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The Financial Times recently reported that the Bank of England, UK’s central banking authority, had launched a probe to evaluate if KPMG worldwide will survive the fallout from its South African division’s troubles.
“Such high profile incidents are not indicative of the overall state of accounting,” insists Ragiema Thokan-Mahomed, Legal, Ethics and Compliance Executive at the South African Institute of Professional Accountants (SAIPA). “We can’t let a few deviants destroy a profession that is essentially the world’s economic foundation.” Accounting integrity stronger than ever Agreeing with SAIPA’s stance, a 2017 paper from the International Federation of Accountants (IFAC), conducted independently by the Centre for Economics and Business Research (CEBR), concluded that accountants play a central role in fighting corruption. According to Thokan-Mahomed, most accountants have a conscience and adhere to prescribed accounting standards. In fact, the latest International Ethics Standards Board for Accountants (IESBA) handbook obliges practitioners to take action when observing or even suspecting a non-compliance with laws and regulations. “Like every IFAC member, SAIPA also has a robust investigations and disciplinary structure in place to deal with offenders,” she adds. “However, we can’t monitor the integrity of millions of companies and transactions, so we need eyes on the ground. It’s time for all South Africans to get involved.” The role of professional accountants In the past, accountants’ response to NOCLAR (Non-Compliance with Laws and Regulations) was limited by client confidentiality but the introduction of sections 225 and 365 of the IESBA code removes this barrier. Now, Professional Accountants (SA) must be conscious of their role when confronted with a NOCLAR and promptly follow the IESBA procedure when identifying a means to remedy the contravention. Where a matter is not resolved effectively, they are required to report it to an appropriate authority. Accountants must further establish whistleblowing policies and procedures in their organisation for this purpose. “We want our members to be at the forefront of promoting good practice, so we encourage them to ensure that these systems are in place,” says Thokan-Mahomed. Investigation and disciplinary process Anyone can report NOCLAR to SAIPA’s legal department directly, by email or by following the complaints procedure on its website. However, the legal team require adequate information to do their job effectively. If the complaint has merit, an investigation will ensue and the SAIPA member may be visited by an assessor collate the relevant documents and inspect them for compliance with accounting standards. When a whistleblower desires anonymity, SAIPA will take on the role of the complainant. For lesser offenses, SAIPA’s Investigations Committee can levy a fine against the transgressor. However, where gross misconduct is apparent, the matter is passed to SAIPA’s Disciplinary Committee. If convicted, a member could be struck from the Institute’s membership role and their dismissal is publicised to protect the public and SAIPA’s reputation. SAIPA is currently negotiating agreements with other accounting institutes to prevent disgraced members from joining another body in South Africa or participating countries. Thokan-Mahomed says observers may become frustrated with the length of the process but notes that dues process must be followed. “Every South African has the right to justice, so evidence must be carefully cross examined and the defence, if any, must be heard. It’s time-consuming but that thoroughness ensures that justice is done.” Taking a stand SAIPA calls on all South Africans to join its ongoing battle against NOCLAR. “We have the systems in place to fight corruption,” concludes Thokan-Mahomed. “But we need information from our members and the man in the street. Together, we can win.” Sources:
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants
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 Author: Ragiema Thokan-Mahomed. Legal, Ethics and Compliance Executive, South African Institute of Professional Accountants (SAIPA)
The 12th to 18th of November is International Fraud Awareness Week, an initiative established to educate the public on the threat of fraud and ways of combating it. It’s therefore a good time for professional accountants and business people alike to take pause and consider what role they can play in driving fraud from the market. New NOCLAR standard However, fraud is only one element of corruption. A bigger war is being waged against what has become known in the accounting industry as NOCLAR (Non-Compliance with Laws and Regulations). The threat is so real that the International Ethics Standards Board for Accountants (IESBA) created a new standard called Responding to Non-Compliance with Laws and Regulations to address the issue. The standard, which became effective on 15 July 2017 and is the result of six years of labour, will be integrated into the organisation’s globally-recognised Handbook of the Code of Ethics for Professional Accountants. Several existing clauses in the Code have been amended to accommodate its provisions. Memorandum of understanding In light of such developments, the South African Institute of Professional Accountants (SAIPA), in collaboration with other regulating bodies for the accounting industry, is working to develop a memorandum of understanding to enable greater cooperation between these parties to fight NOCLAR. As one of the few internationally recognised professional accountancy organisations, SAIPA has taken the lead in pioneering a solution that will work for everyone. While the final terms of the memorandum must still be established, several suggestions have been put forward. For example, member information of each body is and always will be protected as required by law and will never be shared between them. However, where members have been found guilty of gross misconduct related to NOCLAR or any deviant behaviour within their professional body, we look to acknowledge the recommendation of participating Institutes and act as guardians for the profession to keep unethical practitioners out. This record will be available to other regulators, allowing them to determine if an applicant for their own designation is still in fact associated with that professional body. This would be an effective response in cases where, for instance, a discredited accountant attempts to carry on business under an alternative designation or uses a deceased practitioner’s membership number as their own. It will also be important to investigate the principles and processes each body applies