (Western, Cork, Ulster, Mid West, North West, Leinster, London, Australia, United States) Northern Ireland:  Organise webinars on relevant topics for sector (click and search) Technical representations to standard setters, government and regulators on matters also affecting the Sector, based on inhouse technical research and expert input from members technical committees Technical Releases and Technical Alerts providing additional information on technical matters also affecting the Sector Dedicated Governance Resource Centre an Ethics Resource Centre containing updates and other resources on matters also relevant to the Sector Níall Fitzgerald - Head of Ethics and Governance      

Shane McAleer writes: “That would be an ecumenical matter!” The Ethics Research Report, published by Chartered Accountants Ireland in January 2019, reported that “94% of respondents have ‘observed or encountered’ some level of unethical behaviour during their professional career”. Due to the nature of their business, members working in practice can be more exposed to certain ethical dilemmas. In my experience, the following are two typical dilemmas that can arise and, unless appropriately managed, may potentially lead to unethical behaviour. Business & professional client relationship vs close personal friendship Over time, practitioners can develop a good professional relationship with their client. On some occasions this can develop into a closer personal friendship which, in some circumstances, can expose the practitioner to a threat to their professional ethics. The level of threat can vary. For example: Acting for two clients, both friends of the practitioner, on opposite sides of the same transaction can present a greater threat to independence (breach of objectivity) than perhaps having two bookkeeping clients who happen to be competitors Casually discussing a client’s affairs over a drink with a mutual friend can present a breach of confidentiality. There are safeguards in the Code of Ethics, or the Ethical Standard for Auditors, to help manage these. The ultimate safeguard is resignation, but only insofar as the threat arises between the client and the practitioner. Where the misconduct arises through an action of the client, then this can lead to specific professional responsibilities, e.g. whistleblowing or reporting suspicious transactions under Anti-Money Laundering legislation. Such scenarios can present an ethical dilemma where the practitioner is torn between the value of friendship and their professional obligations. For some, the dilemma can deepen where the client pleads for discretion. This segues to another typical dilemma, below. Expectations to deliver vs Undue pressure/influence from the client or management Situations can arise where practitioners are put under undue pressure/influence from the client to “turn a blind eye” on certain matters. This pressure may also come from management within the practice. In my experience as an insolvency practitioner, I have come across scenarios in companies where a potential ethical threat existed for the practitioner previously advising or auditing the company. In one scenario, a sole practitioner provided audit and tax advice to a large family company for many years. There was a good relationship with the client, given that the client had followed from a firm where the practitioner had previously worked. Over time, the owner/director amassed a significant director’s loan. The practitioner was aware of the loan but for several years it was not disclosed correctly in the accounts. The relevant taxes associated with the loan were not submitted. In another scenario, a practitioner prepared management accounts, showing a solvent position, for the purposes of providing these accounts to a secured lender. The practitioner was aware that the accounts were materially different from the actual position, i.e. an insolvent one. The client was insistent that failure to present a solvent position would result in financial support being withdrawn, with the potential loss of the business and jobs. The facts of the cases in scenario one and scenario two suggested that the practitioner had, perhaps inappropriately, succumbed to pressure from the client to agree with the client’s rationalisation that it was in the best interests of the company to account for matters in this way, and even that the company’s survival may depend upon it. Perhaps, the decision to accommodate the client was influenced out of a sense of loyalty. Perhaps it was out of fear of losing a client. Or, perhaps it was out of a lack of awareness of the relevant requirements! In addition to the safeguards outlined in the ‘Code of Ethics’, there are a number of supports available to all Members and their staff from the Institute, including the Ethics Resource Centre which contains a number of articles and publications to assist members to reach a decision. The Practice Consulting team will always be willing to advise members in practice in dealing with ethical issues and, in addition, CA Support is open to all members to assist them in times of difficulty. Shane McAleer is a director in Somers Murphy & Earl Corporate Services Limited. He is a member of Council, the Institute’s Ethics and Governance Committee, and the Members in Practice Committee. He is also a member of the CCAB-I Insolvency Committee.