Many people rely, either significantly or completely, on their accountants to provide them with tax advice or otherwise assist them in managing their financial affairs.
After all, accountants have obtained numerous qualifications which appropriately signify them as experts in their field. Accountants may also be perceived as being ‘good’ with numbers where many others feel they are not!
However, this does mean there is a potential power imbalance between a layperson and their accountant. And it is clear that the potential consequences of negligence, poor advice or mismanagement of funds for individuals due to the actions of their accountants can be extremely significant.
Changes brought about by the Royal Commission
If you have been the victim either of poor work by your accountant or even intentional fraud or financial mismanagement, it is important that you consider whether you have legal options for redress or compensation. Although the prospect of litigation or other means of recovery often seems daunting or expensive, that is not necessarily so, particularly in the current legal and regulatory environment surrounding the provision of financial services.
In 2017, a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was launched. The result of this Royal Commission has meant that there has been much greater focus on the bad behaviours of people employed in the financial services sector, including accountants.
Examples of poor behaviour
Effectively, the Royal Commission considered whether people claiming to have expertise in a specific area, including accountants, were acting correctly in relation to their clients, and whether they were providing incorrect, inappropriate or simply fraudulent assistance.
This can include accountants who are not skilled enough to be aware of applicable tax legislation (resulting in a loss for their clients), accountants who fail to recommend certain strategies where appropriate, or even accountants who plainly embezzle money from their clients.
Other types of negligence include a failure to disclose relevant commissions or financial interests when recommending products, failing to take into account all relevant circumstances of the client, or otherwise failing to consider all potential consequences of recommendations.
The consequences of an accountant providing incorrect or negligent advice can clearly result in clients losing substantial amounts of money, both directly and indirectly (for example, through artificially inflated taxation penalties).
What action can be taken over this behaviour?
This type of misconduct is generally regulated by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC). Both of these regulators have increased in power since the Royal Commission, and have a clear mandate of ensuring that consumers are protected wherever possible against the actions of negligent or fraudulent people providing financial advice or assistance.
An additional avenue of redress could be through making a complaint to the Australian Financial Complaints Authority (AFCA), a free service for consumers whose entire remit is to deal with complaints relating to financial misconduct or negligence. Alternatively, litigation through formal court processes may be an avenue for recovery in the most serious of cases.
At Pentana Stanton, we can advise what steps to take next if you believe your accountant has been negligent in their dealings with you. We can assist you in quantifying how much you may be entitled to through compensation, and recommend the best strategy going forward. Schedule your one-on-one appointment today for detailed legal advice and guidance.