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Decision of EC 1/2018
In the Matter of a Complaint by the Health Service Executive against the Institute of Certified Public Accountants in Ireland
Decision of Enquiry Committee 1/2018
- On 26 April 2018 a Preliminary Enquiry Committee (“PEC”) appointed by the Irish Auditing and Accounting Supervisory Authority (“IAASA”) pursuant to the Companies (Auditing and Accounting) Act 2003 (Procedures governing the Conduct of Section 23 Enquiries) Regulations 2012 (“SI No 96 of 2012”) issued its decision (the “PEC Decision”). A copy of this decision is appended to this decision at Appendix 1.
- Arising from this decision of the PEC this Enquiry Committee was appointed by IAASA on 29 May 2018 pursuant to SI No 96 of 2012 and Regulation 5, in particular.
Remit of the Enquiry Committee
- Pursuant to Regulation 5(5) of SI No 96 of 2012, the remit the Enquiry Committee is to conduct:
“… a full enquiry into whether the relevant prescribed accountancy body has failed to comply with its approved investigation and disciplinary procedures and, if the Enquiry Committee makes an adverse finding under Regulation 11(1), shall determine what sanctions, if any, to impose under these Regulations.”
Work of the Enquiry Committee
- At the outset the Enquiry Committee communicated the grounds for the establishment of the enquiry to the Institute of Certified Public Accountants in Ireland (“Institute”), Mr Derek Page (“Member”) of Cronin & Company (“Member Firm”) and the Health Service Executive (“Complainant”) on 10 July 2018 and sought relevant submissions and documentation to assist its work. This prompted the following relevant replies:
- a letter of 23 July 2018 from the Institute with enclosures; and
- a letter of 02 August 2018 from the Complainant with enclosures.
- The letters of 23 July and 02 August enclosed, respectively, a copy of the documents provided by the Institute and the Complainant to the Preliminary Enquiry Committee.
- The Institute wrote a further letter dated 31 July 2018 to the Enquiry Committee. This letter stated, inter alia:
“The Institute is fully committed to ensuring that all parties to any investigation are afforded fair procedures. The Institute acknowledges the findings of the PEC that, irrespective of what the Institute believed were bona fides reasons for admitted departure from strict compliance with the Institute’s Bye-Laws in certain instances, that prima facie breaches of the Institute’s Articles of Association and Bye Laws occurred in our investigation of this complaint. As previously indicated to the PEC, the Institute has at all times been open to resolving matters and has no objection in principle to address any determined deficiencies by way of fresh investigation, but was constrained by its Bye-Laws and the confidential nature of the PEC process from fully exploring these options with the Member and Complainant concerned. The Institute reiterates its willingness to conduct a fresh investigation if deemed appropriate by the Enquiry Committee and remains fully committed to ensuring all parties to an investigation are afforded fair procedures and process in the operation of its Bye-Laws.”
- By letter dated 21 August 2018 the Enquiry Committee wrote to the Institute stating, inter alia, that “… subject to any submissions that [the Member] may wish to make, the [Enquiry Committee] would propose not to further exercise its rights under Regulation 7(4) and proceed to make a decision under Regulation 11 based on the documentation already furnished to the [Enquiry Committee] by the Institute.”
- By letter dated 28 August 2018 the Enquiry Committee wrote to the Member enclosing a copy of the correspondence with the Institute referred to above and invited the Member, if he so wished, to make a submission to the Enquiry Committee setting out in writing “… any objection that [he had] to the [Enquiry Committee] proceeding on … ” the basis it set out in its letter of 21 August 2018 to the Institute.
- By letter dated 12 September 2018 the Member responded and made the written submission to the Enquiry Committee. [TEXT REDACTED]
Summary of Decision of the Enquiry Committee
- The Enquiry Committee has carefully considered all the documents and submissions furnished to it, including the prima facie decision of the Preliminary Enquiry Committee, the submissions made by the Institute, the Complainant and the Member and has determined that it is not satisfied that the Institute complied with the approved investigation and disciplinary procedures. Consequentially, the Enquiry Committee advises the Institute and, insofar as it is necessary, annuls the decision of the Institute of the 31st of March 2016 in which it was decided by a sub-committee of the Institute that, in relation to the subject of the enquiry, there was insufficient prima facie evidence of professional misconduct and annuls, insofar as it is necessary, the decision notified to the Complainant on 11 July 2016. The Enquiry Committee also directs that a fresh investigation be carried out by the Institute into the matter as soon as practically possible. The detail of the Enquiry Committee’s deliberations is outlined below.
