A KPMG junior auditor has been told he should have questioned his managers' orders, after being instructed to forge documents as part of a bid to deceive regulators.
City A.M. reports that Pratik Paw, a 25-year-old junior accountant, was asked by his superiors to copy meeting minutes into an old document during a Financial Reporting Council (FRC) inspection of KPMG’s audit of the collapsed construction firm Carillion, in a bid to falsely represent them to the FRC with contemporaneous notes.
The probe heard that, in doing so, “Acted without the integrity required of an accountant and became a party to the deliberate misleading of the Audit Quality Review (AQR).”
Paw told the investigation that he simply followed his bosses’ instructions “without thought”, but the panel rejected his explanation, declaring that he should have known there was “no conceivable reason” why he would be asked to incorrectly date the minutes and that such an order “would have raised questions in anyone’s mind”.
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The tribunal ruled that Paw acted “without integrity” but had not acted dishonestly.
The findings come after KPMG was fined a record of £14.4m and ordered to pay £3.95m in costs over its attempts to mislead the FRC.
Why this case is a headscratcher for HR
Although there is a delicate legal situation with this case – one that is almost unique to the financial sector - the fact that Paw was told he should have refused to carry out his superiors’ demands gives rise to a debate that all HR leaders should keep in mind – the fine line between employees speaking up about a work situation they feel is morally wrong, or following the boss’s orders regardless.
If staff should refuse to carry out a task required of them at work, the employment law firm Davidson Morris explains how to deal with insubordination.
“The manner in which insubordination at work should be handled will largely depend on the nature and severity of the incident(s) in question”, the legal resource states.
“Where the misconduct is relatively minor and there are mitigating circumstances, especially where it is a one-off incident and the employee has a good prior disciplinary record, an informal chat between the employee and their line manager or immediate boss should generally be sufficient to deal with the matter. This can often be the quickest and easiest solution. Employers should retain records of all such conversations.
“However, in circumstances where employee insubordination is fairly serious or, alternatively, there have been a series of relatively minor insubordinate acts that, taken together, can be treated more seriously, the employer may decide to initiate disciplinary proceedings.”
What if Paw spoke out?
Paw admitted he didn’t question the instructions of his bosses and was seemingly under the impression that he had done nothing wrong. However, had he known the decision was wrong but felt uncomfortable about speaking up, for fear of repercussions, there would be legal protections in place allowing him to raise the alarm.
Protection for UK whistle blowers is provided under the Public Interest Disclosure Act 1998 (PIDA, part of the Employment Rights Act 1996. The legislation protects employees and workers who blow the whistle about wrongdoings.
As per Reuters news agency’s Practical Law page, employees who make "protected disclosures" under the Disclosure Act can claim unfair dismissal if their contracts are terminated as a result of their whistleblowing.
They are also protected from other potential punishments, such as a refusal to offer promotion, facilities or training opportunities.
However, only certain kinds of disclosure qualify for protection under the PIDA. These are known as "qualifying disclosures" and must relate to one of the following:
A criminal offence
A breach of a legal obligation
A miscarriage of justice
A danger to any individual's health or safety
Damage to the environment
Deliberate covering up of information relating to any of the above.