James Gaa is a Professor of Accounting at the University of Alberta (Canada) and has been a public member of International Ethics Standards Board for Accountants (IESBA, the Ethics Board) since 2010.

What made you interested in serving on the Ethics Board?

JG: I’ve been aware of the Ethics Board for a number of years. Their meetings are open to the public so I attended a meeting as an observer in the late ‘90s or so. Also as an academic—I teach accounting and ethics at the University of Alberta—I felt a responsibility to be engaged with the profession, which I’ve tried to do over the years. I’ve been involved with one of the member bodies in Canada and served as a member of its Board, and I was a member of the International Accounting Standards Committee, the predecessor of the International Accounting Standards Board, in the late ‘90s. So I’ve been involved with the profession for many years. Joining the Ethics Board was a natural progression. I also find the international and cross-cultural aspects of it really interesting.

What particular perspectives or experiences do you bring to the board as a public member?

JG: All members are obligated and agree to act in the public interest and not in the interest of any one segment of society. As an academic and public member, I’ve never worked as an accountant. That can be both a strength and a weakness, but it allows me to bring a different perspective to the board. Everyone is biased to some extent, so of course I bring mine as well. But, I hope it is a more disinterested point of view. I think that’s an important thing.

I’m trying to encourage the board to apply more of a research base to our standard-setting process. One of the limitations of the Board is resources, but if we can leverage members of the academic community to support our efforts by providing reviews of research or analyses, that would be very helpful to us. Increased interaction with the academic community is part of our strategy and work plan for the future, so it’s a visible and fairly prominent initiative of the board moving forward. I have had some discussions with organizations in the academic community to determine their interest. So far I have talked to several groups, and they are very interested, so I think it will gain some traction.

Since you became a member, how has your view of the Ethics Board and its work changed? Has serving on IESBA been what you expected?

JG: I think my basic view of the Board has not really changed, but it has developed. I’ve been impressed with how challenging the work is. It’s intellectually challenging, and the cultural differences that come to the Board is something I have come to appreciate even more. I had had experience with that through the International Accounting Standards Committee, but I think it’s fair to say that the cultural differences are more suppressed when you are dealing with accounting standards than when we’re talking about ethics.

I have also been very impressed with the other members of the Board. Their hard work and their abilities, their perceptions—it is a really impressive group that I’m privileged to be a member of.

A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. What does this mean to you?

JG: Part of it is what I was just saying about being a public member—that is, having sort of a disinterested, more neutral point of view and trying to bring that to the table. As a concept, the public interest is almost impossible to define. IFAC and the Ethics Board have tried. And there is much literature in the sociology profession that tries to define the public interest. I think it defies definition partly because it probably means a number of different things. But one thing it means is to try to separate out our deliberations from the private interests of specific sectors of the economy, occupations, industries, or companies. So to me, it means not favoring any one group or any one segment.

That’s a big challenge with international standards. Because there is so much diversity in the world of occupations and national interests, and cultural differences and so on, to somehow represent all of that in our setting of standards, and then, therefore, in the standards themselves, is a real challenge. One of the ways we address these differences is by basing the Code on principles, rather than rules, so that it can be applied in any jurisdiction, regardless of local regulation and custom.

For instance, the task force for Part C of the Code, dealing with professional accountants in business, is grappling with this in its work around inducements, gifts, and bribes. Clearly there are cultural differences about what is acceptable behavior from one place to the next. Gifts are especially challenging, for example, what is a gift, and what does giving a gift or receiving a gift imply about peoples’ relationships, and so on? And, how can we factor that diversity into writing a standard? Or do we?

At our meeting in October, we finalized an Exposure Draft that will be looking at two issues: fair and honest reporting and intentional manipulation of information, and pressure imposed on professional accountants and imposed by them on others to breach the fundamental principles of the Code. The Exposure Draft will be open for comment from mid-November 2014 at the board’s website—www.ethicsboard.org. We welcome public comment from all interested individuals and organizations.

What pressures or challenges do accounting professionals face today in terms of acting ethically?

JG: I think there is more demand on people’s time and attention. I think that’s important, because assessing the ethical dimension of a person’s behavior requires being reflective and thoughtful. And to the extent time demands are higher, it could restrict people’s ability to consider their situation, and assess aspects of what is going on with their job.

Another major challenge is the increase in regulatory oversight, which presents challenges and pressures, but is a fact of life. Clearly, there is a social demand for more regulation of business and professions. And that’s not going to change anytime soon, I don’t think.

But back to this issue of bribes and corruption, there has been, in the last few years, increasing attention to this kind of thing. The laws are changing around the world about what kinds of payments or inducements can be given without violating laws. So the social norms around the world on that particular issue are changing rapidly.

To what extent do you think that the board’s work will be influenced by the laws and the regulations and the pace at which they are changing?

JG: That’s a really good question because an ethics code is more than just “don’t do anything illegal,” because then our Code could be very short. It could be one sentence long. People generally recognize that a code of ethics is different from a legal code. The Code holds accountants to a higher standard than the legal standard in their jurisdiction. But with the laws and regulations changing over time, how we respond to or even lead the thinking on those issues is very important. As the laws change, the Code has to reflect, and I think will reflect, the current, generally accepted world view on the issue.

What do you see as the key factors influencing the development of global ethics standards in the future?

JG: I think one of the factors is more attention and interest in regulatory oversight and legal requirements. That impacts the Code, of course, and the Ethics Board. It also increases our visibility and the importance of demonstrating our commitment to the public interest.

