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Anti- corruption tool for accounting firms

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Anti- corruption tool for accounting firms

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IFAC has rolled out a new tool to tackle corruption in the system that would armour accountancy firms to fearlessly combat this menace. This crusade against corruption is the order of the day.

By Saikumar C Krishna

28th May 2023.

INTRODUCTION:

Let us remember, as responsible professional accountants, corruption, economic crimes are significant roadblocks to achieving the UN Sustainable Development Goals (SDG). Professionally qualified accountants are well entrenched in business and public practice to confront this heinous crime in the society or indirectly influence the policy makers to progress their crusade against corruption for the benefit of general public at large.

Corruption is rampant across all genres of activities in the world today. One cannot take sides in defending about its presence or otherwise, barring very few countries. It is prevalent in all economies. It is irrelevant to mention about its depth and magnitude.

Some large corporates bit the dust due to corruption that was deep rooted in their operations/, and whose failure had almost wiped out their capital markets. Though it is eons ago, Worldcoms, Enrons of the business ecosystems had faltered, they still remain relevant in terms of corporate governance and financial reporting.

Most often, regulators, legal counsels, investors, shareholders and the Government in general squarely blame professional accountants for tongue in cheek reporting or having clandestine agreement with management of the company. The financial shambles of early 2000s pointed evidently towards that direction and therefore, professional accounting bodies brough in several guidelines to be practiced by accountants. One such effort is this work book.

Having mentioned financial reporting, the business reporting environment has moved past the mundane financial information but much above that. We are now in the aegis of reporting standards issued by IFAC via IFRS which ensures the reporting are in accordance with standards prescribed by them.

Global Fight, Local Action:

IFAC has recently issued an handbook for all accounting firms to lead the fight against corruption titled, “Global Fight, Local Actions: Anti-Corruption Advocacy Workbook for PAOs”. PAO is the acronym for Professional Accountancy Organization.

The objective of this workbook is to assist and support the leadership role against the corruption in their jurisdiction. The best part of this workbook is, it is not a gospel to be strictly adhered to, instead empowers each PAOs or independent practitioners to develop their bespoke practice tools suitable to their environment in which they operate. But the motive should be act as catalyst for anti-corruption.

There are earlier treaties and documents dealing with anti-corruption which acts as a motivation for this workbook. Following are some of them which are reproduced here as a point of reference:

  • The United Nations Convention Against Corruption (UNCAC), treaty which was signed by 189 countries. Broadly, this treaty requires to identify and criminalize corruption. This treaty also encourages creating stringent law and its enforcement, asset recovery, exchange of information, provide international assistance and most importantly, create preventive measures.
  • The Financial Action Task Force (FATF) is a global anti- money laundering monitoring authority and have released 40 standards to combat money laundering (an off set of corruption). Totally 206 countries / jurisdictions have signed up for the implementation of these standards.
  • Organization for Economic Co-operation and Development (OECD) had conducted Anti-Bribery convention in which essential framework for anti-corruption was discussed and framework developed. The specific focus is on the criminalization of bribery in international business deals.
  • Finally, International Code of Ethics for Professional Accountants was issued by the International Ethics Standards Board of Accountants, (IESBA), has set out fundamental ethics for professional accountants and their responsibilities towards public interest.

Identifying Key Stakeholders:

The first step of this workbook is to identify the key stakeholders by PAO, who are willing to partner with them to fight the battle against corruption.

This identification needs to culminate with categorization based on the jurisdiction, profession, desire to support and endorse, share information and finally be part of any policy making.

How to crusade anti-corruption?

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Whenever we say PAO, we intend to cover even the individual professional accounting practitioners.

  1. Identify the jurisdictions to which your fight against corruption will be implemented.
  2. Build a close network of like-minded professional groups who are willing to provide time, effort and resources to this campaign.
  3. The crusaders must possess high standards of integrity as they are acting in the public interest.
  4. Collaboration is the essence here. Therefore, the leader of the pack should practice inclusiveness of all partners.
  5. Supervision and close monitoring of compliance to jurisdictional regulations and ethical standards are key for this effort of PAO.
  6. Whistle-blowers are very key players in anti-corruption drive therefore safeguarding them as well as their identity is extremely important.
  7. The regulations needs to widen in order to keep the non-professional accountants and their role included within the parameters of accountants. Because their participation is also critical in successful implementation of anti-corruption drive.
  8. Since all jurisdictions have agreed to FATF and UNCAC, it is important for PAO to escalate to regulators if there are any exceptions or non-compliance is detected in their jurisdiction. Also, it is critical to investigate why there is hesitation in complying with the above regulations in their jurisdiction and take remedial action.
  9. PAOs must insist on transparency by both private and public sectors to deter corruption. In order to implement the transparency, PAOs must ensure top quality in the financial reporting of their clients.

Engagement Tools

There are four-pronged approach, a PAO can engage in disseminating the anti-corruption initiatives.

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1) One- to – One Engagement: PAOs can engage closely with their partners directly. This is the best approach even to influence policy makers and other enablers. PAOs may plan personal meetings with policy makers or policy influencers.

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2) One- to- Many Engagement: PAO engages with their peer group and other constituents in this effort. This is a good approach to get the key messages spread across wide recipients. PAOs will sponsor events related to anti-corruption within their jurisdiction or podcasts or publish action plan to combat corruption.

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3) Many- to- Many Engagement: PAO should possess the clout to bring in more stakeholders under one roof to convey key expectations and the deliverables. This approach is achieved through conducting conferences and working groups and committees.

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4) PAO- to- Member Engagement: This approach is limited to PAO who chooses to engage with their group members to cascade any key information through training or workshops, continuous learning etc.

Scott Hanson, IFAC’s Director of Policy and Global Engagement has this to say about this handbook on anti-corruption, “Equipping our member organization to lead anti-corruption efforts in their jurisdictions was one of our priority actions… which this hand book delivers. We look forward to talking to PAOs around the world to continue helping them develop their national anti-corruption advocacy plans”. Well said, and the onus is on us accountants to take this combat against corruption forward and lay strong edifice for good governance across system.

IFAC is also planning to roll out a workbook which will encompass interconnected issues relating to sustainability reporting, and financial literacy.

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