Building Trust at the Heart of the Global Economy

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Fayezul Choudhury

By Fayezul Choudhury

Fayezul Choudhury is Chief Executive Officer of the International Federation of Accountants.

Before Mr. Choudhury became IFAC CEO in 2013, his last two assignments were with the World Bank as Vice President, Corporate Finance and Risk Management; and Controller and Vice President, Strategic Planning and Resource Management. In this latter role he was the World Bank’s spokesperson on global accounting and auditing issues.

Mr. Choudhury started his career in 1974 with PriceWaterhouse in London. During his career with PriceWaterhouse, he spent three years in Nigeria, developing the consulting practice in the region.

He has an MA (Hons) in Engineering Science and Economics from the University of Oxford, and is a Fellow of the Institute of Chartered Accountants of England and Wales.

The trust deficit between citizens and the institutions that govern their lives is at the heart of discussions about the global economy and its governance. All the major actors now need to make it an imperative to take concrete steps to bridge the gap, and the accountancy profession is doing its part.

In July, a new ethics standard came into force for all professional accountants, including auditors, that will enhance the ability of nations to fight fraud, corruption and other illegal acts by reporting actual or suspected wrong-doing.

New International Standards to Report Fraud and Suspicious Activity

The new standards, developed by the International Ethics Standards Board for Accountants (IESBA), has already been adopted in over 100 international jurisdictions. The latest addition to these standards: Responding to Non-Compliance with Laws and Regulations(NOCLAR), has already been adopted by many major jurisdictions globally and others are progressing national due process for adoption, or actively considering it.

While the accounting profession has for decades actively participated in the fight against fraud and corruption, the new standard will help professional accountants balance the key principle of client confidentiality with the overriding public interest to appropriately report fraud and other suspicious activity.

The standard’s intention is clear: ensure professional accountants respond quickly and appropriately to identified or suspected non-compliance; mitigate adverse consequences of non-compliance; and deter non-compliance while stimulating increased reporting of it. The new standards are also straightforward to implement.

They recognize that not all professional accountants function at the same level—they operate in different spheres of influence and with different levels of authority, and indeed at different levels of public expectation depending on the nature and scope of their roles vis-à-vis the entity they serve or advise.

We know that corporate scandals driven by unethical behavior damage business reputation, impact profits, burn investors and cause hardship for employees and their families. Each scandal permeates the public consciousness and contributes to lower levels of trust in C-suite leadership.

While the vast majority of businesses and organizations operate lawfully in the global economy, the spirit, intent and implementation of the new standard should be supported by all business leaders who understand that strong corporate governance and reputation are essential to the bottom line.

Accountants—Invaluable in Internal Prevention and Corporate Governance

Meanwhile, many organizations employ professional accountants to support a variety of finance and related functions. As more jurisdictions adopt the new standard, increasing numbers of these accountants will be bound by its provisions.

They can be an invaluable resource to help leaders of organizations create and strengthen internal prevention and self-reporting cultures. A strong internal corporate governance culture must also extend to the corporate board and, especially, the audit committee responsible for managing the external audit process.

The Next Steps

The new IESBA standard is a significant contribution to improving ethics—and building trust—at the heart of the global economy. But the professional accountants implementing the new standard cannot address non-compliance alone.

The standard’s full potential will only be realized with the help of public and private sector organizations working collaboratively to achieve stronger corporate governance; robust, trusted and effective legal and regulatory regimes; and stronger whistle-blowing protection for professional accountants.

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