Topic 12 : Confidentiality And Whistle-Blowing 2019/1/2 Topic 12 : Confidentiality And Whistle-Blowing 2019/1/2 Week 1

Definition Of Whistle-Blowing 2019/1/2 Definition Of Whistle-Blowing Unauthorized disclosure of unethical or illegal acts “Internal” whistle-blowing versus “external” whistle-blowing Acquired knowledge of unlawful act lead to conflicting fiduciary duties Fiduciary relationships >> duty of confidentiality Whistle-blowing >> violation of such relationships Fiduciary relationships >> loyalty to the interests of one’s counterpart Whistle-blowing >> act of disloyalty to such interests 2019/1/2 Week 1

Ethical Considerations Of A Whistle-Blower 2019/1/2 Ethical Considerations Of A Whistle-Blower Loyalty as an issue to a whistle-blower? Traditional view versus other views A tradeoff between confidentiality to client/ employer versus obligations to fulfill the public’s right to know 2019/1/2 Week 1

Ethical Considerations Of A Whistle-Blower 2019/1/2 Ethical Considerations Of A Whistle-Blower Employees (Professionals) possess a prima facie duty of loyalty to their employers (Clients) There is a tradeoff between interests to employer/client and interests to public Loyalty as an issue to a whistle-blower? Traditional view versus other views A tradeoff between confidentiality to client/ employer versus obligations to fulfill the public’s right to know 2019/1/2 Week 1

Ethical Considerations Of A Whistle-Blower 2019/1/2 Ethical Considerations Of A Whistle-Blower Loyalty is only appropriate in the context of mutual surrendering of self-interests Whistle-blowers demonstrate greater loyalty to their employers than non-whistle-blowers Loyalty as an issue to a whistle-blower? Traditional view versus other views A tradeoff between confidentiality to client/ employer versus obligations to fulfill the public’s right to know 2019/1/2 Week 1

Ethical Considerations Of A Whistle-Blower 2019/1/2 Ethical Considerations Of A Whistle-Blower Other factors e.g. consequences of whistle-blowing Positive and negative effects Adequacy ofinformation Reasonable belief or practical certainty that conduct is harmful or wrongful Channels for consultation and advice Professional and legal advice Avenues for blowing a whistle ‘internal whistle-blowing’ v. ‘external whistle-blowing Possibility of over-blowing Are good intentions well-served by the results Use of decision-making models…. Week 1

Confidentiality Requirements Fiduciary R-ships Obligation to disclose Freedom to disclose Confidentiality Absolute or Not Not Absolute 2019/1/2

Confidentiality Requirements Of Practising Members To Clients 2019/1/2 Confidentiality Requirements Of Practising Members To Clients Statement 1.204B : Confidentiality as an important but not absolute requirement Exception One : Auditor’s duty to disclose Duty-bound by Common Law and Statue to disclosure in audit report Exception Two: Obligation to disclose e.g. compelled by process of law However, legal notice be addressed to the member NOT to produce documents unconditionally Exception Two : Freedom to disclose i.e. where member’s own interests require disclosure e.g. defending against charges or clear suspicion Resisting an action for negligence of duty Defending against HKSA’s disciplinary proceedings Suing for fees Week 1

Confidentiality Requirements Of Non-Practising Members To Employers 2019/1/2 Confidentiality Requirements Of Non-Practising Members To Employers Statement 1.290C : Confidentiality as an important but not absolute requirement Allowing “internal” whistle-blowing but not “external” whistle-blowing Report to management internally at an appropriate level Report to non-executive directors Consider making a report to a third party Exceptions for “external” w/b : Exception One - Obligation to disclose: compelled by law Exception Two - Freedom to disclose: protection own interest Defend against a criminal charge or clear of suspicion; resist proceedings for a taxation offence; resist legal actions brought by employer; defend against disciplinary proceedings; take legal actions against unfair dismissal or redundancy payment claim Week 1

Confidentiality Requirements Of Non-Practising Members To Employers 2019/1/2 Confidentiality Requirements Of Non-Practising Members To Employers Exception Three: Disclosure in the public interest Matters for consideration: The relative size of the amounts involved and the extent of the likely financial damage; The reasons for the employer’s/client’s unwillingness to disclose the matters to the proper authority; The gravity of the matter; The possibility of likelihood of repetition; Whether members of the public are likely to be affected Any legal advice obtained Week 1

Knowing More About Whistle-Blowers 2019/1/2 Knowing More About Whistle-Blowers Common characteristics of whistle-blowers e.g. strong belief in moral principles and values Long-serving conscientious employees 47-year-old family man Consequences for whistle-blowers e.g. fired, increased financial burdens, lost homes, divorced, physical deterioration, emotional stress … However, few regrets for most of the whistle-blowers Lost income can be replaced but lost self-esteem is more difficult to retrieve 2019/1/2 Week 1

Do We Need To Protect Whistle-Blowers ? 2019/1/2 Do We Need To Protect Whistle-Blowers ? Arguments FOR protecting whistle-blowers e.g. preventing retaliation Encouraging potential whistle-blowers to speak up Encouraging accountants to be more ethical Protecting the public interest Arguments AGAINST protecting them e.g. inconsistent with the duty of confidentiality Encouraging professionals to think twice Discouraging self-interest pursuing behaviour Who bears the costs of protecting them ? 2019/1/2 Week 1

Ways Of Protecting Whistle-Blowers 2019/1/2 Ways Of Protecting Whistle-Blowers Public education Importance of protecting public interest Legal protection Against unfair dismissal resulting from whistle-blowing Umbrella of the mass media Judging whistle-blowing with a new perspective Corporate measures Corporate culture and code of conduct 2019/1/2 Week 1