Archives For Public Value

board appeal

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.

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By Katka Benešová, head of ACCA Czech Republic, Slovakia and Hungary

This year marks the ACCA office in Prague changing the way professional accountants develop careers in the Czech Republic, Slovakia and Hungary for 10 years.

Earlier this month ACCA’s vice president, Anthony Harbinson, hosted a gala dinner in Prague to mark this great anniversary. Together with members and partners we discussed and celebrated how the past 10 years have been.

In reaching this milestone, we felt that it was time to look at how the accountants’ role, reputation and public value is perceived among our members and students. We commissioned extensive research on the Changing role of the finance professional in both the Czech Republic and Slovakia – 271 respondents were polled.

Despite the economic issues of past the five years, accountants believe that the public perception of them has improved or stayed the same since 2008 (50 per cent). However 37 per cent said it had declined. Technical skills (61 per cent) and trustworthiness (57 per cent) were considered to be key personal attributes for accountants. They are followed by professional ethics and personal integrity (49 per cent).

Eighty per cent of the accountants who responded to our research believe professional accountancy bodies help ensure those within the profession act responsibly.

Czech and Slovak accountants often deal with conflicting demands. Eighty-five per cent said they follow the interest of their employers. But 51 per cent say accountants should follow the public interest in their work. Eighteen per cent of accountants reported that they have had serious dilemmas between public, personal and their employers’ interests.

The findings of our survey revealed the accountancy profession is keen to act ethically and responsibly for the commercial success of their company, financial markets’ stability and economic prosperity. It is good to see that our members see certain transactions and acts as an ethical dilemma and we also appreciate their openness to share this information in our report.

The research findings shows that professional accountants are seen as business partners and contribute to the overall business success of their organisations. This will have a positive impact on the local profession, and professional accountants, regarding what value they bring to the organisation. And as they already face ethical dilemmas in their jobs, this can also have a positive impact on the local economy in the Czech Republic building transparency and enhancing public value.

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By Sarah Hathaway, head of ACCA UK

Trust: over the last year, perhaps even longer, the “T” word seems to have been everywhere, from whether we can trust the food we eat to whether we can trust our financial experts (Libor), our media (Leveson) and even our health services (The Francis Inquiry into the NHS).

The professions have a massive part to play in rebuilding and sustaining trust – that was the main outcome of a timely event I attended a couple of weeks ago, organised by ACCA for Professions for Good. Representing 1.2 million practitioners, Professions for Good is a collaboration of the bodies responsible for the entry policy, professional standards and qualifications across many of the UK’s largest professions – from accountants to lawyers. ACCA is a member, along with The Science Council, ICAEW, The Bar Council, RICS, RIBA, RAE, CMI, CIOT, AAT, CII and CIPD.

This roundtable was Chatham House, so under the Rule I am unable to attribute who said what, but it was a lively debate attended by lawyers, accountants, an MP, a journalist and a self-confessed marketing professional (myself) to look at how we can rebuild trust in the communities and society in which we live and work.

This ACCA roundtable was the final in a series of three such discussions organised for Professions For Good – The ICAEW focussed on Trust and Business, while the AAT conducted theirs about Trust and Professional Careers. Gillian Fawcett, our head of public sector, chaired our event, where we looked at a wide range of questions – from where public distrust stems, to whether there is a greater need to instil ethics through education in professional services.

The evidence is uncomfortable reading: when it comes to trust, an Ipsos MORI Poll in 2011 showed that people trusted doctors to tell the truth more than any other profession, with almost 9 out of 10 of those questioned trusting them. They were followed by teachers, professors, judges, scientists, the clergy and the police. The least trusted in the poll were politicians, with just 14 per cent believing them to tell the truth.

Edelman’s global trust barometer, now in its 13th edition, has also recently revealed that one in five respondents believes a business or governmental leader will actually tell the truth when confronted with a difficult issue. This year’s Barometer demonstrates a serious crisis of confidence in leaders of both business and government.

Aside from these findings, recent public sector scandals such as the Stafford Hospital care failures, Baby P, the phone hacking saga, MPs’ expenses and even the recent “Plebgate” story appearing in the media have all done the professions, government and other public sector bodies no favours in improving trust within the community and society.

A report presented to the Prime Minister in January 2013 from the Committee for Standards in Public Life also highlighted recent unethical – or in some cases possibly criminal – behaviour on the part of the police, the historical behaviour of the armed forces, police and Security Service in Northern Ireland, high profile problems in hospitals and care homes, the BBC, national journalists and banks. The report importantly pointed out that “the factors which influence behaviour in the public sector are likely to be very similar to those which drive high or low standards in other sectors.”

So it appears that no sector – private or public – is immune from the loss of trust; the accountancy profession itself is not immune, but I don’t think as a profession we are complacent about the future. I meet plenty of professional accountants who are working to deliver public value, which for ACCA means acting in the public interest, promoting ethical business and growing the economy. But going back to our Trust roundtable, the outcome and conclusion was all down to three simple words –  the need for accountability, transparency and openness; for me, the accountancy profession is eminently placed to deliver these three seemingly simple – but challenging – things.

And there lies the challenge for all the professions. I’d love to hear from readers what they think the professions should be delivering, and what being a professional means.

By Ian Welch, head of policy, ACCA
The half-jokey jibe at the profession which UK Prime Minister David Cameron made recently, when he said he did not want his government being just 'seen as a bunch of accountants' has upset some of the professional bodies, two of which have gone into print to complain.

While I think the comment should be seen in the throwaway spirit it was intended, there is a more serious issue involving the government and accountants. Since the onset of the global financial crisis, qualified accountants have played increasingly central roles in businesses, providing greater input into strategy and working well outside of the traditional finance function.

But at ACCA's recent symposium of its global forum chairs, there was a general consensus that the profession was in some ways under siege – the ever-increasing regulatory burden aimed particularly at larger entities means finance directors may be too bogged down with compliance that they will be unable to devote enough time to enhancing business performance. Which is not what economies need right now.

Auditors too, are under relentless political and regulatory scrutiny across the world, following the crisis. And with audit being the best-known part of the profession, all accountants will suffer in reputational terms if auditors remain under sustained fire. And while ACCA agrees that audit needs to evolve and widen in scope, let’s not throw the baby out with the bathwater.

Governments need to be more aware that finance professionals can play a crucial role in generating economic recovery. Consider a few of the typical things that accountants do: the preparation of financial statements, the provision of strategic guidance for business, or the provision of assurance services. At the SME level surveys  consistently show that accountants are the top advisers to these businesses.

And accountants are also involved in redefining what business success means. Given the effects of the financial crisis – recessions, job losses, austerity measures, and continuing crises of confidence – the accountancy profession is increasingly looking at how we measure true value. Do we just look at balance sheets and profit statements, focusing just on the financials, or do we look at the wider value that business brings to the public and society? Our work on sustainability and more recently integrated reporting, is aimed to ensure that business performance is judged in the round. And by putting their ethics training into action and following through on the values of the profession they represent, qualified accountants have the opportunity to spread the public value message throughout the business world.

The accountancy profession is strong enough to withstand a few jibes and jokes. Ever since the famous Monty Python sketch in the early 1970s, it has taken a good few blows. But governments need to realise that recession is not the best time to alienate the very people who will help business recovery by blaming them for the economic situation and piling on regulatory burdens. Let accountants and governments work together to solve our problems not battle against each other.