Reason for the Enquiry Committees decision
Submissions by the Institute
- The Enquiry Committee considered the reasoning behind the PEC Decision and the submissions made by the Institute, the Complainant and the Member to the Enquiry Committee. In relation to the submissions made by the Institute, by letter dated 31 July 2018 from the Institute to the Enquiry Committee, the Institute stated that it did not:
“propose to make any additional written submissions in this matter or request an opportunity to make oral submissions before the Enquiry Committee. The Institute believes that all relevant material was before, and considered, by the PEC and we would refer you to the Institute’s written submissions to the Preliminary Enquiry Committee (PEC) of 19 and 28 February 2018 together with enclosures and the Institute’s letter of 13 April 2018 in reply to the draft conclusions of the PEC.”
Article 50 and Bye-Law 6.10
- Article 50(c) and Bye-Law 6.10.3 include provisions permitting the Investigation Committee of the Institute (the “Investigation Committee”) to delegate such of its functions and powers to a sub-committee of its members. Article 50(b) and Bye-Law 6.10.2 state that the quorum for a meeting of the Investigation Committee shall be three persons as follows:
“The quorum for meetings of the Investigation Committee shall be three persons, so long as a majority of the attendance thereat consists of members who are not Members of the Institute.”
- The Member did not make any submission in relation to Article 50 and Bye-Law 6.10.
- The Enquiry Committee, having carefully considered the reasoning of the PEC at paragraphs 13, 14, 15, 16 and 17 of the PEC Decision, agree with the reasoning therein and adopts same for the purpose of this decision.
- This Bye-Law states:
“The Investigation Committee may in its absolute discretion give a Member, Firm, Affiliated Partner or Student the opportunity to be heard before it and to be represented at that time by a Lawyer or a Member.”
- The Member’s submission can be summarised thus; the two persons (the Audit Manager and consultant/author) present at the relevant hearing were not there in a representative capacity but as appropriately qualified witnesses and to “assist” the Complainant.
- The Member relies on Bye-Law 6.18.7 which refers, inter alia, to the right of a member of the Institute “to be heard and be represented by a lawyer or a Member of the Institute at an application and call witnesses to give evidence if he desires [emphasis added]”. However, this Bye-Law deals with ex-parte applications to the Investigation Committee which is not relevant in the circumstances being considered by this Enquiry Committee. Bye-Law 6.19.4 (the relevant Bye-Law) does not confer an entitlement to call witnesses to give evidence and, presumably this was intentional. In any event, the gravamen of the decision of the PEC was that the two persons present with the Member acted in a representative capacity and not in the capacity as mere witnesses. The PEC expressed the view that:
“it is evident from the transcript of the hearing before the Investigation Sub-Committee on 7 March 2016 that the consultant ICAI member and author was a frequent contributor to the hearing and was clearly representing the Member Firm before the Sub-Committee. Indeed in response to Sub-Committee questions on a number of occasions, the principal of the Firm deferred to the consultant and allowed him to answer the questions on the Firm’s behalf“.
The Enquiry Committee agrees with this view.
- The Enquiry Committee, having carefully considered the reasoning of the PEC at paragraphs 21, 22, 23 and 24 of the PEC Decision, agree with the reasoning therein and adopts same for the purpose of this decision.
- This Bye-Law states:
“The Investigation Committee may in its absolute discretion give a Complainant the opportunity to be heard before it. If the Investigation Committee affords the Complainant with this opportunity it shall also afford the Member, Firm, Affiliated Partner or Student with the same opportunity together with the right to be represented by a Lawyer or a Member.”
- The Complainant raised an issue about the fact that the Complainant was not given an opportunity to be heard in relation to its complaint. The Member submitted that he had “no idea why this opportunity was not given to the Complainant, but [he] should not have to suffer the additional expense of hiring professional representatives, the stress and time cost of a re-hearing.”
- The Member does not argue that the Complainant should not have been given the opportunity to be heard but takes issue with a potential consequence of the Investigation Committee not giving the opportunity to the Complainant i.e. the Enquiry Committee directing a fresh investigation. The Enquiry Committee has some sympathy with the Member given that the Investigation Committee took no issue with the role played by the persons who accompanied the Member. However, the role of the Enquiry Committee is to ensure that the Institute complied with its Bye-Laws and, in the absence of any evidence that the Member would be prejudiced to the extent that he could not have a fair hearing, the Enquiry Committee is entitled to consider all of the options open to it, including directing a fresh investigation.
