Audit insurance and managing conflicts of interest


By Bruce Quigley, CTA

The Tax Practitioners Board (TPB) recently issued a discussion paper seeking assistance in reviewing their guidance on managing conflicts of interest for registered tax and BAS agents, having regard to:

  • the recommendation in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services sector (Royal Commission) concerning conflicts of interests;
  • the Federal Government’s endorsement of the recommendations concerning conflicts of interest.

The Royal Commission Final Report recommended that where possible, conflicts of interest, particularly those pertaining to duty and interest, should be removed rather than managed. It suggested that the general duty to disclose conflicts of interest is an insufficient means of managing conflicts of interest, particularly conflicts between a duty owed to the client and a financial interest of the adviser.

Subsection 30-10(5) of the Tax Agent Services Act 2009 (TASA) requires that registered practitioners have in place adequate arrangements for the management of conflicts of interest that may arise in relation to the activities that a tax practitioner undertakes in their capacity as a registered tax practitioner. According to the TPB, what is ‘adequate’ is a question of fact having regard to the particular circumstances of the matter in question.

The TPB’s position on the application of subsection 30-10(5) of the TASA is set out in TPB(1) 19/24 Code of Professional Conduct – managing conflicts of interest (TPB(1) 19/2014). That information sheet states that a key objective of the TASA is not only to promote consumer protection but also to maintain the integrity of the profession. The TPB defines a “conflict of interest” as a conflict arising where a tax practitioner has a personal interest, or a duty to another person, which is in conflict with the duty owed to the client.

Some guidance is provided in TPB(1) 19/24 on the types of mechanisms that registered tax practitioners can employ to manage conflicts of interest, the most relevant being disclosure. TPB(1) 19/24 provides that ‘the form of the disclosure must be sufficient to allow an informed decision to be made about how the conflict may affect the services being provided and about its management’. However, there is no guidance as to the form or substance of the disclosure, nor what the TPB considers to be an ‘informed’ decision. To address this, the TPB is proposing to amend the information sheet to recommend that a registered agent obtain the client’s consent to act in these circumstances and that this may be in the form of a positive affirmation from the client. A draft example relating to conflicts of interest arising in the context of audit insurance has also been included in a revised TPB(1) 19/24 for feedback.

The Institute’s Tax Policy and Advocacy team is considering whether to provide a submission in relation to the updated information sheet. It would be appreciated if any members who have comments in relation to the matter could get in touch with the Tax Policy team. Here is a link to the current information sheet.


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