Professional Duties Must Always Come Before Client Interests

By Suvro C.K. Banerjee, Quality Assurance Manager, Ethics

This year, New Yorkers have learned of allegations of misconduct in the audits of Long Island public school districts. The Office of the State Comptroller has issued a report that finds fault with the manner in which the independent audits of these districts was conducted. Whether any acts discreditable to the profession of public accountancy were committed during these audits remains to be seen.

What is known is that the Long Island public school financial failures have led to the introduction of two bills, one in each house of the state legislature, which would greatly strengthen the audits of school districts and lead to greater accountability among school boards. This legislation was one of the main topics discussed during the Foundation for Accounting Education’s recent School District Auditing Conference.

Two additional topics discussed at the conference serve as good advice to all members in public practice. One is that many acts that violate professional standards often have their roots in an auditor’s desire to provide excellent client service. It is well known that many clients rely on their auditors to give them advice on financial matters and often ask their auditors to take on responsibilities in addition to the performance of an audit. Licensees are cautioned to ascertain that the advice they give or the duties they perform do not violate applicable independence and other professional standards before taking on additional responsibilities.

This type of situation is common among scandals. One of the central allegations in the Enron case was that the auditors helped the client’s management create many of the off–balance sheet financing vehicles that were later deemed to serve no purpose other than to hide liabilities. In the Roslyn school district case, the state comptroller has alleged that the auditors did not maintain their independence during the performance of the audits because they performed certain management functions.

Former NYSSCPA President Brian Caswell, cochair of the School District Auditing Conference and a school board member, also raised another important point. He noted that independent auditors, because they do not want to lose their engagements, are sometimes tempted to tell a client that its operations are running smoothly, even when they know otherwise. Public accountants who provide their clients with anything less than complete and accurate information are doing a disservice to the public, he said.

“If you do something you know to be wrong, it may not cost you your job now, but it might cost you your license later,” said Caswell, a nationally recognized ethics expert.

We can only hope that all CPAs will adopt this mindset soon.

Close