Tuesday, 19 August 2008 
 
The Institute of Chartered Accountants in Australia (the Institute) acknowledges the media release issued by the Australian Securities and Investment Commission (ASIC) over concerns that accountants are signing ‘capacity to repay loan’ certificates without properly ascertaining or researching the borrower’s financial position. 
 
The Institute advises its members to be cautious about signing ‘capacity to repay loan’ certificates also known as advice certificates to ensure that they only sign certificates where they have performed the work and understand what they have signed.  
 
“The Institute has recently communicated with members of the need to be cautious when signing advice certificates in regards to self managed superannuation funds (SMSFs) and the increased interest in borrowing for SMSFs - such as installment warrants,” said Hugh Elvy, Head of Financial Planning and Superannuation at the Institute of Chartered Accountants in Australia.  
 
“In many cases by signing an advice certificate accountants are taking on responsibility that they have explained the various terms and conditions of the borrowing conditions to their client”.  
 
“The Institute's advice is therefore to treat such certificates with care and to only sign a form of words which, based on the circumstances of their client relationship and the level of work able to be performed, is appropriate to their situation – this relates to a financial advice certificate, solvency certificate, or other certification.” Mr Elvy said. 
 
The Institute will support ASIC in their initiative to alert accountants of the need to ensure the appropriate systems are in place and that accountants are making rigorous and detailed enquiries prior to certifying the borrower’s ‘capacity to repay’. This will not only protect the accountant but the borrower as well.  
 
The warning is in light of an ASIC report Protecting wealth in the family home which analyses the conduct of transactions made by brokers who had refinanced a home loan for a borrower in financial difficulty. The report can be viewed at www.fido.gov.au/protectingwealth.