CPA Australia’s Quality Review Program has identified the most common ways members breached professional standards or legislative or regulatory requirements.
1. APES 315 Compilation of Financial Information
- Not having all the required elements in a compilation report such as date, name, title, complete address (either a PO Box or Street address with applicable state), and the specific purpose for which the special purpose financial statements have been prepared, as required by paragraph 12.6.
- Not having footnote reference such as "Unaudited", "Compiled without audit or review", or "Refer to Compilation Report" on every page of the compiled financial information as required by paragraph 12.7.
- Not obtaining acknowledgment from the client of their responsibility for the reliability, accuracy and completeness of the accounting records and disclosure to the Member of all material and relevant information as required by paragraph 11.1.
2. APES 220 Taxation Services
- Not having maintained open, frank and effective communications with a client or employer advising them of their rights, obligations and options available under taxation law as well as advising them of their rights and obligations under taxation law with respect to seeking a private ruling and lodging objections and appeals against adverse positions adopted by revenue authorities as required by paragraph 3.14(a).
- Not having maintained open, frank and effective communications with a client or employer advising on the application of the Taxation Law, including any possible penalties and other legal tax consequence, so as to allow the client or employer to make an informed decision of the course of action to be taken as required by paragraph 3.14(b).
- Not having provided their client with a statement in writing that the responsibility for the accuracy and completeness of the particulars and information provided by the client rests with the client as required by paragraph 3.15(a).
- Not having provided their client with a statement in writing that any advice given to the client is only an opinion based on the Member’s knowledge of the client's particular circumstances as required by paragraph 3.15(b).
- Not having provided their client with a statement in writing that a taxpayer has obligations under self-assessment to keep full and proper records in order to facilitate the preparation of accurate returns as required by paragraph 3.15(c).
3. APES 305 Terms of Engagement
- Not having documented and communicated terms of engagement when performing professional services and not having documented the terms of the engagement in the engagement document as required by paragraphs 3.1 and 3.4.
- Members should have an engagement document in place for all clients regardless of how long they have been a client or the engagement that they perform. The engagement document can be in the form of a letter (for example business clients) or in the form of a brochure (for example individual tax returns).
- For recurring engagements public practitioners need to assess whether the existing engagement document covers the scope of the engagement or if there is a need to reissue a new engagement document.
- Not advising the client that the practitioner's liability may be limited by being a participant under the Professional Standards Legislation as required by paragraph 6.2.
4. APES 320 Quality Control for Firms
- Not having established and maintained a documented system of quality control as required by paragraph 3.
- Not having a system of quality control which addresses all of the six mandatory elements as required by paragraph 10.
- Not having appropriate documentation to provide evidence of operation of each element of its system of quality control as required by paragraph 124.
- Practitioners are often breached for not having documented quality control policies and procedures or having just downloaded the CPA quality control manual and rebranding it as their own. Practitioners need to develop something that is appropriate to their practice reflecting the engagement work that is performed. The manual should have polices (the what) and procedures (the how). Checklists provide evidence of operation but are only a part of a procedure and policy.
5. APES 110 Code of Ethics for Professional Accountants
- Not being independent when performing an audit or review engagement as required by paragraph 290.
- Practitioners are found to have breached this standard when preparing the financials for a client and then auditing those financials, most commonly with respect to self-managed super funds and Building Services Authority QLD (BSA) engagements. The Independence guide (PDF) released by the Joint Accounting Bodies provides further guidance in this area.
6. APES 205 Conformity with Accounting Standards
- Not having identified the specific purpose for which the special purpose financial statements have been prepared in the special purpose financial statements and any associated audit report, review report or compilation report as required by paragraph 6.1.
- Not having identified the significant accounting policies adopted in the preparation and presentation of the Special Purpose Financial Statements in the special purpose financial statements and any associated audit report, review report or compilation report as required by paragraph 6.1.
7. RMS 1 Risk Management Statement (superseded by APES 325 Risk Management for Firms as of 1 Jan 2013)
- Not having a risk management statement as required by RMS 1.
- Using the sample risk management statement designed by CPA Australia with no amendments made to make it appropriate to the practitioners firm or engagement work as required by RMS 1.
- Practitioners are reminded that APES 325 has been issued requiring members to have established a Risk Management Framework (in accordance with this new standard) by 1 January 2013, for further guidance on the requirements of APES 325, see Risk management.
8. Corporations Act 2001 section 347A Solvency Declaration
- In the instance where the member has agreed to lodge the solvency resolution on behalf of the client there was no evidence on file to demonstrate that:
- all directors have understood and agreed with the solvency resolution before it was signed
- the solvency declaration was lodged within two months of each review date.
Note: Corporations Act breaches tend to occur due to confusion as to the responsibility of the practitioner and that of the client. Practitioners are encouraged to review their engagement letter to ensure that the scope for corporate secretarial engagements clearly outline who is responsible for what.
9. CPA Australia By-Law 4 Continuing Professional Development
- Members failing to keep or have a contemporaneous record of their continuing professional development for their current triennium required by By-Law 4.2.
- Members who perform audits of self-managed superannuation funds failing to meet the minimum approved competency standards required by By-Law 4.6.
10. APES 310 Dealing with Client Monies
- Members failing to have their trust account audited within three months of the applicable year end date as required by paragraph 8.1.
- Members who deal in client monies transactions (such as a bookkeeper transacting directly from clients bank accounts to make payments) not having had these transactions audited within the required timeframe as required by paragraph 8.1.
With regards to each of the Corporations Act breaches, these tend to occur due to confusion as to the responsibility of the practitioner and that of the client. Practitioners are encouraged to review their current engagement letter to ensure that the scope for corporate secretarial engagements clearly outline who is responsible for what.