What should you consider if you discover that your organisation’s trustees are unaware of a fraud investigation?
In his second article, AAT’s head of professional standards Adam Williamson provides tips on how to deal with unethical practice.
As many finance professionals are well aware, fraud is not as uncommon as we’d like to think, and a number of organisations don’t always have clear guidelines as to how they will tackle such situations of wrongdoing from their own employees.
Whistleblowing policies are supposed to help uncover certain fraudulent scenarios, but even when this has been followed, does every stakeholder need to be made aware? Consider the below:
You work in the finance team of a charity. One of the directors is being investigated for fraud involving the reselling of IT equipment, and personal use of a company credit card.
It has come to your attention that the trustees of the charity have not been made aware of this.
After the initial issues came to light, the charity immediately implemented a whistleblowing policy which required incidents to be reported to the Chair and Deputy Chair of the Board. However, the Director General has subsequently advised all staff that this particular matter should not be discussed with trustees.
What do you need to consider, and what action do you need to take in this scenario?
Considerations and actions
Firstly, you’ll need to consider why exactly the Director General has decided to advise staff in this way. You should enquire in writing directly to him on this, asking him to set out reasons why he is instructing staff to disregard the whistleblowing policy.
Bear in mind, of course, that there may well be legitimate reasons for his advice. For example, it may be in connection with the police investigation into the fraud, other legal proceedings, or indeed any internal investigations.
However, if the Director General does not provide any acceptable reasons, then go ahead and follow the whistleblowing policy.
There are two areas of AAT’s own code of professional ethics, of which all other professional bodies have similar versions, that this particular example relates to.
- The principle of objectivity, where accountants are obliged not to compromise their professional or business judgement because of bias, conflict of interest or the undue influence of others
- Confidentiality, as there are some situations where the law legally allows a breach of the duty of keeping information confidential. This would clearly be an example of where disclosure can be necessary.
The accounting profession has countless examples where accountants are challenged by unethical or even illegal behaviour, and ethical compliance – such as demonstrated in this example – helps to correctly tackle such issues.
For more ethical accounting dilemmas:
- Accounting dilemmas: 3 Politically exposed persons
- Accounting dilemmas: 4 Expansion advice
- Accounting dilemmas: 5 AML obligations
Adam Williamson is AAT's Head of Professional Standards.