About the “We Are IESBA” Series
The purpose of this series is to bring the work of the IESBA to life, adding context and color to the people who carry out the activity of ethics standard setting for the international accountancy profession. The series aims to further increase the transparency of the board’s activities. Transparency is written into the board’s due process, and indeed, into its operations. The IESBA’s agenda papers and meetings are public (you can register to attend and observe any meeting, or listen to meetings and summaries via our iTunes channel). To learn more about the board, follow along via Twitter and email: Follow @Ethics_Board and subscribe to IESBA eNews. For additional developments related to ethics and other areas of the profession, subscribe to topics from the Global Knowledge Gateway.

Caroline Gardner is the Auditor General for Scotland and has been a public member of International Ethics Standards Board for Accountants (IESBA, the Ethics Board) since 2010.

What made you interested in serving on the Ethics Board?

CG: I was serving as the president of CIPFA [The Chartered Institute of Public Finance and Accountants], in 2006 when we adopted the IESBA’s Code of Ethics for Professional Accountants [the Code]. As president, I had the opportunity to lead our adoption of the code and to talk with many of our members about why ethics matters. I’ve had a particular interest in ethics since then.

What particular perspectives or experiences do you bring to the board as a public member?

CG: As a public member, I’m even more aware of the importance of making sure the board’s decisions, and the implications of the board’s decisions, truly further the public interest as much as possible. Because I’ve worked in public service for most of my career and I currently serve as Auditor General for Scotland, I have a very clear sense of the importance of ethics in government and public services. I understand the way decisions are made and that the perception of good ethical conduct is very important. I try to bring that perspective, keeping that sense of the public interest first and foremost, into my work both with the board and as Auditor General.

Since you became a member, how has your view of the Ethics Board and its work changed? Has serving on IESBA been what you expected?

CG: I’d highlight two changes since joining the board in 2010. First of all, the aftermath of the global financial crisis, and various other corporate failures, has heightened my sense of the importance of ethics. What they show is the damage that can be done, not just to the investors in those companies, but more widely.

Second, it’s become clear to me that the public interest isn’t a straightforward thing. Good ethical conduct is often very complex and can sometimes require difficult tradeoffs. For example, I am currently chairing the task force that is addressing what professional accountants should do if they come across a suspected illegal act [now called non-compliance with laws and regulations, or NOCLAR]. In these situations, professional accountants are put in a very difficult position—trying to balance the fundamental principles, particularly confidentiality in this case, with serving the wider public interest by reporting a potentially illegal act—and it’s not always clear which action is the right one. This project has shown me that professional accountants are often faced with very complex decisions, which they do not take lightly, and they need support in making the best decision they can.

A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. What does this mean to you?

CG: As professional accountants we need to recognize that we are required to really think through the consequences of our professional conduct and decisions, not just for ourselves and our own financial interests or those of our colleagues or employer, but much more widely than that. We have to consider who else might be affected by our decisions. And, depending on what role we play as professional accountants that group may vary. It could well include the investing public, the suppliers and customers of the companies that we work for, or the wider, general public when we talk about accountants in health and safety or employment practice. Holding that very broad frame of reference in mind, and considering the effects our actions will have, is very much a part of the challenge of what it means to act in the public interest. It’s also a key part of what makes us valuable as a profession—to be trusted to take that wider perspective, and not just think about our own immediate personal or professional interests.

What pressures or challenges do accounting professionals face today in terms of acting ethically?

CG: I think the real challenges come from two pervasive factors that we all have to deal with: First, the world that we’re operating in continues to become more and more complex, and we need to look at some of the complex judgments and strategic decisions that auditors and professional accountants have to make every day. Technology and environmental considerations are some of the drivers of this complexity that are making it more difficult to ensure that we’re acting ethically. For instance, we might be able to make profits from manufacturing goods in the short term, but they will have a damaging effect on the environment in the long term, so emissions and overall carbon footprint are the sort of things we have to take into consideration, in addition to the financial.

Second, I think that in the wake of the financial crisis, the public and regulatory expectations of the profession are continuing to increase. Things that were considered acceptable in the past are no longer seen as acceptable. And when things go wrong, people are more and more likely to ask questions about what the professional accountant or the auditor is doing. I think this raises the stakes for acting ethically at all times. At the same time as I said before, our complex environment means that ethical dilemmas are becoming more prevalent, so making the most ethical decision is becoming more challenging.

What do you see as the key factors influencing the development of global ethics standards in the future?

CG: I think the biggest challenge for us is to first of all not just respond to but lead the way in meeting public expectations for where the ethics of the profession ought to be—that expectation for greater transparency and a greater willingness to put personal/professional interests to one side in the name of the public interest, and to do that in a world where there is still a great deal of difference between the local legislative, regulatory, and cultural environments.

Again, if I think about the project that I’m working on [NOCLAR], there are huge differences from country to country. Some jurisdictions are already very clear on the requirement to report breaches of laws and regulations to the appropriate authority, and it’s very straightforward in that sort of environment. But in other jurisdictions where the laws are not clear on this issue or where people don’t have confidence that the existing laws will work properly or that whistleblowers will be properly protected, it’s much more difficult for the board to play its part.

So I think the challenge is seeing the Code as part of a wider system of laws and regulations, and developing it in a way that is really leading expectations of ethical conduct while recognizing that it can’t be a substitute for an effective legal and regulatory framework, good judicial processes, and a culture where ethical behavior is expected. It’s a fine balance for us to get right.

