Information Integrity – January 2013: An AICPA-CICA White Paper

Various types of information are increasingly being made available by business entities to stakeholders, including management, investors, regulators, shareholders and other interested parties. This information may include: excerpts from financial statements, such as inventories or accounts receivable; data from the company records, such as production volumes; and key performance indicators. Stakeholders use this information in making decisions, interpreting or using other information and generally increasing their knowledge about the subject matter.

To make the best decisions, users need to have confidence in the integrity of the information. With this in mind, the AICPA Trust Information Integrity Task Force, in conjunction with the Canadian Institute of Chartered Accountants (CICA), prepared a white paper called Information Integrity in January 2013. The purpose of this white paper is to define what information integrity means and to provide context for it to users, preparers and practitioners.

The 28-page white paper offers insight on how information can have integrity and discusses how information integrity can be achieved and maintained. It should be of interest to professional accountants in the accounting profession as a whole, including those in public practice, in business and industry, and other participants in the business reporting process, such as producers and consumers of business information.

The effective internal auditor: 7 key attributes

As the role of the internal auditor shifts, through regulatory changes or a more volatile economy, so do the skills required to do the job well. The skills shift is demonstrated by what companies expect of the internal audit function. Technical skills are a prerequisite, but those skills alone are not enough as the job’s scope broadens.

A recent report co-authored by Richard Chambers, chief executive and president of the Institute of Internal Auditors (IIA) provides insight on Succeeding as a 21st Century Internal Auditor: 7 Attributes of Highly Effective Internal Auditors. The report, produced by the IIA and global staffing firm Robert Half, discusses these seven traits: Integrity; Relationship building; Partnering; Communication; Teamwork; Diversity; and Continuous learning. These attributes fall into the category of soft skills, but more and more those skills are required, not desired.

For more information, read the Robert Half news release “Transformation of Skills Key to Success for Internal Auditors, Reveals Report.” In addition, review the related CGMA Magazine article “Internal Auditors Must Focus More Attention on Strategy.” Also, see related postings dealing with Internal Auditing.

CIMA, IFAC and PwC combine forces to look at business model reporting

Accountancy Age recently reported that: “The Profession has joined forces in investigating financial reports reflection of the business model and how that can be included into future integrated reporting.” It notes that a background paper Business Model, which reviews business models and how they are represented in financial reports, was prepared for the International Integrated Reporting Council (IIRC) by the Chartered Institute of Management Accountants (CIMA), the International Federation of Accountants (IFAC) and PricewaterhouseCoopers (PwC).

The Executive Summary to the 23-page background paper explores and reconciles divergent approaches in business model reporting with the aim of reaching a common, widely-accepted definition of the business model for use in Integrated Reporting (<IR>). Specific implications for the development of the International <IR> Framework are summarized. A distinction is made between business model disclosures and other information, such as: external factors or context; capitals; governance; strategy and resource allocation; opportunities and risks; performance; and future outlook. These elements are highly interconnected as shown below.

To learn more, read the report Understanding Transformation: Building the Business Case for Integrated Reporting. It tracks the behavioural changes of businesses on their journey towards Integrated Reporting during the first year of the IIRC Pilot Programme. Also, refer to other developments on integrated reporting.

Guidance for Professional Accountants in Business

According to the International Federation of Accountants (IFAC):
“Professional accountants in business (PAIBs) are a very diverse constituency, and can be found working as employees or consultants in commerce, industry, financial services, education, and the public and not-for-profit sectors. Many are in a position of strategic or functional leadership, or are otherwise well-placed to collaborate with colleagues in other disciplines to help their organizations toward long-term sustainable success.”


The PAIB Committee provides leadership and guidance on relevant issues pertaining to professional accountants in business and the business environments in which they work. This guidance is helpful because “Professional accountants support their organizations in a wide range of job functions at various levels, including leadership and management; operational; management control; and accounting and stakeholder communications.”

The key roles and expected areas of competency of PAIBs are discussed in Competent and Versatile: How Professional Accountants in Business Drive Sustainable Organizational Success and an accompanying employer-focused brochure. This discussion explains how professional accountants can broadly be categorized as creators, enablers, preservers, and reporters of sustainable value for their organizations, and the wide scope of their activities in organizations can be better promoted by the profession. In addition, it highlights the importance of the professional accountant’s mindset that needs to embrace: professionalism and ethical behaviour; professional judgment; an investor and wider stakeholder focus; organizational and environmental awareness; and change, uncertainty, and complexity.

Professional skepticism and professional judgment: Two hot-button issues in the audit world

According to a recent article, “Threats of inherent bias in making judgments can be overcome if processes include appropriate safeguards.” The article notes that “Professional skepticism and judgment are two hot-button issues in the audit world. Many experienced auditors are finding the mounting questions vexing, with the implied criticism of their judgment process.”

Attention to professional judgment and skepticism comes at the same time as advances in cognitive psychology. There is increased attention on the way our brains are programmed to make judgments. It turns out that making good judgments is not intuitive and is much more difficult than initially realized. In fact, our brains are programmed to make snap judgments, often based on little evidence and guided by strongly built-in unconscious biases. Although the ability to react quickly and decisively may be vital to survival in life and death situations, it is not usually helpful in conducting an audit.

The article concludes that “Audits of micro-entities may be low risk by definition, but significant judgments are still necessary and auditors must still approach these engagements with a skeptical attitude. Unconscious biases can have a detrimental impact on auditor judgments. Regardless of the size of the audit team, it is important to have safeguards to protect against these unconscious threats. A rigorous process to help reduce unconscious bias in making judgments is essential in even the smallest of audits.”

For more information, read the article “Good judgments” by Phil Cowperthwaite, FCA, in the April 2013 edition of CAmagazine online. As well, see “Developing strategies to heighten professional skepticism and help overcome judgment biases” and “Are checklists killing the CA profession?” In addition, review other informative research and guidance materials on professional skepticism.