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False accounting

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Mike, a certified public accountant, was the voluntary treasurer of the parent-teacher-association (PTA) of the private school which his son attended.  Though the PTA had an annual expenditure budget and raised substantial funds each year, no formal accounting reports had been made by the school.  The new PTA Chairman thought it was time to clarify the current financial position of the association and asked Mike for assistance.


When going through the accounting records, Mike discovered several red flags: the actual expenditures were inconsistent with the approved budget; the cash balance fluctuated without explanation; and the cash inflows from fund-raising events did not match with the accounting records.


Mike then approached the school secretary, who looked after the PTA’s accounts, for clarification.  However, the school secretary repeatedly gave vague and evasive responses. As Mike did not have access to the school’s accounts and lacked important information to determine the cause of the problems, he suspected that a fraud might be involved. Meanwhile, the school principal had recently indicated concerns on the academic performance and constant school behavioural problems of Mike’s son.


Mike was uncertain if he had any professional obligations as a voluntary treasurer in the PTA.  He was also worried whether reporting the suspected fraud would cause the school any trouble and affect his son’s interests in school. What should Mike do?   


Case Analysis

The school secretary might have committed an offence under Section 9(3) of the Prevention of Bribery Ordinance (POBO) if he had submitted false documents, i.e. false PTA accounting records, to deceive his principal, i.e. the school.     


Though being a voluntary treasurer, Mike still has professional obligations to the PTA.  Mike should bring the issue to the attention of the PTA or consider reporting the suspected fraud to the school or law enforcement authorities. He should also avoid involve in any acts that might call his integrity and professionalism into question. He must take into account his own views on ethics and legality and offer advice to the PTA if there were better alternatives.  


As a professional accountant serving as a volunteer, Mike should always observe the Code of Ethics of Professional Accountants and comply with the fundamental principles of integrity, objectivity, professional competence and due care and avoid any conflict of interest. 

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