UK Do Accountants Have a Duty of Care to a Company's Shareholders?

[Hilton]

An accountant was engaged to administrate the financial affairs of a limited company.
The managing director of that company asked the accountant to take certain measures which would be to the managing director's personal financial gain, but which would be against the interests of the company causing its shareholders financial losses.

Although the accountant was taking instruction from the company's Managing Director he was not working on behalf of the company MD, he was working on behalf of the company. The accountant was invoicing the company for his services, he was not invoicing the MD. Therefore if the accountant was aware that the instructions he was being given by the MD were against the interests of the company and therefore its shareholders, and if the accountant then complied with the MD's instruction in full knowledge that he was working against the interests of the company and its shareholders, can the accountant be held accountable for professional negligence by the company's shareholders?

The accountant's duty of care was to the company who he was invoicing for his services. His duty of care was not to the MD who was issuing the instructions, but under whose sole instruction he acted. Should the accountant have taken an ethical stand and informed the MD that what he was being asked to do was ethically and professionally compromising and refused to do it? Because he did not go against the MD's instruction in full knowledge of the implications to the company has the accountant breached his duty of care to the company even though he was following the orders of the MD?

 

[Steve-LevelUp]

In my view, yes, he would have been ethically bound to report it. He should not knowing allow this sort of misappropriation of funds by the MD. Things are always more complicated than they seem, and it is easy to look from the outside to ask things like this.

 

[Drmdcpa]

He had at least a duty to bring it to a superior or confirm the board agreed with the transaction being booked as instructed. Public accountants first owe a duty to the public. That includes shareholders if it is a publicly traded company.

 

[Accounting & Tax Neophyte]

Yes, the accountant had an ethical and professional responsibility to the company and its shareholders first and foremost. However, for a managing director to be so blatant with the company's affairs is indicative of a much bigger problem..... weak or non existent internal controls.