Chartered Accountants Worldwide welcomes The Institute of Chartered Accountants of India

The Institute of Chartered Accountants of India (ICAI) has joined as an Associate Member of Chartered Accountants Worldwide. During its 66 years of existence, ICAI has achieved recognition as a premier accounting body for its contribution in the fields of education, professional development, and maintenance of high accounting, auditing and ethical standards. Associate Member status is a recognition that ICAI has demonstrated a commitment to the highest professional and ethical standards.

ICAI is the fourth institute to join Chartered Accountants Worldwide as an Associate member, making a key contribution to the global expansion of the organization. The rest of the Chartered Accountants Worldwide family are founder members; Chartered Accountants Australia and New Zealand, Chartered Accountants Ireland, the Institute of Chartered Accountants of England and Wales, Institute of Chartered Accountants of Scotland, The South African Institute of Chartered Accountants, the Institute of Singapore Chartered Accountants (who joined as an Associate Member in June 2015), The Institute of Chartered Accountants of Pakistan (who joined as an Associate Member in February 2016), and the Zambia Institute of Chartered Accountants (who joined in March 2016).

Chartered Accountants Worldwide brings together like-minded Institutes who continuously contribute to the enhancement of the value of the brand and the profession of Chartered Accountants. For more information, read the June 2016 Chartered Accountants Worldwide Press Release.

Professional Attitude

A thought-provoking discussion of professional attitudes was posted online at Clancy’s Quotes dated March 26, 2009. The discussion suggests that Professionalism is one of those words that’s rather hard to define. Consequently, people have different viewpoints on what characteristics constitute professionalism.

According to Clancy, “Professionalism consists of certain attitudes, beliefs, and behaviors sometimes known collectively as “virtue” or “good character.” Attitudes and behaviors have two things in common. First, both are produced by our beliefs. Second, we have the power to choose our attitudes and behaviors.”

Furthermore, “Becoming a professional is an attitude adjustment process that begins by understanding what it means to be a professional, creating a personal vision of professionalism, and aligning one’s values in accordance with that image. Another way to say this is “change on the outside begins on the inside.” If you were to understand professionalism, then claim it as your set of personal values, where would you start to begin your professional tune-up? A good place is with the attitude called “respect” and a person must start by respecting oneself. Professionalism also insists on respect toward others, explained best by “The Golden Rule.”

Critical success factors for tomorrow’s business leaders: Perspectives from the UK

The latest report from Chartered Accountants Worldwide has called for business to instill a culture of ‘moral courage’ from the boardroom downwards. In Critical Success Factors for Tomorrow’s Business Leaders: Perspectives from the UK, the international body states that social media and the 24-hr scrutiny of the digital age mean that there is a direct link between ethics and value creation that business needs to acknowledge.

The report follows the latest Chartered Accountants Worldwide Critical Success Factors Summit in London. The summits gather senior CEOs, CFOs and executives, together with the heads of global Chartered Accountancy bodies, to discuss key issues facing future finance professionals. The report covers issues ranging from geopolitical tensions to the need for tax simplification and also draws on research surveying chartered accountants leading UK businesses.

According to Pat Costello, Chairman of Chartered Accountants Worldwide: “The digital age means that everyone is under scrutiny, all of the time, and issues can escalate through social media like wildfire. The right decisions need to be taken in real time – it’s no longer enough to rely on the traditional hierarchies. This means we need to foster a culture where people are trained to know what the right thing to do is when a challenge presents itself. A culture of ethics certainly starts in the boardroom, but it can’t stop there.”

A Definition of the Public Interest: IFAC Policy Position Paper #5

In November 2010, the International Federation of Accountants (IFAC) published a consultation paper setting out its perspective of the public interest. According to IFAC, “A hallmark of the accountancy profession is its obligation to act in the public interest. But, it is not always apparent what this means and how accountants can determine whether they are meeting this expectation. IFAC, by developing this position paper, is seeking to advance its understanding of this important issue.”

IFAC defines the “public interest” as the net benefits derived for, and procedural rigor employed on behalf of, all society in relation to any action, decision or policy. This practical definition of the public interest enables one to assess the extent to which actions, decisions or policies are made in the public interest.

