A call to action for Chartered Accountants

 Open letter to Chartered Accountants

How Should Members Respond When Their Professional Body Blocks Independent Scrutiny?

Dear Members,

For seven years, many members have tried to have CA ANZ impartially address serious concerns about the conduct of its senior officers, which has now reached the courts. When allegations were raised through the PJC Ethics Inquiry, CA ANZ chose not to set the record straight and stated that:

“CA ANZ rejects outright all allegations raised by the Submission, including the serious allegations of impropriety on the part of current and former CA ANZ office holders, staff members and auditors.

The allegations are based on assertions and are without evidence, and in many cases, fail to acknowledge the considered and reasonable explanations which have been provided by CA ANZ staff and others in good faith to address the concerns raised.” [Note 1]

Two key questions arise. First is whether CA ANZ can avoid an impartial review of ‘serious allegations of impropriety’ by simply denying the allegations – could an ordinary CA escape impartial scrutiny under the Ethical Code by mere denial?

Secondly, is it acceptable for CA ANZ to use significant member funds to thwart attempts to have its conduct impartially reviewed, including through the courts - is this a proper use of resources?

If the allegations are without foundation as CA ANZ claims, an independent review should be the quickest and least costly way to put them to rest. Yet every avenue for examination has been resisted at significant cost to members. That raises a simple question: Whose interests are protected by preventing scrutiny?

When significant issues around governance arose in connection with CPA Australia in 2017, the course adopted was to appoint an Independent Review Panel.

Also of serious concern is the systematic dismantling of member rights since the amalgamation which has allowed conduct antithetical to basic tenants of the accounting profession.

As a former member for 40+ years, I joined with other members urging CA ANZ to uphold the principles of transparency, accountability and integrity, which are instilled in all CAs. Recently, these concerns were taken to the Supreme Court of NSW and the High Court.

Set out below is a brief outline of:

•  Why legal actions became necessary

•  Four key matters brought for consideration by the courts

•  How member funds are used to prevent accountability

•  How CA ANZ has created a fortress of unaccountability since the amalgamation

•  Operational concerns and risks to financial security

•  What members can do.

Why the Legal Actions Were Taken

After years of CA ANZ refusing an impartial review, the legal process became the only remaining avenue to uphold the interests of the CA ANZ corporation, and the members who fund it.

Matters placed before the courts

The following four conduct issues were drawn to the attention of the courts:

Member AGM motions quashed

1. CA ANZ quashed all 38 requisitions for the 2020 AGM which were raised by ten unrelated members who sought to make CA ANZ accountable for a wide range of significant matters. The CA ANZ charter provides that the exercise of all the board’s powers is subject to the control and regulation of any general meeting. CA ANZ asserted that the proposed motions were illegal due to legal principles which CA ANZ had “thoroughly tested”, yet refused to share with members.

Ten-fold more difficult to raise member motions

2. In the following year, CA ANZ orchestrated to increase the number of members required to make an AGM requisition from 10 to 100. The legal question centres on the alleged lack of notice/details for a motion having such a detrimental impact on members’ rights.

Questions around authorisation of directors' remuneration since 2015

3. Uncertainty exists around whether required member approvals were obtained for directors’ remuneration since the amalgamation in 2015. For the period 2015 to 2020, CA ANZ apparently relied on alleged approval in 2013 of a different remuneration system by members of the predecessor ICAA body. After 2020, CA ANZ apparently relies on a 2019 AGM show-of-hands vote in Wellington NZ which allegedly suffers from numerous apparent irregularities, including whether the vote was carried by persons with an interest in the outcome. Around 50 members attended the AGM, including around 40 who appear to be connected with CA ANZ.

Do financial reports give the required true and fair view?

4. Issuing financial reports which allegedly do not give the required true and fair view.

Ethical principles apparently ignored

Even if the various impugned acts could somehow be lawful, significant ethical questions remain where the issue is not whether something can be done, but rather whether it should be done. For example, if the courts found no illegality around the quashing of member motions, did CA ANZ nevertheless properly serve its members by denying them a democratic way of setting priorities?

Use of Member Funds to Prevent Scrutiny

Longstanding legal duties well known to members require company officers to avoid positions of conflict, and also to use corporate funds for a proper purpose. How can CA ANZ reasonably expect members to believe directors to be impartial and responsible to members when instructing lawyers to stifle legal actions seeking to make the directors accountable?

When the legal actions commenced, CA ANZ had the option of submitting to declarations made by the courts, subject to correcting any mistakes of fact. Instead, the approach adopted by CA ANZ was to thwart the opportunity to have the conduct of its senior officers ratified by a court.

The current position is that CA ANZ has so far succeeded in thwarting a derivative action. The Supreme Court of NSW and the High Court have refused member access to the corporation’s funds to conduct legal actions on behalf of the CA ANZ corporation against the alleged wrongdoing officers. The courts have also allowed those officers to use member resources to thwart being made accountable. The High Court asserted that the application seeking justice “does not raise any question of law of public importance.” [Note 2]

A further action is currently afoot in the Supreme Court of NSW seeking declarations by the court on the lawfulness of the various acts. CA ANZ has indicated that it will seek to stifle this remaining legal action, and appears prepared to use member resources of around $0.5 million to ensure that the substantive matters remain unconsidered.

