Don’t Cross the Line

It can sometimes be challenging to navigate the sensitivities of providing sound counsel to clients, and potentially stepping into the grey space dividing accounting from legal advice.

All Australian states have laws that prohibit any person, other than a qualified legal practitioner, from providing legal advice or engaging in legal practice. Each professional accounting body, including the CPA, publishes guides for accountants that set out what services they may offer, including:

On the other hand, the guidelines are clear that an accountant cannot:

Watch your step

The difficulty lies in determining where the line is between acceptable accounting activities and legal practice, whether you’re a director, partner or manager in an accounting firm.

Unfortunately, current legislation and available case law provide little guidance, although it is clear that producing and supplying a legal document (such as a trust deed) and/or establishing or advising on the legal effect of a document, is categorized as legal advice or engaging in legal practice.

The problem is that many accountants’ daily activities include:

Everyone has been there. A template is available for a Div 7A loan agreement, which an accountant assumes has been validated and scrutinised. It appears to be a simple case of filling in the details and receiving the final documents. The risk lies in the fact that a legal document has been completed without the appropriate legal scrutiny, leaving the accounting firm vulnerable from a compliance perspective.

The risks can’t be ignored

The risks for accountants undertaking any of the above activities include:

It’s important to be clear on the potential for crossover, and the risks in venturing into the legal domain. Feel free to contact us at any time if you are unsure how the guidelines may apply to you.