Earlier this year, we had three very successful global roundtables on non-compliance with laws and regulations to get additional input from various key stakeholders, such as regulatory bodies like the IOSCO, the investing community, and the international corporate governance network. This sort of outreach is critical to helping us understand the various environments and may set a new precedent for our standard-setting activity in the future.

About the “We Are IESBA” Series
The purpose of this series is to bring the work of the IESBA to life, adding context and color to the people who carry out the activity of ethics standard setting for the international accountancy profession. The series aims to further increase the transparency of the board’s activities. Transparency is written into the board’s due process, and indeed, into its operations. The IESBA’s agenda papers and meetings are public (you can register to attend and observe any meeting, or listen to meetings and summaries via our iTunes channel). To learn more about the board, follow along via Twitter and email: Follow @Ethics_Board and subscribe to IESBA eNews. For additional developments related to ethics and other areas of the profession, subscribe to topics from the Global Knowledge Gateway.

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) recently featured two key international accounting personalities, Fayez Choudhury, the Chief Executive Officer of the International Federation of Accountants (IFAC), and Rob Ward, Head of Leadership & Advocacy of the Institute of Chartered Accountants of Australia, at a CFO Forum held recently in Colombo, which focused on the complex and constantly demanding role of today’s Chief Financial Officer. 

Following are excerpts of the speeches: 

International Federation of Accountants^® (IFAC^®) CEO Fayez Choudhury

Thank you very much. Although I’m from Bangladesh, it’s the first time I’ve been in Colombo. It’s a great pleasure to be here. I’m particularly interested in talking about this topic to you today because I’m completely ‘knocked out’, as they say in America, at the buzz that seems to be going on in Colombo.

There seems to be so much development, there seems to be so much progress, so much vibrancy… so I think if you believe, as I do, that the private sector is really the engine of economic growth, then certainly, there’s a lot going on in Sri Lanka at the moment and people like yourselves are extremely important to make sure that development takes place in a very controlled, strategic and managed way.

The big picture

Let’s put the role of the CFO in the context of what’s been going on globally, because there’s no avoiding globalisation. Everyone is global now. You either operate globally, or you supply globally… you compete with people in the same industry around the world… and you look for comparative advantage, whether it’s wage arbitrage, government incentives, or whatever. We are all global citizens now. There’s no such thing as a local market.

We still have corporate failures going on, unfortunately all over the world. It’s the bigger ones in America and Europe that get the attention, but increasingly we are seeing global failures going on in very unexpected places—like the Bitcoin disaster. But the corporate failures remain a norm and that will happen continuously—and when they happen, depending on the market, they can threaten global stability.

We have also obviously come out of the period of the financial crisis, and I think fortunately, that seems to be behind us, but other global economic threats remain. I think if you look at the recent reports from the IMF, World Bank, etc., they point to a macro level relatively healthy picture. And there’s economic growth that’s going to occur in most parts of the world—in some regions higher than others—Asia obviously continues to grow; Africa continues to grow from a fairly low base; Europe is relatively stagnant; and the US is showing some signs of economic recovery.

I think one trend is increasing economic disparity. And that’s potentially dangerous going forward because it threatens social stability. I don’t know how many of you have heard of the French writer Thomas Picketty. He has written a book which is, I’m told, 543 pages, I wouldn’t recommend that you take it and try reading it in a short flight, but I think it’s the best seller now in Europe and in America. But it’s really challenging whether society can survive with this kind of global economic disparity, with the “haves” getting more and the “have knots” getting less, and the aging populations, demographics changing, increased urbanisation, more and more people going to cities, the prospect of mega cities, imposing different demands on infrastructure, on the distribution of societal support systems like education, healthcare, etc.

Although we are out of the economic crisis, arguably threats always remain. Where there are governments that are responsive to those threats, unfortunately the responses are often regulation. And where they are not responsive to those threats, there is usually inaction. So I think the global CFOs of today—and as I say we are all global citizens now—have to be cognisant of some of these trends, and as they plan and help steer their organisations into the future, they should understand that it’s not necessarily a stable and perfect world. 

But having said all that, corporations have to respond to that external environment. But at the same time there’s no getting around the fact that you also have to improve internal organisational performance, because that’s what defines one important element of your comparative advantage. You can try and read the tea leaves of what’s happening in the global markets and position your organisation accordingly. But unless you are geared to having your internal organisational performance live up to those expectations, to that demand, you won’t really be able to avail your full potential.

So one key requirement of an organisation is transparent, relevant reporting, both internally to be able to manage and assess your performance, but also externally to create the transparency and the trust in the reliability and integrity of your numbers so that your investors trust you, the capital markets trust you, your suppliers trust you.

That’s really key for the sustainable generation of wealth within the business world. But what’s often ignored is the public sector, because the private sector can operate within a dysfunctional public sector for only so long. There’s a limit to growth that’s imposed by a dysfunctional public sector. So increasingly the public sector also has to create an environment where they are transparent, where they manage citizens’ finances transparently, reliably and with accountability and create a stable macro-economic environment where corporations can flourish.

And of course responsible entrepreneurial business behaviour has to predominate, whether you are a public or a private sector organisation, because without those ethical principals you will eventually fail.

So how do we improve organisational performance within a company? I think increasingly good governance is being seen as key. You can have the right product, you can have great distribution, you can have great manufacturing, but if you don’t have the right governance structures that make sure that everything works in the right context, you will be at risk. You also need better and more integrated management.