A Systematic Pattern of Reduced Member Rights

A former CA ANZ Board Chair acknowledged that good governance should be focused on service:

 “We are ever mindful that, as your member body, we are here for the sole purpose of serving your needs.” [CA ANZ 2017 Annual Report]

Members’ experience since the 2015 amalgamation is that structural changes have made it progressively harder, if not practically impossible, for members to participate meaningfully in governance.

The changes were orchestrated by CA ANZ under innocuous labels such as ‘modernisation’ and ‘streamline’. CA ANZ describes the current framework as a “best practice governance model”, and claims that it “embraces scrutiny and transparency”, yet the accumulated effect of the changes appears to entrench power and eschew accountability.

The CA ANZ governance framework embraced the following ‘features’ since amalgamation:

•  Directors are no longer appointed by direct member vote.

•  Directors can now be appointed by unelected persons nominated by directors.

•  Maximum director terms extended from 6 to 9 years (the current Chair was appointed director more than 10 years ago, and looks set to continue for at least another year. He was paid $123,600 by CA ANZ in 2025).

•  Members not allowed to meet physically at AGMs.

•  Members not allowed to raise questions orally at AGMs.

•  Members not allowed to raise uncensored questions at AGMs.

•  AGMs don’t allow any meaningful member engagement.

•  AGM minutes either hidden from members or censored.

•  Regional Councillors’ details hidden, and one third now appointed by CA ANZ.

•  Regional Councillors report to CA ANZ and not to members.

•  Orchestrating member votes with practically no opportunity for member debate.

•  Orchestrating member votes without providing the case against members’ interests.

•  No practical means for CA ANZ conduct to be impartially reviewed

•  Appointing CEOs who are not CAs, and hence not subject to the accountants’ Ethical Code. The current CEO is a lawyer, previously with Westpac, with no credible background in accounting. The average pre-tax operating result from normal operations since she commenced in 2020 is an annual loss of around $1.6 million (ie around $10 million net loss so far), with CA ANZ expecting the 2026 result to be lower than 2025. Her annual pay exceeds $1 million, which is around 58% more than the Prime Minister.

These changes were facilitated by a Governance Review process which was portrayed to members as being ‘independent’, yet was led and influenced by persons responsible for governance. A similar approach was taken by CA ANZ when significant failings were exposed around the Professional Conduct Review Framework. The review conducted by CA ANZ, after significant media pressure, was internal, and led by the persons responsible for the alleged failures. Only the findings of the conflicted internal review were submitted for external comment.

Since CA ANZ was incorporated under a royal charter, the effect of these changes is exacerbated by stakeholders not having the benefit of safeguards normally available under the corporations law. CA ANZ, being self regulated, is beyond the jurisdiction of authorities such as ASIC.

It is also telling that a former Federal Court judge believed it necessary to highlight that a member should not be sanctioned merely for criticising CA ANZ, since “that would effectively stifle any expression of discontent with CA ANZ’s conduct.” [Note 3]

Operational Concerns & Risk to Financial Security

Since the amalgamation ten years ago, accumulated results from ordinary operations have declined from $54 million to around $16 million (pre tax and reserve transfers). The liquidity ratio has dropped from 1.09 to below 0.9, which CA ANZ describes as “better than expected”. Operating deficits have become regular, despite members being promised that the merger would result in annual cost savings of around $15 million (the average annual result for ICAA leading up to the merger was a $3 million profit, even after allowing for merger costs of around $8 million).

Key concerns are that member rights have been withdrawn as performance has declined, and CA ANZ may have difficulty dealing with another round of significant losses such as $7.7 million and $8.7 million for the 2022 and 2023 years.

What Members Can Do

Members have rights under the By-Laws which include requisitioning a special meeting, and removing directors and/or main councillors. One hundred members are required to exercise such rights, and this poses a logistical challenge, especially when members are not informed of the unfortunate circumstances by CA ANZ.

Due to resource constraints, this message could only be issued to a small sample of members. You can choose to assist fellow members by notifying media; pointing to the ca-mambers.com website; and/or requesting CA ANZ to properly inform members in the way they would expect.

The next stage of the judicial process is scheduled for the first few days in December. If members wish to restore accountability and ensure transparency, and limit further significant drain on member resources, they must now make their voices heard.

You may confirm your support for an impartial review simply by email to help4CAs [add suffix @gmail.com]. Personal information of a member will not be shared unless approved by the member.

I look forward to assisting members uphold accountability, transparency and integrity, consistent with maintaining community trust, and the status of CAs in the accounting profession. General updates will be communicated via [this] website.

Gerald Jaworski

(Former CA 40+ years)

Notes

1. PJC Ethics and Accountability (ie PwC) inquiry – see submission #63 and the CA ANZ response (includes details of the 38 quashed AGM requisitions): https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/ConsultancyFirms/Submissions

2. Case references:

NSWSC key judgement: https://www.caselaw.nsw.gov.au/decision/196c7db8a45ab1ed7849c918

HC: https://www.hcourt.gov.au/cases-and-judgments/judgments/special-leave-dispositions/jaworski-v-chartered-accountants-australia-and-new-zealand

3. The Honourable Dennis Cowdroy AO KC, in his 16 May 2023 review of the proposals made in a self-assessment report prepared by the CA ANZ Professional Conduct Framework Review Committee at [5.16 and 5.76]. https://www.charteredaccountantsanz.com/news-and-analysis/news/professional-conduct-framework-review/the-independent-review