Whistleblowing or professional secrecy? The dilemma facing CPAs
In the practice of their profession, chartered professional accountants are among those best placed to detect or suspect collusion and corruption schemes, as well as wrongdoings relating to public bodies.
With the coming into force of the Act to facilitate the disclosure of wrongdoings relating to public bodies on May 1, 2017, CPAs will have to learn to balance their moral duty to disclose wrongdoings with their obligation to protect professional secrecy on behalf of their clients and employer. This Act expressly authorizes the lifting of professional secrecy, except for lawyers and notaries, to facilitate disclosure of “wrongdoings” relating to public bodies. It also amends the Anti-Corruption Act to expressly authorize the lifting of professional secrecy, except for lawyers and notaries, for wrongdoings covered by the Act.To provide clarity, this page includes a comparative table [PDF], which presents the scope of both acts and some practical tips on their application.
- Public bodies covered by the acts
- Wrongdoings covered by the acts
- To whom should I make a disclosure?
- Who can make a disclosure?
- Protection for whistleblowers against reprisals and civil liability suits
- To disclose or not to disclose?
- Collaboration between the Order and government bodies
- Trends at home and abroad
The public bodies concerned are not the same under both acts. The key difference to note is that the Anti-Corruption Act applies to municipalities and certain NFPOs that manage and support public activities with government funds.
The Anti-Corruption Act covers only violations of laws or regulations involving corruption, malfeasance, collusion, fraud or influence peddling, for example, in awarding, obtaining or performing contracts of a public body. The Act to facilitate the disclosure of wrongdoings is much broader since it covers any offence under a law or regulation.
The Act to facilitate the disclosure of wrongdoings also covers serious breaches of the standards of ethics and professional conduct, and any act or omission “that seriously compromises or may seriously compromise a person’s health or safety or the environment;” however, these are not covered by the Anti-Corruption Act.
The wrongdoings covered by both acts include misuse of funds or property belonging to a public body, as well as gross mismanagement.
Under the Anti-Corruption Act, the Anti-Corruption Commissioner receives disclosures. The Act to facilitate the disclosure of wrongdoings relating to public bodies has empowered the Québec Ombudsman to receive disclosures under this act and conduct investigations. This role is shared with the Minister of Families when a disclosure involves a daycare centre. In special circumstances involving a serious risk to a person’s health or safety or to the environment, the disclosure can also be made directly to the public (in addition to a police force).
In the general role conferred on him, the Québec Ombudsman can direct CPAs to the appropriate person who can receive a disclosure when the Québec Ombudsman is seized in error with a disclosure outside of his jurisdiction.
The Act to facilitate the disclosure of wrongdoings also indicates that the public bodies covered by the act must designate a person responsible for receiving internal disclosures. It specifically provides that a member of the personnel of the public body may choose to report a wrongdoing to such person rather than to the Québec Ombudsman. In other cases, including situations covered by the Anti-Corruption Act, internal disclosure is not expressly provided for, but nothing prohibits it, since making a disclosure to the Québec Ombudsman or the Anti-Corruption Commissioner is optional. This may however give rise to the question of whether a person who makes an internal disclosure when it is not provided for by law would be protected from reprisals.
Any person who becomes aware of or suspects that a wrongdoing has been committed by one of the public bodies covered by the act, or by an entity contracting with such body, can make a disclosure. This means that the authorization to disclose despite professional secrecy can apply not only to CPAs working within one of these public bodies, but also to CPAs who offer services to such bodies or an entity involved in preparing, obtaining or performing a contract with one of these public bodies or CPAs who are employed by the entity.
Both the Anti-Corruption Act and the Act to facilitate the disclosure of wrongdoings provide for protection against reprisals. “Reprisals" basically refers to situations affecting the employment relationship, such as the termination, suspension, demotion or transfer of an employee. “Reprisals" can be interpreted more broadly to include contractual situations other than employment. The Québec Ombudsman cites automatic disqualification of a supplier from calls for tender as an example.
However, since the Act does not define the term “reprisals", it is by no means certain that the courts will interpret it in a way that protects whistleblowers against legal proceedings. None of the acts provides for civil or disciplinary immunity for having disclosed a wrongdoing in good faith. For this reason alone, you should inform your insurer and consult a lawyer or the syndic of the Order before disclosing a wrongdoing to the Québec Ombudsman or Anti-Corruption Commissioner.