Companies of today, as you well know, are complex. And unless you get that integration where you have cross-cutting themes and risk management and effective control procedures and systematic and consistent reporting practices, and an eye on sustainability, you are not going to get the operational performance management that is a pre-condition of your competitive success.

The changing CFO role

Within that context, the CFO role is stretched and scrutinised. Rarely do you hear about the Chief Marketing Officer or the Chief Human Resources Officer or the Chief Engineering Officer—you don’t read much about them in the press. You do read a lot about the CFOs. Arguably sometimes you read more about the CFOs than the CEOs. Certainly as you all know, your performance and your work is very carefully scrutinised.

You are really stretched because there are two competing demands. One as stewards and one as business partners and I’ll come back to this at the end and pose a provocative question to you. But for the purpose of this slide you are stewards because you support effective governance and compliance and control and business ethics. You are custodians of the reputation of the financial integrity of an organisation.

But at the same time, you are also a business partner. You have to provide the CEO and the Board with proactive leadership, direction, decision making, contribution to strategic directions—you have to finance growth, diversification, acquisitions, stability. You are a key person in the organisation. But at the same time, you have to make sure that you are a steward of the corporation’s resources.

CFOs have to manage the collaborative relationships and potential conflicts as trusted proactive partners, but they also need to own and manage the safeguards that are built into the organisation design, reporting structures, and required professional development.

So the old role of the CFO was as the number cruncher. Keep the books, make sure that the financial transactions are properly processed, do the right projections, and we are happy. But the new role puts the premium on issues such as ethical leadership and business integrity. Many people say that the breakdown in trust is probably the single most damaging thing for a company’s long term success.

I don’t know how things are for listed companies in the Sri Lankan context, but we all know in the major capital markets, it’s a major issue when there’s such a focus on quarterly earnings, the bottom line, bonus pay and incentives for the staff… How do you balance short-term concerns and pressures with the long-term vision, success, and managed, sustainable growth? How do you balance fulfilling the stewardship responsibilities and sharing the strategic leadership with CEO and senior management? There is a balancing act there.

If you are trying to make sure that you have the right risk management tools and techniques, the right controls—and at the same time you are trying to drive growth and entrepreneurship. There’s a tension there that has to be balanced. That can be very difficult sometimes. You have to ensure that the finance accounting function supports the business… accounting is based on certain principles, and the accountants in the room will know you can’t deviate from those. At the same time you have to provide the business with the right sort of numbers to enable their decision making.

Non-accountants will sometimes make suggestions… ‘I don’t like the way you are valuing this,’ ‘I don’t like the accounting treatment of these project expenses.’ So you have to make sure you are fulfilling your statutory requirements in accordance with sound accounting principles, and at the same time meeting the principles of business in providing reliable management information.

You have to drive and manage innovation. Again, critical for success, and not only for success, but critical for survival. But sometimes in conflict with stability, risk management and effective controls. Again a balance to be maintained that is sometimes difficult. And you have to engage and communicate effectively, internally and externally. Very often, in my experience, the CFO is actually looked at as a more reliable source than a CEO. People look to them as the stewards of the organisation. People look to them for what they are projecting in terms of the financial situation of an organisation. And once the CFO loses that trust with the stakeholders, that CFO becomes far less effective.

IFAC discussion paper

So just a little plug for a publication that IFAC has recently issued. It’s a discussion paper on the role of the CFO and its being prepared by our professional accountants in the Business Committee which comprises 18 senior experts from around the world. It has had inputs from accounting bodies and CFOs and it’s had direct endorsement by many CFOs and it’s currently open for public comment. So I would urge you to go on the IFAC website, have a look at it and I think you’ll find it interesting, but we would also welcome your comments because I think it would be enriched by the more perspectives that we can get. 

Some of the things that are brought out in that report are that the CFO needs to be an effective organisation leader and a key member of the senior management. They need to balance the responsibilities of stewardship with business partnership. They need to act as the integrator and navigator for the organisation. It all comes together in the CFO’s office. There needs to be an effective leader of the finance and accounting function. And they need to bring professional qualities to the role and the organisation.

Accountants are trained with a certain code of conduct with certain ethical requirements, with a very rigorous approach to what they can and cannot do and subject to investigation and disciplinary requirements. That’s the discipline that doesn’t exist in any other functional area in any organisation. So a CFO really has to bring that mindset and bring that leadership to an organisation of what constitutes ethical behaviour, what constitutes discipline and principled behaviour.

Professional accountants bring some very valuable talents to the CFO role. They are trained to exercise professional judgment as an auditor, strong ethical leadership. If you want to call yourselves a CPA or whatever the designation is, you are required to comply with ethical requirements of your institute. And you obviously have deep financial acumen and a distinctive way of thinking, which again is drummed into you and which is very, very relevant and useful to the CFO.

And a little plug for IFAC. We have recently started something called the Global Knowledge Gateway, where we provide a global platform for topics of interest, not just to accountants but more broadly to finance professionals. We organise it under a number of topical areas and we provide links under each topical area to the worldwide set of resources that are available from accounting bodies and other authoritative sources. We also have viewpoints where leading figures in finance, regulation of accounting, etc., provide insights on certain topics and we invite discussion and dialogue around those issues.

I would strongly urge you to visit the Gateway, and I think you will find it interesting and a good resource, not just for yourselves but also for the finance staff within your own organisations to use. It is a free resource, you don’t have to be a member of an accounting body to access it and I think you will find it very helpful.