to combat corruption within its ranks. Where these are determined to be sound, consensus will be sought on how to make them universally applicable or to adapt them for the collective good. SAIPA believes that cooperation and communication between regulators is the only way to provide robust defense against NOCLAR and promote the main goal of the Code of Ethics, which is always to protect the public interest. This interest extends to upstanding accountants who adhere to the principles of ethical conduct, organisations and individuals who administer their affairs honestly, and the reputation of the profession itself. It is in this spirit that the memorandum will be drawn up and made effective. The accountant’s role It’s also vital that professional accountants know and understand the Responding to Non-Compliance with Laws and Regulations standard, which was developed for three reasons. Firstly, it makes provision for disclosing potential NOCLAR to public authorities, where appropriate, without breaching client confidentiality. Secondly, it arms the accountant with better alternatives than simply resigning from a matter without NOCLAR issues being resolved. Thirdly, it provides direct guidance on how to respond to potential NOCLAR in various contexts, allowing the practitioner to act with confidence when approaching these difficult situations. While the standard was created to enhance ethical conduct, and offer protection to stakeholders and the general public, it also gives the professional accountant the freedom to play a significant role in the global fight against NOCLAR. It is therefore the duty of all practitioners to know what steps to follow and when to act if corruption is detected, and SAIPA encourages them to familiarise themselves with its requirements. The concerted and cooperative efforts of the various professional bodies in South Africa and guidance provided by the new standard will provide a robust defence against NOCLAR. It is SAIPA’s vision that, by working together, we will hold the name of the profession high and continue to fulfil our obligation to the public good. Photo caption: Ragiema Thokan-Mahomed ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants Author: Ragiema Thokan-Mahomed, Legal, Ethics and Compliance Executive,
South African Institute of Professional Accountants (SAIPA) The increasing number of matters involving fraud, corruption and money laundering emphasises the role of the professional accountant to report any non-compliance with laws and regulations. In July this year the International Ethics Standards Board for Accountants, established by the International Federation of Accountants (IFAC), introduced a new section to their code of ethics. The draft was out and available since 2016. Non-compliance goes far beyond reportable irregularities, and includes actual or suspected non-compliance with data protection, securities trading, terrorist financing and environmental protection. The newly added Section 360 in the code of ethics guides accountants to act in the public’s interest when they become aware, or suspect a NOCLAR (non-compliance with laws and regulations) Roles and responsibilities of professional accountants The code states that a distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest (section 100.1 of the IESBA). When responding to a NOCLAR, the professional accountant is required to comply with the fundamental principles of integrity, objectivity, professional competence and due care and professional behaviour. Once they become aware of the NOCLAR they have to report it to their direct superior, and if they are the most senior person they have to consult with the board of directors or anybody who is involved in corporate governance in the organization. The responsible people must be allowed time to rectify, remediate or mitigate the consequences of the identified or suspected non-compliance as long as there is no urgency in the matter. SAIPA advises accountants to follow the internal route first. If they feel there is insufficient action to rectify the non-compliance, they can approach the regional forums and their professional bodies. If there still remain unease they should consult legal counsel. The code acknowledges that a senior professional accountant is expected to apply knowledge, professional judgment and expertise. However, he is not expected to have a level of understanding of laws and regulations beyond that which is required for the professional accountant’s role within the employing organisation. The newly added section provides accountants with an override to the principle of confidentiality when reporting the non-compliance is in the best interest of the public. Once they have taken appropriate action, they must feel comfortable that the noncompliance has been fully dealt with and remember to document everything. Dealing with threats and intimidation Professional accountants need to maintain their independence and objectivity, and not succumb to intimidation or threats when they encounter and report non-compliance. South African legislation supports this professional duty in the form of the Protected Disclosures Act. The code states that where it is not possible to reduce the threat to an acceptable level, a professional accountant shall refuse to remain associated with information that is considered misleading or may cancel their mandate to ensure that the code is upheld The Letter of Engagement should reflect clearly that the client’s information will be held confidential, but if there is a legal or professional duty to disclose non-compliance the professional accountant will not hesitate to do so. This sets the ground rules for the client to understand that the professional accountant will not tolerate non-compliance if it impacts on the public’s best interest. The accountant has a trained eye, and can determine if something seems untoward. Meticulous record-keeping It is critical for the professional accountant to meticulously document what he has done to address the non-compliance. This will act as proof that he adhered to the requirements and responsibilities set out in the new section of the code. It is advisable to document the nature of the matter, the results of discussions with a superior or, and where applicable, those charged with governance. It is important to document the response of the accountant’s superior, the courses of action taken by the professional accountant and the judgments made and the decisions that were taken. The International Ethics Standards Board for Accountants: https://www.saipa.co.za/wp-content/uploads/2017/01/2016-IESBA-Handbook.pdf ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants |
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