CPAs are not under any obligation to disclose wrongdoings to the Anti-Corruption Commissioner or the Québec Ombudsman. Such disclosure should not be automatic: CPAs have a duty of confidentiality and any breach of confidentiality on their part will taint the bond of trust they have built with their clients, which is essential to the quality of their work. Conversely, CPAs also have a duty of integrity and cannot associate themselves with an act of wrongdoing. Moreover, some may claim that CPAs who fail to make an external disclosure about an obvious wrongdoing causing damage to third parties could be exposed to civil liability. So what should CPAs do when faced with this dilemma?
The Code of Ethics contains a number of provisions to assist CPAs, including section 34, which provides that CPAs cannot associate their names with any document which they know contains false or misleading information. In addition, members who participate in assurance engagements or who are responsible for applying accounting standards within an entity must report situations where the financial statements are not in compliance with recognized standards (sections 19.1, 19.2 and 36).
In keeping with the spirit of these provisions, CPAs should first consider, circumstances permitting, disclosing internally within the enterprise or organization (be it their client or employer) any apparent non-compliant situations or wrongdoings. The officers of the entity concerned may not be aware of the wrongdoing detected by the CPA, in which case internal disclosure will provide an opportunity to rectify the situation. The role of CPAs is above all to help their client or employer comply with accounting standards and rules of good governance.
The Act provides that any person may disclose a wrongdoing directly to the Québec Ombudsman or Anti-Corruption Commissioner, despite professional secrecy. In some cases, depending for example on the gravity and systematic nature of the wrongdoing, the seriousness of the damage to the entity or group of individuals, or the loss of the CPA’s confidence in the good faith of the officers of the organization, external disclosure may be appropriate from the outset. However, it is best that a CPA give careful thought before deciding to disclose a wrongdoing to a third party, as is permitted under the Act, and seek legal counsel, as needed.
The Québec Ombudsman's website contains information on financial assistance for legal advice provided under the Act to facilitate the disclosure of wrongdoings. The syndic of the Order also answers members’ questions on this issue and can assist them in their assessment. However, the Order is not empowered by regulation to oversee the disclosure of wrongdoings; all the syndic can do is to provide guidance on these issues.
Before making an external disclosure to either the Québec Ombudsman or the Anti-Corruption Commissioner, it is important to inform the administrator of the group insurance plan (ACPAI Insurance, 1 800 268-2630 or firstname.lastname@example.org) of any potential risk of a lawsuit and find out whether such risk is covered under the plan.
The Order is currently working with the plan administrator to ensure that insurance coverage, where possible, takes into account the risk that CPAs face in terms of professional liability when they choose to disclose or refrain from disclosing wrongdoings. Clearly, the impact of the new acts could not be taken into account in the negotiations with the insurers or in the current wording of the insurance policy. The plan administrator has confirmed that legal fees related to the disclosure of a wrongdoing are covered up to $10,000.
As things stand, the Code of Ethics does not contain any provisions specifying what CPAs should do as they decide whether or not to disclose a wrongdoing; therefore, CPAs are advised to document their rationale and the steps taken. Any relevant information should be documented in writing, which will enable CPAs to show the merits of their decision to disclose or not to disclose a wrongdoing detected or suspected in the practice of their profession.
The Order is pursuing its efforts to obtain clarification as to the scope of the protection afforded to professionals who decide to disclose a wrongdoing as authorized under the new legislative provisions. The Order has asked the Québec Ombudsman to prepare a guide informing the public of the scope of such protection against reprisals.
The Order is also continuing to make representations before the Office des professions, among others, to have the Professional Code amended so that professional orders could incorporate into their codes of ethics a procedure for members who detect or suspect that a wrongdoing has been, or is about to be, committed, as well as requirements limiting information disclosures to what is absolutely necessary.
Both the Act to facilitate the disclosure of wrongdoings and the Anti-Corruption Act are part of a wider context that extends well beyond Quebec. The International Federation of Accountants (IFAC), an umbrella organization of accounting bodies from numerous countries, including Canada, recently amended its code of ethics to “assist” professional accountants who suspect their clients or employer of committing legal or regulatory offences. These provisions will take effect in July 2017 and, although they do not directly have the force of law in Quebec, they will force the Canadian accounting profession to take a position.
For instance, the AMF is currently working on a reform of legislation governing financial markets, which will introduce provisions facilitating the disclosure of violations of these laws. According to information obtained by the Order, these provisions will be heavily based on the Act to facilitate the disclosure of wrongdoings.
The Order will continue to closely monitor developments in this sensitive area.