And let me just conclude, if I may, by being provocative because I think it’s so interesting to do that. Let me give a scenario, which a former boss of mine painted quite vividly—his words were “the currently defined role of the CFO is toxic. It is unsustainable, and it does more harm than good.” He says that trying to balance the roles of stewardship and the roles of business partner are fundamentally incompatible. That the finance function in terms of the controllership function, the integrity of financial transactions, the strategic reporting for a company should be an independent function, which has not only a direct link to the CEO but also a direct link to the audit committee.

And the finance official who guides the CEO and the board on driving the business, managing the business, growing the business should be separated from the controllership role. So in many ways that’s a reversion back to the model of 20, 30 years ago, but when you look at some of the major corporate failures that occurred and if you look at the role of this CFO in many of those cases, the judgment was bad because the tensions could not be managed.

Are we putting far too much pressure on a CFO? Because the CFO is supposed to be balancing the stewardship role and driving the business role. But he or she has got the CEO looking for a certain set of results, has the board looking for a certain set of results, has investors in the short term looking for a certain set of results and has his or her own pay check looking for a certain set of results. And when you throw in an incentive pay, which can be significant multiples of base pay and depend on the performance of the organisation, which often happens in Europe and North America, are you really making the situation much worse?

I think that’s an interesting discussion and in the course of the Q&A, maybe some of you can comment on that. It’s non-traditional thinking and it would be interesting to explore that.

Anyway, I hope you found these insights and thoughts helpful and I look forward to Rob’s comments and thereafter to a dialogue around this topic.

Thank you.

Institute of Chartered Accountants of Australia Head of Leadership & Advocacy Rob Ward

This is my first visit to Sri Lanka. The hospitality has been marvellous and the city is very impressive and it caused me to reflect on the debate in Australia at the moment which is reassessing its budget and how infrastructure is always considered a good indicator of a thriving economy. The renewal in infrastructure and the way the city presents itself it is always very encouraging.

Congratulations to all of you and thank you for the opportunity to speak today along with Fayez on this topic. Fayez and I have a long history going back. His presentation was excellent and there’s a lot of experience in there. What I’m going to do is, make you do a little bit of work privately.  I’d like you to think about what does Fayez’s presentation mean for you personally?

Some of the words Fayez used are quite overwhelming words, if you take them one by one, for example, stewardship, if you take the role seriously, you are the steward of an organisation. Transparency, meeting and competing goals, and being transparent about it is not easy. Business partner, integrated management, what do they mean?
Collaborative relationships in a competing world, building a network internally and externally, on relationships that make a difference is key. How do you do that when people are competing for their own survival? What do you do about that? And safeguards, how do you make sure you protect your organisation and how do you protect yourself?

Now he used another two words. Bean counter. So it’s quite interesting considering my background as described in the introduction. I have started many speeches with “I’m an auditor and I’m exciting.” I have also had a background, 40 years in the profession and responsible for over7,000 auditors in 148 countries, I’ve had a fantastic time. I’ve seen great growth stories such as the emergence of Asia but also stories of arrests and auditors being followed by intelligence agencies, and people call, being an auditor boring! I can assure you it’s not boring to be in a practice like that and it’s not boring being an auditor.

So I’ve had the great privilege of being a managing director, an auditor, a chief financial officer, managing partner. We all share a broad experience and I’d like to draw upon that and that to give you a secret to success. All organisations that succeed, every organisation that I see succeed, has a team of three people that run it. The Chair of the Board charged with governance. The second person in the partnership is the CEO. And person No. 3 is “Another”. The CEO needs Another, and so does the Chair.

Who is that Another in your organisation?  Just think about that for a second. That really is Fayez’s point: Are you Another? If you’re not, do you want to be? Stewardship is part of that role, because it’s part of what you do, transparency that brings to life the dreams of the organisation that the CEO is probably trying to bring to life. They can’t do it without one another.

You know the work you do as the CFO, accounting standards, auditing, taxation law, enterprise wide systems, HR staff, and marketing, all of that, if you try to think of that as just all the things you’ve got to do.

Five steps to success 

The overarching secret is the five-step process of bringing to life the governance structure that Fayez mentioned. I am going to go through the five steps, give you an example of how to bring those five steps to life, and how you can apply it in your organisation.

• Step No. 1: What are the principles that will guide our organisation forward? What are the guiding principles that will lead our organisation to success?
• Step No. 2: Having established those principles, have you communicated them to every person in the organisation? So your team knows where you are going and how to lead your organisation.
• Step No. 3: How you are going to train your people in what those principles mean? Not only how they now understand what you are doing, but also how you are going to teach them to do it. I’ll come back to that example in a second.
• Step No. 4: How you are going to provide assurance that the substance behind those principles is working?
• Step No. 5: How you are going to provide insight back to the board on how you are going against the principles. So it’s a loop. Can you see the loop? Start at 1, finish at 5 and that’s insight back to the board on those principles.

So let’s have a look at a couple of principles. A clear principle. We have a clear vision where we want to be and a plan to get there. That’s a principle. Another principle. We treat our people with respect. A third principle: We respect the laws of the land in which we operate – for example, It is ultimately up to your organisation to come up with the principles for your organisation. You’ve got to come up with the guiding principles for your organisation.

Another principle: We consider all of our stakeholders in ensuring our mutual success.

That’s another principle. So let me take any one of those. We have a clear system of financial control and stewardship of the shareholders’ funds. Let’s take that one as an example. So we have a system of control and stewardship of those funds. You do this one actually every day.