IFAC considers that the “public” is inclusive of all individuals and groups because the responsibilities of the accountancy profession affect (directly or indirectly) every aspect of society: investors, consumers, suppliers, citizens and taxpayers, as well as those seeking sustainable living standards and environmental quality, for themselves and future generations. The extent to which any particular group is impacted can vary according to the action, decision or policy taken.

The paper was developed in the context of IFAC’s mission, to enable IFAC to assess the extent to which its actions and decisions are made in the public interest. IFAC is of the view that the benefits for society noted in the public interest definition may include the soundness of financial and non-financial reporting, the comparability of financial and non-financial information across borders, fiscal prudence in public expenditures, and the contributions that accountants make to corporate governance, efficient resource management and organizational performance.

For an overview of IFAC’s work, see A Definition of the Public Interest: At a Glance. Also, review the related materials: A Definition of the Public Interest: Policy Position Paper #5 and Appendices referred to in the paper which was published in June 2012. In addition, consider the guidance issued by the Institute of Chartered Accountants in England and Wales (ICAEW) in the paper Acting in the public interest: a framework for analysis.

Chartered Accountants Worldwide: business leaders, decision-makers and trusted advisers

Chartered Accountants (CAs) were the founders of the accountancy profession and have led its global development. Today, they hold influential positions around the world as business leaders, decision-makers and trusted advisers. In over 180 countries, CAs have attained and maintained the top professional standard that this status demands.

CAs have been a mark of excellence across all aspects of business and financial life for over 150 years. They advise organizations, lead major companies, shape economic policy and deliver effective financial management and reporting. Talented, ethical and committed professionals have never been more highly valued. By combining unrivalled knowledge, skill and commitment, CAs enable businesses, organizations, individuals and communities to achieve their financial and strategic goals with rigour, integrity and vision.

The leading institutes of Chartered Accountants from around the world have come together to support, develop and promote the vital role that Chartered Accountants play throughout the complex global economy. They include the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants of Scotland (ICAS), the Institute of Chartered Accountants Australia (ICAA), Chartered Accountants Ireland (CAI), the New Zealand Institute of Chartered Accountants (NZICA) and the South African Institute of Chartered Accountants (SAICA).

To learn more about this initiative, browse the new website “Chartered Accountants Worldwide.” In addition, review the 87-page publication Chartered Accountants Worldwide: No ordinary business minds. For further information, contact: info@charteredaccountantsworldwide.com.

UK Supreme Court Blocks Tax Advisers' Legal Privilege

In the recent court case of Prudential plc v Special Commissioner of Income Tax, the United Kingdom’s Supreme Court decided that legal professional privilege (LPP) should not be extended to clients of non-legally qualified tax advisers, but that the matter should be looked at by Parliament.

LPP is a common law right that has developed over the past 400 years. In other cases, the English legal system requires full disclosure from a party of all the documents which they have which are relevant to the matters at issue, but the privilege is designed to ensure that any person can feel confident in seeking advice about their legal rights and obligations, and be reassured that any information they provide cannot be passed to a third party without their express consent.

LPP currently only applies to clients of lawyers, and also extends to any tax advice they provide – despite the fact that the majority of tax advice is now provided by chartered accountants. Confidential tax advice passing between the latter and their clients will now still have to be disclosed as part of any litigation. Extending the privilege, the Supreme Court held, would cause uncertainty over its scope and inconsistency in its application. That would be likely to lead to what is currently a clear and well understood principle becoming an unclear principle, involving uncertainty.

Read more about this court judgment in the article “UK Supreme Court Blocks Tax Advisers' Legal Privilege” by Jason Gorringe in Global Tax News online (London, January 2013). Tax-News.com is a daily worldwide tax news service with a 45,000 story archive that can be searched for free!

Sarbanes-Oxley and the Accounting Profession: Public Interest Implications

A recent research article notes that “The US accounting profession was caught up in, and some say responsible for, the whirlwind of accounting and business scandals that rocked the US markets in 2002. To restore investor confidence in financial information, the Sarbanes-Oxley Act created a new Public Company Accounting Oversight Board [PCAOB] with the authority to set standards for auditors of publicly-traded companies, thus ending a century of professional regulation of auditing.”

The research uses sociological theories of professionalism to help understand the implications of the Sarbanes-Oxley legislation for the accounting profession and for the public interest. It explains why professional self-regulation is important for retaining valuable economic franchises. It also explains why the public interest orientation of the profession is important and how government take-over of auditing standards potentially erodes the public accounting profession’s commitment to the public interest.

