ICAS President, Clive Bellingham CA: Dealing with ethical dilemmas
By CA magazine
26 October 2023
President Clive Bellingham CA recounts some tough judgement calls from his past and explains why they are relevant today
This issue features interviews with six CAs, spanning a broad range of experiences and sectors, talking about the future of the profession. One of the issues that comes up regularly is ethics. I attended a class on the subject in Glasgow in August, which I thoroughly enjoyed. A lot of questions related to the practical side, the application of ethics to real-world situations.
It made me reflect on my own career and, specifically, three occasions when the “red flags” were flying. The first was in Jeddah, Saudi Arabia. My employer, PwC, was providing services for a large conglomerate that had got into financial difficulties. We had to report to a steering committee back in London every month, and I was leading on the Saudi side.
This client decided that it was going to dump a load of past-their-sell-by frozen chickens in the Red Sea. Quite apart from the ridiculousness of this idea, they chose not to tell us. It became apparent several people were aware of what was going on. Eventually it all came out in an inquiry.
As the saying goes, a secret only remains a secret until you tell someone. I was an auditor at that point and when you start to hear rumours it is worth applying some professional scepticism, which is a key component of ethics, as it will serve you well. Don’t bother trying to sweep things under the carpet because ultimately the truth will come out.
The next instance was when a client in Switzerland had sold a property in December, the year’s end, and booked a gain on the sale of the asset. We made it crystal clear that they needed to provide supporting documentation to allow that gain to be recorded in December.
Come early February, and we’re still chasing the documentation. I received a call from the CFO, to go to his office to sign off on the audit. I said I couldn’t sign anything because the client hadn’t provided me with the documentation, which we had stressed was essential. I was given an ultimatum: “If you don’t sign I never want to see you again on these premises.” It was uncomfortable but I had to do the right thing.
When faced with a confrontation such as this, it is important to talk to colleagues. Don’t try to go it alone. I became persona non grata with this CFO. I knew one of the company’s board members but I didn’t approach him. The view we took was to let this unwind in its own way. A couple of months later, the board member remarked that he hadn’t seen me around the office for a while. This was a privately owned group, so my presence about the place was expected – and my absence was conspicuous.
The CFO explained the situation to his colleague and was told I had been doing the right thing. “That’s the sort of adviser we need,” they said. So the CFO phoned my colleague – he didn’t want to speak to me – and said I could come back. I could have thrown my toys out of the pram, but I liked the client, I liked the people, I liked the sector in which they operated. So I went back, and the CFO never spoke about it. But by making the right call, things actually worked in our favour, the relationship with that client was strengthened because of a difficult situation. There is a lot to be said for playing the long game and allowing a situation to play out, rather than reacting in the moment.
Going concern
My third story involved a Swiss conglomerate, again one in financial difficulty. Often when that happens you get into conversations around going concern, where the auditor has to express a view about the company’s ability to operate for 12 months beyond the audit report date. From our side, we were unsure that it could, and we would have had to include a paragraph stressing this in the audit opinion.
Doing so, however, can become a self-fulfilling prophecy. Once the auditor casts doubt on the company’s future, that company may well go bankrupt. It is, without doubt, a pressure call. Again, the key thing is not to go it alone. You need to engage with colleagues, not try to be some sort of lone ranger. When we expressed our view, the company CFO, who would himself have been under tremendous pressure, duly exploded in an audit committee meeting. That was understandable and perhaps not unexpected. He moved on, but we stayed in touch. Despite what had happened, he never bore a grudge.
All CAs will face dilemmas like these in their careers. But ethics underpins everything that a CA does. That means you can apply professional scepticism and make difficult decisions, rather than look the other way, because you know it’s the right thing to do. It’s a lesson worth learning early because – be in no doubt – there will come a time when you will face that dilemma. And you will have to make that call.
Read the ICAS Code of Ethics
