By John Davies, head of technical, ACCA
Trust is one of the fundamental elements of the landscape in which the professions operate and is seen as one of the key qualities that professionals can bring to the business world.
Clients go to accountants, lawyers and doctors because they want expert, specialist advice that addresses the particular problem they have; they are prepared to pay for that advice because they trust the adviser to give them good advice which best suits their needs. Businesses employ professionals for similar reasons.
Governments for their part realise that the economic and social needs of society benefit from the services provided by professional advisers and have long been prepared to allow the activities of those advisers to be regulated in accordance with professional norms.
Today, we are facing a crisis in this fundamental element of trust. Simply put, politicians and the general public are questioning whether business and the professions can be depended on to run their affairs in the interests of consumers and society in general.
Auditors have been criticised from many quarters for being too close to their clients and for failing, as a result, to act competently and objectively. It has been argued that the rules on fair value accounting, which deal with the way that investments are measured and reported, are framed in a way which gives a misleading picture of the health of the reporting company. Insolvency practitioners are often accused of being complicit in the winding up of businesses that could be saved. And the prevailing economic climate has seen a material increase in the incidence of in-house fraud, and an accompanying concern about how accurately frauds and other forms of financial crime have been reflected in companies’ accounts, with, by consequence, questions about just how ‘true and fair’ some financial statements actually are.
The current concerns actually spread much wider than the professions themselves. The series of collapses in the banking sector in 2008-9 has led to exhaustive re-examinations of how the major banks are run: the UK’s Commission on Banking Standards has concluded, this month, that one issue (among many) that needs in future to be addressed is the process by which individuals are appointed to senior positions in the industry: there needs to be much greater emphasis on ensuring that the individuals in those positions are not only technically competent but can be relied upon to act in a prudent and responsible fashion. The public sector has seen a series of governance-related scandals that have revealed not only gross failures of operational effectiveness but a worrying determination on the part of management to cover them up and to prevent public-spirited individuals from divulging information about them.
This key issue of trust was the centrepiece of the 2013 meeting of the chairs of ACCA’s global forums, the group of expert bodies that advise ACCA on its technical and research work. The meeting considered just how widespread the problem was, how justified the criticisms were, and how the professions might respond so as to re-establish a relationship of trust with clients, employers, governments and wider society.
To help in the discussion of this topic, the meeting heard a presentation from Lawrence Evans, the president of the consultancy firm Edelman-Berland, which produces the Global Trust Barometer, the leading global study of trust and reputation.
Mr Evans drew out a number of key findings from his firm’s latest survey. They confirmed not only that the problem of trust was widespread but that, for all the scandals and the criticisms made of the business world by politicians, people still actually trust business more than they do politicians.
He stressed that the way forward for business was for it to make a strong commitment to transparency. There was a strong correlation, he claimed, between trust and transparency, and the more open and forthcoming businesses were, the greater the likelihood that stakeholder trust would follow. He also reported a strong link between trust in an entity and consumer attitudes towards it – the stronger the degree of trust, the more positive consumer behaviour was likely to be, and vice-versa. Another relevant finding from his survey, one that is encouraging in the context of the issue of trust in the professions, was that people generally placed more trust in the word of subject experts within a business than they do in CEOs.
Mr Evans’ findings suggest that, for all the important problems that the accountancy profession is currently having to wrestle with, accountants are still, potentially, a strong force for good. His contention that transparency offers the way to stakeholder trust is a message that needs to be heeded by businesses of all kinds, in both the private and public sectors, and one which reaffirms the strategic importance of accountancy. Transparency is, after all, what accountancy should be all about – the presentation of information which reveals an accurate picture of the business health of an entity – and a combination of technical competence and a commitment to openness, both qualities that ACCA actively encourages in its members, appears to be the formula which can lead directly to enhanced business effectiveness.