According to the article, self-control over professional work, a key characteristic of professional status, is pre-empted by the newly created government oversight body PCAOB. With government takeover of oversight of auditing practice, claims to professional status are weakened and professional commitment to, and involvement with, vital work standards may suffer. In addition, the profession may no longer have incentives to promote the public interest or to innovate and change in response to changing conditions.

The authors trace events leading up to Sarbanes-Oxley legislation and conclude that underlying problems arising from internal work differentiation as consulting work became more profitable and glamorous, and development of a commercially-oriented work culture may continue to threaten the profession in the future.

They speculate that the greatest costs may be opportunity costs as the profession no longer has the incentives or ability to innovate and embrace new forms of accountability. Learn more by reading the research article “Sarbanes-Oxley and the Accounting Profession: Public Interest Implications” by Sara Ann Reiter (1Binghamton University, Binghamton, USA) and Paul F. Williams (North Carolina State University, Raleigh, USA) in Open Journal of Accounting, 2013, Vol. 2, pages 8-15.

Pathways Commission Report (July 2012)

The Pathways Commission Report (July 2012) summarizes two years of collective effort by over 50 individuals representing stakeholders in a broadly defined accounting profession – encompassing public and corporate accounting, education, and government. The impetus for this project came from the US Department of the Treasury’s Advisory Committee on the Auditing Profession (ACAP) report recommending that the American Accounting Association (AAA) and American Institute of Certified Public Accountants (AICPA) study the possible future structure of higher education for the accounting profession.

With a mission to consider accounting education and the accounting profession in the broadest sense, the Commission’s recommendations are expansive in scope; they demonstrate the need to address difficult and persistent issues and impediments so that the discipline and profession of accounting can better meet the challenges and opportunities of the future.

The Future Outlook section of the Report (on page 133) concludes that “As accounting and business evolve, the required knowledge and skills will also change. Adoption of more principle-based standards will require more judgment. More judgment may lead to a wider variability in decisions and, possibly, increase the risk of litigation. At the same time, pressures to conform to economic forces may increase. Measurement issues and fair value calculations may enhance financial reporting, but they are also more subject to manipulation. Therefore, responsible judgment becomes even more important as does ethical behavior consistent with the accounting profession’s responsibilities.”

For more information, visit the Pathways Commission Homepage on the website of the American Accounting Association and read the highlights in the Indiana CPA Society blog posting “It Won’t Be Easy, But It’s Worth Doing” dated December 13, 2012.

Practice-Based Education – Perspectives and Strategies

There are many challenges facing researchers, educators, practitioners and students in today’s practice worlds. Published in 2012, the 37-page Australian book Practice-Based Education- Perspectives and Strategies is part of a series that examines research, theory and practice in the context of university education, professional practice, work and society. The series examines places where two or more of these areas come together.

Themes explored in the series include university education of professions, society expectations of professional practice, professional practice workplaces and strategies for investigating each of these areas. The authors bring a wealth of practice wisdom and experience to examine these issues, share their practice knowledge, report research into strategies that address these challenges, share approaches to working and learning and raise yet more questions. The conversations in the series contribute to expanding the discourse around the way people encounter and experience practice, education, work and society.

This book explores the principles, context, practices and strategies of practice-based education from multiple perspectives. It examines the place and nature of practice-based university education, that is, education that prepares graduates for practice. This seems initially to be a straightforward goal. However, practice-based education is, in reality, a complex of ideas, pedagogies, opportunities and possible experiences. In this complexity of realisation and simplicity of concept lies its strength and potential for rich and productive higher education.

The book is written by leading academics in higher education and is aimed at a broad audience including university educators, as well as researchers and those in the professions. The book examines goals, trends, perspectives and strategies of practice-based education in international, professional education programs. There are three sections: 1. Contesting and Contextualising Practice-Based Education; 2. Practice-Based Education Pedagogy and Strategies; and 3. The Future of Practice-Based Education.

Towards a global Code of Ethics for a global internal auditing profession

A recent article notes that the rapid pace of globalization requires internal audit professionals to possess a more sophisticated global mindset. This mindset includes not only the traditional technical dimensions of internal audit practice, but also its ethical foundations which can vary from country to country, from culture to culture and from language to language. Furthermore, language, culture and local laws and regulations can significantly impact how the ethical behavior of internal auditing professionals is analyzed, understood and, when necessary, investigated for propriety.