How do you communicate that principle to all the people in the organisation? How do you actually show them how that works, right through to the person at reception? How do you train them in their responsibility to do that? Are you certain that all of your appropriate people are trained properly? How do you provide assurance, not in a negative way, but in a positive way, that the funds of the company are well and truly subjected to a stewardship and control and reported correctly? And what insight you provide back to the board. Everybody in this room probably does that every month.

So let’s consider another one. We treat people with respect. It’s a bit harder. How do you communicate what your code of conduct is? How do you train people in the Code of Conduct, the way they treat each other and how they treat their customers. What assurance do you get as to how your people are treated well? And what insight from this step is brought back to the Board on a regular basis about that principle?

We have a clear, strategic direction to maximise shareholder value. And that’s another principle. How do you get that message out to everyone in your organisation? How do you train them and what it means for their daily job? Had you trained them on that? Do you have system of assurance that all the goals of the business plan are actually on track? And what insight are they giving back to the board. So I am sure you could imagine, if you shaped and adopted nine key guiding principles, you could put the organisation on a path that would bring your organisation to readiness for a bright and happy life.

And I don’t think there’s a better person in the organisation than the CFO to be ‘Another’ and lead that change.

The role of CFO at this time and in business is becoming more sophisticated, and the demand upon all of us is great. The role of the CFO is an excellent one.  All you have to do is step up to the challenge.

Thank you very much, everyone.
 

This article was reproduced with permission and first published in the Daily FT, Sri Lanka on August 1, 2014.

In an exclusive interview, James Sylph, IFAC Executive Director, Professional Standards & External Relations, speaks about the essential role of ethics in the accounting profession.

This article was first published in the IS Chartered Accountant, July 2014.  Reproduced with permission from the Institute of Singapore Chartered Accountants.

James Sylph is the keynote speaker at the Ethics Forum on July 30, at the Singapore Accountancy Convention 2014. The Convention themed “Staying Ahead of the Curve”, is organised by the Institute of Singapore Chartered Accountants from July 30 to August 1.

In an exclusive interview, Professor Arnold Schilder, Chairman, International Auditing and Assurance Standards Board, speaks about the essential role of audit in the accounting profession.

This article was first published in the IS Chartered Accountant, May 2014.  Reproduced with permission from the Institute of Singapore Chartered Accountants (ISCA).

Part I explains the rationale and underlying theories that support the switch from hourly to value pricing.

Part II discusses early challenges and practical steps to take when beginning to transition your accounting practice to a pricing model based on value. 

Part III outlines the 8 steps an accounting practice or firm should take to implement value pricing. Accompanying exhibits include practical checklists and forms.

Articles by Ronald J. Baker. This three-part series of articles were excerpted, and adapted, from his latest book, Implementing Value Pricing: A Radical Business Model for Professional Firms, published by John Wiley & Sons, Inc., 2011

The Accountant's Carlos Martin Tornero and Vincent Huck interview industry leaders about key issues facing the profession, encompassing transparency, public sector financial management reform, MINTs, 'hot' Southeast Asia, management accounting and the ongoing regulation debate. 

The World Survey starts this year in a Central London café, where we met Warren Allen, currently presiding over the International Federation of Accountants (IFAC). As IFAC president, Allen is globetrotting the world, London being a brief stop between meetings in New York and Australia.

"This is an exciting profession. We quote 2.5 million professional accountants under IFAC membership and there are not enough of us," Allen says, taking a sip of his cappuccino.

IFAC membership could expand this year with new countries, six candidates from around the world whose identity Allen would not reveal at this stage. The accountancy profession has attained global status, and what affects international mainstream economics affects accountants too.

Accountants, especially in the West, have felt the impact of the economic crisis in the past few years. At times it looked like they had lost public trust and that their relevance in the global economy was put into question. But as the tide of the economic recession recedes and economic recovery starts to be a reality again, accountants look at playing a major role in the economy and regaining public confidence.

To read this article in its entirety, subscribe to The Accountant by clicking here.

Cómo los Contadores Profesionales en los Negocios pueden mejorar el entendimiento del desempeño organizacional para los terceros interesados

Muchos líderes organizacionales consideran que las medidas desarrolladas bajo los principios de contabilidad generalmente aceptados (PCGA) por lo regular no capturan en su totalidad el desempeño actual de una organización o sus perspectivas futuras. Para llenar este vacío, frecuentemente proporcionan medidas financieras adicionales que no son específicamente definidas por las normas contables: medidas financieras complementarias.

Muchas de estas medidas son ampliamente utilizadas tanto en la información interna como externa, por ejemplo, la utilidad antes de intereses, impuestos, depreciación y amortización (EBITDA, por sus siglas en inglés); la utilidad subyacente (Underlying Profit); y el flujo de efectivo disponible  (Free Cash Flow). Sin embargo, algunos comentaristas consideran que las organizaciones utilizan dichas medidas en su información externa para ocultar un bajo desempeño.

Para ayudar a los contadores profesionales a abordar esta cuestión y desarrollar e informar medidas que sean útiles, el Comité de los Contadores Profesionales en los Negocios (PAIB, por sus siglas en inglés) de la Federación Internacional de Contadores (IFAC, por sus siglas en inglés) ha emitido una propuesta de guía, Developing and Reporting Supplementary Financial Measures (Desarrollo  e Información de Medidas Financieras Complementarias).

Esta propuesta de guía ofrece principios relativos a las cualidades que una medida debería tener y las revelaciones que debieran acompañarla si fuera a ser informada externamente. La guía está dirigida a todas las organizaciones que quieran utilizar medidas financieras complementarias, sin importar su tamaño o estructura, si es privada o pública. La guía también puede ser aplicada a medidas no financieras, tales como las emisiones de gases tipo invernadero o la producción equivalente de barriles de petróleo.

