If There Is a Poor Public Perception of Disciplinary Processes, Is It Truly Serving the Public Interest? How ICAP Made a Good I&D System Great

Saira Shamsie | November 12, 2018 |

Effective leadership is putting first things first. Effective management is discipline, carrying it out. – Stephen R. Covey

The Institute of Chartered Accountants of Pakistan (ICAP) takes pride in its effective management and maintaining accountancy profession quality by ensuring proper implementation of the International Code of Ethics for Professional Accountants by its members and students. But we also faced a problem: although we had a robust disciplinary system defined under the Chartered Accountants Ordinance, if there is a poor public perception of the disciplinary process, what purpose does it truly serve? Rather than just continue to implement a critiqued system, ICAP determined it was time to take action.

Historically, ICAP’s investigation process and fact finding was carried out by the Investigation Committee with final adjudication by ICAP’s Council. The entire process, although lengthy, was robust, included Council members and independent lawyers, and was effective for several decades.

However, with the recent rise in importance and recognition of the profession’s role within the Pakistani economy, regulators, corporations and other stakeholders began to expect much more from the profession. If ICAP judges its own members, is the investigative and disciplinary system just? Additionally, the procedures faced criticism for a lack of transparency, inconsistent penalties, and lengthy process. Moreover, ICAP members were concerned for the profession’s reputation due to a lack of feedback, education, and awareness regarding commonly made mistakes.

Recognizing the significance of these issues, the ICAP Council committed to reform the process despite a number of obstacles. The foremost obstacle was that any amendment to the CA Ordinance required Parliament legislation, which is a long and cumbersome procedure and beyond the Council’s control. Instead of permitting the issue to stagnate, the ICAP Council devised a more creative, two-pronged strategy—addressing issues and implementing changes that were under Council’s control in the short term and simultaneously initiating the process for amendments in law for more substantive changes in the future.

The Changes

As part of its short-term endeavors to bring more transparency, impartiality and public scrutiny to the investigation process, the ICAP succeeded in implementing a number of changes over the course of 2015—2017.

  • The composition of the Investigation Committee was changed to increase independent members and bring it on par with the number of Council members on the Committee. External representation was also diversified, thereby achieving higher level of transparency and objectivity.
  • To increase quality, consistency and fairness of decisions and penalties, all past disciplinary/investigation decisions and information was transformed into an Investigation Manual through a detailed and exhaustive exercise.
  • As a part of an awareness, capacity building and advocacy campaign, the Investigation Committee began publishing an annual report of its activities. This report also provides information regarding the nature of offences and references the laws and/or regulations that should have been complied with. Furthermore, it also serves as an important tool for creating awareness amongst ICAP members on the investigation proceedings and process.
  • In order to improve timeframes, a new procedure was adopted whereby the reports/findings of the Investigation Committee are referred to the Council for approval through electronic circulation, thereby eliminating the need for a more formal presentation and report adoption during in-person Council meetings.

The Societal Impact

ICAP has proposed amendments to the CA Ordinance, which are now pending approval with the Government of Pakistan. The proposed amendments include establishing a Board of Discipline and Appellate Authority to ensure that the investigation and disciplines process meets international best practices and ensure ICAP fulfills IFAC’s membership requirements for investigation and discipline.

We are confident that advances made to date will help drive the necessary legislative changes. However, even in the interim, these reforms have brought more creditability, transparency and openness to one of the most vital aspects of the accountancy profession. Members are more aware of regulators’ issues and concerns and they know that if they face a disciplinary proceeding, it will be efficient, effective, consistent and one from which they can learn and improve. Moreover, the changes are valuable to the public, key stakeholders, and regulators—who walk away from any disciplinary matters with a better view of ICAP than when they started.

If you are interested in learning more about the ICAP’s I&D efforts to enhance transparency, please post a comment below or visit the ICAP’s website. Don’t forget to subscribe to receive updates from the IFAC Quality & Development Team, and let us know if your PAO has led an initiative related to improving investigative & disciplinary procedures in your jurisdiction—we would love to showcase your work in action!

Issues and Insights

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Saira Shamsie

Director Corporate, Legal & Membership Affairs, Institute of Chartered Accountants of Pakistan

Saira Shamsie serves as the Director Corporate, Legal & Membership Affairs, at the Institute of Chartered Accountants of Pakistan (ICAP), where she manages the Investigation & Discipline area. Previously, she worked in ICAP’s Technical Services department where she provided technical support to ICAP’s Accounting Standards Board on key projects such as Islamic Financial Accounting Standards, IFRS 17, Takaful, IFRS 9 and XBRL.

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