Financial abuse – relevance to accountants

The accounting profession requires its members act ethically and professionally in the best interests of their clients. All members have a duty of care.

Like all responsible members of society, accountants should also have a social and moral conscience that sees any mistreatment of older people – financial or otherwise – as being unacceptable and possibly illegal.

CPA Australia recognises the duty of care owed to the client by an accountant. In a suspected case of financial abuse, the accountant should do everything that can reasonably be done to detect and prevent such abuse. It’s the right thing to do in accordance with the profession’s statements on ethics and social responsibility.

Due to professional training, an accountant can be in a unique position to recognise and understand where financial abuse may exist, either potentially or actually. This professional understanding lifts the level of responsibility of the accountant above that of the general public. If a case of abuse results in court action, the accountant may have to defend their actions or lack of actions against charges of negligence.

If a finance professional or institution knowingly assists a fiduciary, such as a trustee or the holder of a power of attorney, to commit a breach of fiduciary duty such as the misappropriation or the misuse of funds, he or she may be liable for loss resulting from the breach, even though the professional or institution received no benefit from the breach, and even though it was not fraudulent or dishonest itself. This is known as liability under the second limb of Barnes v Addy – assisting with knowledge in a breach of duty by a fiduciary. You can read more about these legal consequences in Monash University’s publication “Financial abuse of elders: A review of the evidence” (2009).

The accountant's professional duty to exercise reasonable care and skill may, in some circumstances, include the obligation to enquire as to whether a valid mandate exists. This is despite the potential for a conflict between the professional's duty to carry out their client's instructions and the responsibility to ensure that there is a valid mandate for those instructions.

Accountants, particularly those in public practice, are typically people who clients trust to understand financial matters which can affect them, whether it be tax, financial planning or other general financial advice.

A read of the finance media will show that individuals are frequently advised to discuss matters with their accountant before making financial decisions. This is an indication of the broad perception that the accountant is the “doctor” of matters financial and should be referred to for professional, unbiased and sound advice.

An accountant is likely to be in a position to both notice and understand the implications of actions that could lead to elder financial abuse. Elsewhere in these pages the various forms of financial abuse are discussed. It is apparent from the recognition of the forms financial abuse may take that a client who is otherwise quite in control of their faculties may be blind to the potential abuse.

This may be because of:

• the people involved (trusted friends or family)
• the complexity of the matter
• the habit of leaving financial matters to the accountant.

While there is no consideration that the accountant should be burdened with total responsibility, their professional competence does inevitably mean that they face a degree of accountability if no attempt is made to deal with concerns about potential financial abuse.