- The Enquiry Committee, having carefully considered the reasoning of the PEC at paragraphs 41, 42, 43 and 44 of the PEC Decision, agree with the reasoning therein and adopts same for the purpose of this decision.
The Independent Review Process (particularly Bye-Laws 6.24.6, 6.24.7 and 6.24.8)
- Bye-Law 6.24 relates to the independent review process. The relevant provisions at issue are:
The Independent Reviewer shall carry out the review based solely on all documentation that was in the possession of the Investigation Committee when it was carrying out its investigation in relation to the Complaint. If the Independent Reviewer is provided with new information that was not before the Investigation Committee and if he is of the opinion that this information is significant he can require the Investigation Committee to reopen the case or can require the new information to be dealt with under these Bye-Laws as a new Complaint.
If, following a review in accordance with this Bye Law 6, the Independent Reviewer is of the opinion that the decision of the Investigation Committee was correct the Secretary shall on his behalf so inform the Member, Affiliated Partner, Student or Firm concerned, the Investigation Committee and the Complainant in writing, stating his reasons for forming such an opinion.
If, following a review in accordance with this Bye Law 6, the Independent Reviewer is of the opinion that the decision of the Investigation Committee was wrong, he shall remit the case to the Investigation Committee for reconsideration stating In Writing his reasons for forming such an opinion. At the same time the Secretary shall on his behalf inform the Member, Affiliated Partner, Student or Firm concerned, and the Complainant, In Writing, that he has decided to remit the matter to the Investigation Committee for reconsideration.”
- The Member did not make a submission in relation to the above Bye-Laws.
- The Enquiry Committee, having carefully considered the reasoning of the PEC at paragraphs 27, 28, 29 and 30 of the PEC Decision, agree with the reasoning therein and adopts same for the purpose of this decision.
Last Submission by the Member
- The Member finished up his submission stating “It is simply unfair that I should have to endure further disciplinary Action by IAASA when the problems lie solely in the manner in which the CPA Institute Bye-Laws are written. I was fairly exonerated at the Institute Investigation Sub-Committee, in 2016 and that should be the end of the matter, from my point of view.”
- In relation to this submission the Enquiry Committee notes that IAASA is examining this matter pursuant to Section 933 of the Companies Act 2014 in relation to the conduct of the matter by a prescribed accountancy body and is not engaged in a disciplinary action with a member of prescribed accountancy bodies. The Enquiry Committee notes the Member’s views about perceived unfairness, but it is of the view of the Enquiry Committee that, if the Bye-Laws are correctly applied, he should not suffer an injustice. The Enquiry Committee must also weigh the fairness or lack thereof in the Institute not conducting the matter in accordance with its Bye-Laws. In these circumstances the Enquiry Committee is entitled to consider all options open to it in relation to any sanction.
Other Observations of the PEC
- The Enquiry Committee note the observations of the PEC from paragraph 37 to 50 (excluding paragraphs 40 to 44) of the PEC Decision. The Enquiry Committee take the view that these are matters to be considered by IAASA and the Institute and, as such, the Enquiry Committee makes no findings in regard to any of the matters therein contained.
- The Enquiry Committee has carefully considered the sanctions that are available to it. The Enquiry Committee notes that from a very early stage i.e. during the early stages of the PEC process that the Institute, to its credit, was open to reaching a settlement with IAASA. Unfortunately, due to the statutory framework it was not possible to agree an appropriate settlement and the matter had to proceed to this stage of the process. The Enquiry Committee also notes that all of the parties fully co-operated with the Enquiry Committee, dealt with the process as expeditiously as possible and complied, in the main, with any time limits imposed on them.
- Taking the previous paragraph into consideration the Enquiry Committee:
- finds that the Institute should be advised;
- annuls, insofar as it is necessary, the decision of the Institute of the 31st of March 2016 in which it was decided by a sub-committee of the Institute that, in relation to the subject of the enquiry, there was insufficient prima facie evidence of professional misconduct and annuls, insofar as it is necessary, the decision notified to the Complainant on 11 July 2016;
- directs that a fresh investigation should be undertaken by the Institute and that such fresh investigation should be commenced as soon as reasonably practical but no later than six weeks from the date this decision has legal effect; and
- makes no direction as to levying the costs of this enquiry or imposing a monetary penalty on the Institute.
Chair of Enquiry Committee
10 December 2018