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Holding professional bodies to account

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Comment from SA Institute of Business Accountants: Saiba subscribes to the conduct and engagement standards as issued by the International Ethics Standards Board (IESB) for Accountants. This is a cornerstone of our membership pact and we believe in holding members to the highest international standards of ethics. Conduct standards are included in the Handbook of the Code of Ethics for Professional Accountants.

Saiba is a legislative controlling body for accountants, accounting officers and independent reviewers. As a controlling body we are required to monitor and sanction compliance to standards of member conduct. We perform this function by ensuring compliance by our members to the IESB Handbook.

Professional bodies provide a key public interest function in setting ethical standards and holding members to these standards.

There’s no question the accounting profession is in crisis. Acres of press coverage have been dedicated to documenting cases of corruption and neglect by accountants. Think KPMG, VBS Bank, Bosasa, Eskom, to name just a few.

A timely piece of research from the SA Qualifications Authority (SAQA) and the Institute of Internal Auditors (IIA) looks at the state of professional bodies in SA and, more importantly, their sustainability and internal practices for disciplining members.

The research, entitled Do professional bodies have the capacity to truly protect the interest of the public while remaining sustainable?, also explores how these bodies are fulfilling their mandate to protect the public interest.

Some of the key takeaways:

  • The research was prompted by an increase in reports of unethical behaviour highlighted in the media involving members of professional bodies, particularly in the governance sphere such as the field of auditing and accounting.
  • This poses a financial risk to professional bodies. A key concern of the IIA SA, therefore, was the capacity of professional bodies to handle the costs associated with disciplinary cases involving their members (either in their internal processes or in terms of legal fees where members may challenge their decisions in court), in a climate of unethical professional behaviour where legal battles appear to be on the rise.
  • SAQA says it needs “to engage with the question of whether it should recognise a professional body that does not have any reserve funds and a clear ability to implement the required processes to protect the interest of the public, particularly given that SAQA wants to recognise sustainable professional bodies who protect the public interest, whilst acknowledging that some professional bodies do experience financial constraints”. SAQA takes into account the role of professional bodies in holding members to account when extending recognition to the body.
  • SAQA requires professional bodies to ‘protect the public interest in relation to services provided by its members and the associated risks’.
  • The current environment in South Africa is indicative of an intense need for professional bodies to implement their processes in relation to holding members accountable for unethical behaviour.
  • Organisations have their own specific definition of sustainability based on their particular context. There is, however, a commonly held meaning, namely ‘triple bottom line’ sustainability which focuses on economic, social, and environmental sustainability.

Professional bodies are beginning to realise the importance that sustainable practices play in their survival for them to remain credible and relevant to industry, government and society.

The true value of a professional body will be measured by how successful the body is in addressing specific needs at any given point in time, especially its ability to handle challenging situations within its profession and its willingness to protect the interest of the public. Moreover, professional bodies cannot claim to provide full protection in relation to the profession because some have a limited membership base and some professions, such as internal auditing, are not regulated – thus, those who are not members of a professional body may remain a risk to the profession and the public as they are not being held accountable

A general legal definition of ‘public interest’ suggests that it is to be understood in contrast to private or individual welfare. According to the International Federation of Accountants, the public interest is defined as “the net benefits derived for, and procedural rigor employed on behalf of, all society in relation to any action, decision or policy”. The ‘public’ includes the widest scope of society in the public and private sector.

For a professional body, protecting the public ‘interest’ would include for instance, making sound financial decisions, transparency and good governance, public accountability, regulating and monitoring the profession, communicating crucial information to the industry, partnering with the government and industry to improve practices in the profession, and so on.

The state of the accounting and auditing profession has been riddled with incidences of bribery, corruption and the soliciting of financial gains. This has brought with it a decline in the ethical compass and reputation of the profession as a whole. In light of this, professional bodies such as the South African Institute of Chartered Accountants (SAICA) have to take the lead in restoring the trust relationship between the public and the profession and regaining the reputation of the profession.

Another matter pertains to how professional bodies can become more proactive and authoritative about these matters rather than ‘reactively’ acting on public complaints. A critical question which remains pertains to how professional bodies can improve their monitoring of the profession. For professional bodies which are not regulated, this activity is likely to pose particular challenges.

The purpose of sanctions is to protect the members of the public, maintain public confidence in the profession, and declare and uphold proper standards of conduct and performance. As an Irish law firm explains, in disciplining members, regulatory bodies generally consider that “the reputation of a profession as a whole is more important than the fortunes of an individual member of that profession”.

One way for professional bodies to reinvigorate ethical behaviour is to follow the example of Saica’s Ethics Programme, which opens channels and support for whistleblowers; through education and imbuing new members with an ethical culture and sense of greater purpose; and by spreading the ethical message through networks and communication.

For more information about Saiba Code of Ethics, click here.