and Breaching the Institute’s Code of Ethics)
At a hearing of the Disciplinary Tribunal of the Institute
of Chartered Accountants of New Zealand held in
public on the 30th day of May 2006, at which the member was in attendance and represented by counsel, Clement Chun Wang Chak, of Auckland, pleaded guilty to the following charges (1), (2), (3) and (4) and admitted
the following particulars 1 (a), (b), (c) and (d) and 2 (a), (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (b), (c), (d) and (e).
THAT in terms of the Institute of Chartered Accountants of New Zealand Act 1996 and the Rules made thereunder, and in particular Rule 21.30, the member is guilty of:
(1) misconduct in a professional capacity; and/or
(2) negligence and/or incompetence in a professional capacity, that has been of such a degree and/or so frequent as to reflect on his fitness to practise as an accountant and/or tends to bring the profession into disrepute; and/or
(3) breaching the institute’s code of ethics; and/or
(4) supplying information to the institute which was false or misleading.
1. In his role as a chartered accountant in public practice and in relation to a complaint, the member:
(a) failed to advise the complainant that he had received his 2002 and/or 2003 terminal tax refunds and/or company A’s 2002 and/or 2003 terminal tax refunds; and/or
(b) failed to obtain the written consent of the complainant to record his bank account details on their tax returns that he subsequently filed with the Inland Revenue Department (IRD); and/or
(c) misled the complainant in that he advised him that the IRD was holding his refund and/or refunds when the funds were in his bank account; and/or
(d) misled the complainant in that he claimed that the IRD would deposit funds into the client’s bank account when, in fact, he transferred the funds into the complainant’s bank account directly from his own bank account.
2. Being a member of the Institute of Chartered Accountants of New Zealand and in his role as a chartered accountant in public practice, the member:
(a) dealt with client monies through bank accounts (suffixes 90, 25 and 00) that were established and operated in breach of Professional Standard No. 2 “Client Monies” (“PS-2”). In particular he:
(i) failed to establish a trust account to deal with client monies (paragraphs 7 to 13); and/or
(ii) failed to credit interest earned on client monies held in his bank accounts to the clients concerned, within a reasonable period of time (paragraph 15); and/or
(iii) failed to record details on receipt of client monies in accordance with paragraph 24; and/or
(iv) withdrew client monies from his bank accounts other than in accordance with paragraph 26 of PS-2; and/or
(v) used client monies for private transactions, thereby obtaining a benefit from client monies without prior written authority (paragraph 34); and/or
(vi) retained client funds, particularly tax refunds, for longer than was reasonably necessary (paragraph 38); and/or
(vii) failed to balance client monies records and reconcile these to the bank accounts in accordance with paragraph 49; and/or
(viii) failed to keep a record of client monies in accordance with paragraph 50;
(b) did not hold appropriate client authorities to have IRD refunds direct credited to his bank accounts; and/or
(c) altered bank account details of clients recorded in clients’ income tax returns subsequent to them signing their tax returns but prior to filing them with the IRD; and/or
(d) misled practice review, in that he led them to believe that he did not receive or hold money on behalf of his clients, when in fact he did; and/or
(e) misled the professional conduct committee, in that he gave the impression to the investigator appointed by the committee that his account used for client monies was used infrequently when, in fact, it was used on a regular basis.
The tribunal has had regard to the fact that no client has lost money, that interest has been paid albeit late, and that client money systems are now compliant and that the member has given assurances that they will continue to be so. The member has co-operated with the investigation. Without these mitigating factors, the tribunal would have imposed a much greater penalty.
Orders of the Tribunal
(a) Pursuant to Rule 21.31 (c) of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal orders that Clement
Chun-Wang Chak pay a monetary penalty of $15,000.00.
(b) Pursuant to Rule 21.31 (e) of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that the practice of Clement Chun-Wang Chak as to client monies be investigated by the professional conduct committee as soon as practical and again one year later.
(c) Pursuant to Rule 21.31 (m) of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Clement
Chun-Wang Chak pay the complainant the sum
of $5,000.00 in respect of the costs and expenses incurred by the complainant in relation to the complaint or the matters which gave arise to it.
(d) Pursuant to Rule 21.33 of the Rules of the
Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Clement
Chun-Wang Chak pay to the institute the sum of $6,483.00 (inclusive of GST) in respect of the costs and expenses of the hearing before the disciplinary tribunal and the investigation by the professional conduct committee.
In accordance with Rule 21.35 of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal directed that the decision be published in the Chartered Accountants Journal, the New Zealand Gazette and the New Zealand Herald with mention of the member’s name and locality and that the decision be circulated to the clients of the practice.
Right of Appeal
Pursuant to Rule 21.41 of the Rules of the Institute of Chartered Accountants of New Zealand which were in force at the time of the original notice of complaint, the member may, not later than 14 days after the notification of this tribunal to the member of the exercise of its powers, appeal in writing to the appeals council of the institute against the decision.
No decision other than the direction as to publicity shall take effect while the member remains entitled to appeal or while any such appeal by the member awaits determination by the appeals council.
Dated this 2nd day of June 2006.
R. J. O. HOARE, Tribunal Chairman.