Consideraciones para el desarrollo e información

Con base en las características cualitativas de utilidad de la información financiera, [1] la guía recomienda que los contadores profesionales consideren ciertos atributos al desarrollar e informar medidas financieras complementarias. Una medida financiera complementaria debe ser:

• Relevante—utilizada por la administración para evaluar el desempeño o empleada por usuarios conocedores de la información externa.
• Completa—proporciona toda la información necesaria para que un usuario entienda  el concepto que se describe.
• Neutral—no tendencioso, ponderado o manipulado para obtener un resultado deseado.
• Transparente—se alinea con sus componentes y se acompaña por una explicación suficiente para evitar en lo posible que esté libre de incertidumbre y error en la estimación.
• Entendible y verificable—permite que los usuarios conocedores entiendan su construcción y limitaciones y concluyan que informa verazmente lo que pretende describir.
• Comparable—entre las entidades en la misma industria y entre periodos.
• Oportuna—informada al mismo tiempo que los estados financieros correspondientes.

 Consejos de revelación

En adición a estos atributos, la guía proporciona ciertos consejos de revelación de las medidas financieras complementarias.

• Para evitar confusión, las medidas financieras complementarias deben ser claramente definidas. Adicionalmente, el propósito de una medida debe ser revelado. Más aún, las medidas financieras complementarias deben ser etiquetadas como tales y estar claramente diferenciadas de las medidas de los PCGA.
• Cuando cambien los componentes de una medida, o cambien sus cálculos, se debe explicar el motivo del cambio y deben reformularse las cantidades comparables con las nuevas bases de cálculo.
• Una medida financiera complementaria debe incluir una conciliación cuantitativa con la medida más directamente comparable que fue informada como medida bajo los PCGA.
• Una medida financiera complementaria debe ser presentada con la suficiente información que permita a un usuario entender sus componentes  y cuidar que la medida sea completa, neutral, y libre de error.
• Una medida financiera complementaria reportada externamente debe ser presentada de tal manera que complemente pero no ensombrezca las medidas bajo los PCGA de una organización.

Dada la ausencia de definiciones de medidas financieras complementarias, muchas jurisdicciones regulan su uso y revelación al informarse externamente. Consecuentemente, la propuesta de guía debe ser considerada a la luz de las regulaciones en la jurisdicción particular en donde sea aplicada.

La propuesta de guía incluye también una lista limitada de recursos relevantes de IFAC, sus organismos miembros, y otras organizaciones relevantes.

Cómo comentar

El Comité de PAIB invita a todos los terceros interesados a comentar sobre la propuesta de guía; los comentarios se requieren antes del 26 de mayo de 2014.

Sobre las Guías de Buena Prácticas Internacionales
Las Guías de Buenas Prácticas Internacionales (GBPI) emitidas por el Comité de PAIB cubren áreas de importancia internacional y estratégica en las cuales probablemente se ven involucrados  los contadores profesionales. Al emitir guías con base en principios, IFAC busca fortalecer un enfoque común y consistente en aquellos aspectos del trabajo de los contadores profesionales en los negocios no cubiertos por normas internacionales. IFAC busca identificar con claridad los principios que sean generalmente aceptados internacionalmente y aplicables a organizaciones de todos los tamaños en el comercio, la industria, la educación, y los sectores públicos y no lucrativos. Las guías emitidas previamente están disponibles en el sitio web de IFAC (IFAC website), que incluyen el prefacio a las Guías de Buenas Prácticas internacionales (Preface to IFAC’s International Good Practice Guidance).

Sobre el Comité de PAIB
El Comité de PAIB (PAIB Committee) sirve a los organismos miembros de IFAC y a los contadores ´profesionales a nivel mundial quienes trabajan en el comercio, la industria, los Servicios financieros, la educación, y los sectores públicos y no lucrativos. Su propósito es promover  y contribuir a valorar a los contadores profesionales en los negocios al crear conciencia de las responsabilidades importantes que desempeñan los contadores profesionales, apoyando a los organismos miembros a mejorar la competencia de sus miembros, y facilitando la comunicación y el intercambio de buenas prácticas e ideas.

Sobre IFAC 
IFAC  es la organización global de la profesión de la contaduría que se dedica a server al interés público mediante el fortalecimiento de la profesión y contribuyendo al desarrollo de economías internacionales sólidas. IFAC está constituida por 179 miembros y asociados en 130 países y jurisdicciones, representando aproximadamente a 2.5 millones de contadores en la práctica pública, la educación, el Servicio gubernamental, la industria y el comercio.

Traducción de Raúl González Lima, C.P.C. y P.C.F., miembro del Colegio de Contadores Públicos de México y del Instituto Mexicano de Contadores Públicos. Miembro del Comité de Contadores Profesionales en los Negocios de IFAC.

Translated by the Instituto Nacional de Contadores Públicos (Colombia).

Los contadores profesionales en empresas son usualmente considerados como asesores de negocios confiables. Esta relación surge de su amplia y significativa experiencia, combinada con un conocimiento detallado de los negocios de sus clientes, lo cual en gran parte se obtiene de los encargos de aseguramiento realizados en los estados financieros de sus clientes. Los contadores profesionales se encuentran en una posición única para agregar valor ya que pueden potenciar la credibilidad de los estados financieros de sus clientes y proporcionarles asesoría de negocios personalizada.

