Promoting a Worldwide Commitment to Integrity,Objectivity and Professional Competence
Marilyn PENDERGASTChairman,IFAC Ethics CommitteeManaging Director,Urbach Kahn & Werlin Advisors, IncUnited States
WORLD CONGRESS OF WORLD CONGRESS OF ACCOUNTANTSACCOUNTANTS
Promoting a Worldwide Commitment to Promoting a Worldwide Commitment to Integrity, Objectivity and Professional Integrity, Objectivity and Professional
CompetenceCompetenceMarilyn Pendergast, ChairMarilyn Pendergast, Chair
IFAC Ethics CommitteeIFAC Ethics Committee
Crisis In Public Confidence
Executives Have ResponsibilitiesExecutives Have Responsibilities
• Moral as well as legalMoral as well as legal
• Management for the benefit of shareholdersManagement for the benefit of shareholders
• Honest communicationHonest communication
• Strong, principled ethical conductStrong, principled ethical conduct
Boards Have ResponsibilitiesBoards Have Responsibilities
• Ensure management operates with integrityEnsure management operates with integrity
• Exercise oversight over managers and over the Exercise oversight over managers and over the independence and work of the outside auditorindependence and work of the outside auditor
Auditors Have ResponsibilitiesAuditors Have Responsibilities
• Ethical StandardsEthical Standards
• Auditing StandardsAuditing Standards
• Accounting StandardsAccounting Standards
Lenders and Analysts Have ResponsibilitiesLenders and Analysts Have Responsibilities
• Scrutinize borrowers’ creditworthinessScrutinize borrowers’ creditworthiness
• Project business opportunities and growthProject business opportunities and growth
• Assess and interpret and numbersAssess and interpret and numbers
Regulators Have ResponsibilitiesRegulators Have Responsibilities
• Consistent and meaningful regulationConsistent and meaningful regulation
• Timely review of filingsTimely review of filings
• Enforcement of standardsEnforcement of standards
Investors Have ResponsibilitiesInvestors Have Responsibilities
• Recognition of RisksRecognition of Risks
Responsibility of Member BodiesResponsibility of Member Bodies
• Provide ethical requirements to ensure the highest Provide ethical requirements to ensure the highest quality of performance and maintain public quality of performance and maintain public confidenceconfidence
• The international code serves as a model on which The international code serves as a model on which to base national guidelines.to base national guidelines.
• Give consideration to the public service and user Give consideration to the public service and user expectations expectations
Achieving Harmonized StandardsAchieving Harmonized Standards
• International Solutions International Solutions for Global Issuesfor Global Issues
Fundamental Principles Applicable Fundamental Principles Applicable to All Professional Accountantsto All Professional Accountants
• IntegrityIntegrity
• ObjectivityObjectivity
• Professional competence and due careProfessional competence and due care
• Professional BehaviorProfessional Behavior
• ConfidentialityConfidentiality
IntegrityIntegrity
ObjectivityObjectivity
Professional Competence And Due CareProfessional Competence And Due Care
Professional BehaviorProfessional Behavior
ConfidentialityConfidentiality
INDEPENDENCE INDEPENDENCE
The Foundation for Public Trust The Foundation for Public Trust
INDEPENDENCE FOR ACCOUNTANTS INDEPENDENCE FOR ACCOUNTANTS IN PUBLIC PRACTICEIN PUBLIC PRACTICE
• ThreatsThreats– Self-InterestSelf-Interest
– Self-ReviewSelf-Review
– AdvocacyAdvocacy
– FamiliarityFamiliarity
• SafeguardsSafeguards– Created by the profession, legislation or regulationCreated by the profession, legislation or regulation
– Within the assurance clientWithin the assurance client
– Within the firm’s own systems and proceduresWithin the firm’s own systems and procedures
INDEPENDENCE FOR INDEPENDENCE FOR ACCOUNTANTS IN PUBLIC ACCOUNTANTS IN PUBLIC
PRACTICEPRACTICE
• Independence-- the Conceptual ApproachIndependence-- the Conceptual Approach
– Independence of MindIndependence of Mind
– Independence in AppearanceIndependence in Appearance
Some Areas of Current InterestSome Areas of Current Interest
• Technology servicesTechnology services
• Internal auditingInternal auditing
• The “revolving door”The “revolving door”
Activities Not Allowed for Audit ClientsActivities Not Allowed for Audit Clients
• Authorizing transactions on behalf of clientAuthorizing transactions on behalf of client• Determining recommendations to be implementedDetermining recommendations to be implemented• Reporting in a management roleReporting in a management role• Valuation of material matters involving subjectivityValuation of material matters involving subjectivity• Making management decisions related to client Making management decisions related to client
personnelpersonnel• Promoting or underwriting sharesPromoting or underwriting shares
Role of the Accountant in Management
Conflict of loyalties
Presentation of financial information
Professional Competence
Support for Professional Colleagues
Accountants in Management Roles
It’s not easy but it must be doneIt’s not easy but it must be done