Ethical concerns and advice for accountants around Covid-19 fraud.
The Treasury Direction (TD) under the Coronavirus Act 2020 sets out the legal framework for the scheme and was last updated on 25 June 2020.
The Coronavirus Job Retention Scheme (CJRS) was introduced to protect jobs and HMRC has stated that:
‘the person making the claim accepts that: (a) a payment made pursuant to such claim is made only for the purpose of CJRS and (b) the payment must be returned to HMRC immediately upon the person making the CJRS claim becoming unwilling or unable to use the payment for the purpose of CJRS.
No CJRS claim may be made in respect of an employee if it is abusive or is otherwise contrary to the exceptional purpose of CJRS’.
Ethical requirements for accountants
Ethical behaviour by advisers is critical, to ensure businesses and individuals understand government initiatives and that public funds are used as intended. The work carried out by an adviser needs to be trusted by society at large as well as by clients and other stakeholders. What a member does reflects not just on themselves but on the profession as a whole.
ACCA members are reminded that they should continue to observe ethical standards as set out in the code of ethics. The fundamental principles include:
Integrity – to be straightforward and honest in all professional and business relationships
Objectivity – to not allow bias, conflict of interest or undue influence of others to override professional or business judgements
Professional competence and due care – to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation and techniques, and act diligently and in accordance with applicable technical and professional standards
Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the member or third parties
Professional behaviour – to comply with relevant laws and regulations and avoid any action that discredits the profession.
Examples of areas of concern
Examples of abuse that HMRC will target include:
Employer-benefit fraud
where an employer purports to place an employee on furlough in order to access the scheme, but in fact has instructed that employee to work, provide services or generate revenue for that employer
where the employer does not pay the full furlough entitlement to the furloughed employees.
Employee-benefit fraud
where an employer seeks to allow an individual not ordinarily employed by them to be regarded as an employee for the purposes of the scheme, so that the scheme will provide funds for the individual that they are not entitled to.
HMRC has put in place a fraud hotline (telephone 0800 788 887) and an online whistle-blower service based on a structured email form, for employees and the public to report suspected fraud in the furlough scheme.
Professional accountants should ensure that clients understand the rules relating to the furlough claim and have systems in place to ensure compliance.
If they become aware that an employer-client is breaching the rules (for example an employee is carrying on work while on furlough), advise the client accordingly and ask the client to rectify the error. A member should keep sufficient appropriate records of discussions and advice given.
If the client rectifies the error (and repays the ‘over-claimed grant’), the accountant is free to continue to act for the client. However, should the client ignore such advice and guidance, the accountant must:
consider carefully their response to any professional enquiry letter (also known as professional clearance letter).
Accountants should also be aware of their obligation on engagements in assisting a client to apply for any other government support measures such as Bounce Back Loans and the use of ‘Time To Pay’ arrangements. Accountants should fully explore what support is available for their client’s actions ethically and within the law. A professional accountant shall not be allowed to be associated at any time with information that they believe to be wrong or misleading.