El Consejo de Normas Internacionales de Auditoría y Aseguramiento (IAASB) ha emitido el documento Estándar Internacional de Encargos de Revisión (ISRE) 2400 (revisado), Encargos de revisión de estados financieros históricos,, el cual se encuentra vigente para los periodos que finalizaron en o después de diciembre 31, 2013. Los encargos de revisión proporcionan una forma limitada de aseguramiento sobre los estados financieros históricos y pueden ser una alternativa rentable y de valor agregado cuando no se requiere una auditoría.

Agregando valor rentable para los clientes

La revisión, la cual consiste principalmente en investigación y análisis, se basa en el entendimiento del contador profesional frente a la entidad y su entorno y el marco de información financiera aplicable, según el cual son preparados los estados financieros. Este entendimiento incluye factores relevantes industriales, regulatorios y demás factores externos; la estructura de las operaciones de la entidad, la propiedad y el gobierno; y sus sistemas y registros contables. El contador profesional utiliza este conocimiento para diseñar y realizar procedimientos de investigación y análisis en rubros materiales en los estados financieros y rubros donde es probable que surjan errores materiales. Durante el encargo, el profesional desarrolla un entendimiento significativo del cliente y su negocio, lo que le otorga una excelente oportunidad de ofrecer valor adicional al cliente a través de la provisión de una asesoría personalizada.

Los profesionales pueden proporcionar servicios de revisión de manera más eficiente al componer el grupo de auditoría de profesionales con habilidades y técnicas de aseguramiento, acudiendo a los mismos miembros y utilizando la tecnología para automatizar los mecanismos de la revisión, donde sea posible. Dado que gran parte de la revisión consiste en una comunicación efectiva con los clientes, es preferible realizar una proporción significativa del trabajo en las oficinas del cliente.

Agregando un nivel considerable de aseguramiento a los estados financieros

Según el ISRE 2400 (revisado), el contrato de revisión no es únicamente para que los profesionales obtengan un conocimiento de sus clientes a través de preguntas y análisis; el contrato requiere que el contador vaya más allá y obtenga evidencia adicional si se determina que puede existir un error material en los estados financieros.  Se requieren igualmente procedimientos adicionales cuando surgen más dudas, por ejemplo si las transacciones de partes relacionadas se categorizan fuera del curso normal del negocio, sospechas de fraude o no cumplimiento con las leyes o regulaciones, o dudas sobre la capacidad de la entidad de continuar como un negocio en marcha. Este esfuerzo adicional permite lograr el nivel significativo y valioso de aseguramiento indicado por la conclusión de revisión.

Bajo el ISRE 2400 (revisado), el profesional debe cumplir con los requerimientos éticos relevantes, incluyendo aquellos relacionados con la independencia en el Código de ética para contadores profesionales del Consejo de Normas Internacionales de Ética para Contadores (Código IESBA), o los requerimientos nacionales equivalentes que son por lo menos igual de restrictivos. El estándar de revisión requiere igualmente que los contadores profesionales ejerzan el juicio profesional y sean escépticos a lo largo del contrato.

Beneficios para todas las partes involucradas

En resumen, existen beneficios para todas las partes involucradas en un contrato de revisión del ISRE 2400 (revisado). Los profesionales obtendrán la base de conocimiento que les permitirá agregar valor a los negocios de sus clientes, expresando simultáneamente las conclusiones de aseguramiento necesarias en los estados financieros anuales. Los clientes y demás usuarios de los estados financieros contarán con un nivel significativo de aseguramiento proporcionado por un contador profesional objetivo e independiente.

Una guía de revisiones para contadores profesionales y organismos miembros de la IFAC

La guía más reciente del Comité SMP de la IFAC, la Guía de contratos de revisión, tiene como objetivo brindar una ayuda a las organizaciones miembro de la IFAC y sus miembros en firmas, en particular firmas pequeñas y medianas (SMP), frente a la implementación del ISRE 2400 (revisado). Para permitir a los contadores profesionales desarrollar un entendimiento más profundo del contrato de revisión llevado a cabo en cumplimiento con el estándar, la guía incluye ejemplos ilustrativos junto con extractos relevantes del estándar.  Incluye igualmente puntos prácticos para consideración de los profesionales, tips sobre cómo implementar eficientemente el estándar y listas de verificación y formatos que los contadores profesionales deben adaptar para cumplir con los requerimientos y circunstancias en su jurisdicción.

Recursos IFAC

Puede visitar el área SMP del sitio web de la IFAC, www.ifac.org/SMP, para acceder a esta guía y guías adicionales del Comité SMP, conocer más sobre las actividades del Comité y suscribirse al eNews SMP. Si bien la guía incluye extractos relevantes del ISRE 2400 (revisado), el estándar completo se encuentra disponible en el Manual 2013 del IAASB (ver igualmente la publicación At a Glance.

• Guía de los contratos de revisión

Artículos adicionales:

• Encargos de Revisión para PYMES: Aseguramiento limitado, Numerosos beneficios
• El estándar para contratos de revisión de aseguramiento limitado

¡Únete al debate y mantente informado! Puedes seguir al Comité SMP en Twitter (@IFAC­_SMP) y LinkedIn (IFAC SMP Community). Puedes encontrar recursos relevantes adicionales bajo la categoría Audit & Assurance (auditoría & aseguramiento), a partir de abril 2014, en la sección IFAC Global Knowledge Gateway.

Translated by the Instituto Nacional de Contadores Públicos (Colombia).