In this regard, the cultural anthropology concepts of emics (the insider’s perspective) and etics (the outsider’s perspective) of a culture influencing an individual’s ethical stance, and corresponding behavior, are discussed in detail. The article suggests that internal auditors working in global contexts might usefully adopt the “participant-observer” technique. Utilizing the constructs of the “three levels of culture” could be extremely useful in appreciating the surface features and deeper, unconscious bases where basic assumptions and values reside, and are correspondingly quite difficult to discern.

While appealing in theory, applying the participant-observer technique in practice could present a serious challenge to internal audit practitioners. In the 21st century, the Institute of Internal Auditors (IIA) constitutes one of the truly global professional organizations featuring representation from all major continents. So, there is an opportunity to evaluate the existing IIA Code of Ethics from different angles using the perspectives mentioned in this article, as well as others. The task seems endless, and the complexity is immense, but there is every promise that the efforts of many dedicated professionals around the world will make this evolving process exciting and worthwhile for future generations.

For more information, read the article “Towards a global Code of Ethics for a global internal auditing profession” by SridharRamamoorti, PhD, Associate Professor of Accounting and Director, Center for Corporate Governance, Kennesaw State University, Kennesaw , Georgia, USA.

ICAEW - Acting in the public interest: a framework for analysis

According to the Institute of Chartered Accountants in England and Wales (ICAEW), the phrase “in the public interest” is used by many to justify a wide range of actions and proposals. It is often unclear what it means and there can be a natural suspicion that it may be used as a smokescreen to garner support for something that is actually in the advocate’s own interests. From a broad perspective, the ICAEW suggests that a definition would serve no useful purpose because circumstances vary widely and a definition would inevitably result in unintended consequences.

Instead, the ICAEW proposes, in the summary report Acting in the public interest: a framework for analysis that there be a framework of matters to consider when justifying an action as being in the public interest. That framework is presented in graphic form below.

The report starts by considering the issues surrounding the use and application of the concept, and how the concept has developed, including its use by professions. It then goes on to consider the key issues that would arise in each element of the framework. The elements, together with some of the key aspects and questions are also discussed. For more information, read the Full Report (81 pages) and visit the ICAEW website section on The Public Interest.

Promoting Professionalism: Lessons from the Medical and Legal Professions

Recent research has observed that: “The accounting, medical and legal professions share characteristics common to peer-reviewed professions. These professions also share challenges to professionalism. All three have been criticized for declining professionalism and for choosing commercial success over serving the public interest. Although the medical and legal professions have taken steps to promote a higher level of professional conduct by their members, the accounting profession has not launched initiatives to promote professionalism.”

 

That research discusses the initiatives instigated by the legal and medical professions using the five elements of a professionalism framework. Specifically, the framework highlights the importance of growth in personal conscience, demands compliance with the ethics of duty, inspires realization of aspirational goals, requires accountability of peer professionals, and emphasizes devotion to serving the public good. It recommends that members of the accounting profession use the five elements of the professionalism framework to define, demonstrate and assess professionalism. In addition, it concludes that promoting professionalism is a means for restoring professional identity for individual accountants as well as a means for fulfilling the accounting profession's contract with society.

 

For more information, refer to Promoting Professionalism: Lessons from the Medical and Legal Professions by Laurie Swinney and Bruce Elder in Research on Professional Responsibility and Ethics in Accounting, Emerald Group Publishing Limited, Volume 16, 2012, pp. 93-128. Also, see previous postings on the accounting profession and professionalism.

Developing a framework for “Professionalism”

Australia was the first country outside of the United States to adopt the Certified Financial Planner (CFP) certification model for practitioner excellence. In 2007, the Financial Planning Association of Australia introduced a structured professionalism framework to demonstrate the profession’s commitment to best practice. The publication, A framework for financial planning professionalism, states that professionalism is based on three pillars: professional membership, professional conduct and professional accountability.

The three pillars are illustrated in the following professional framework exhibit. Professional membership is about ensuring that only the right people can become members. Professional conduct is about ensuring members adhere to the high standards set for the profession and that they are supported in following professional ideals. Professional accountability is about protecting the reputation of all members by putting in place an independent, peer-driven disciplinary mechanism.

The framework publication also states: “Our community comprises of our clients, the media, consumer groups and advocates as well as the broader community in which we all live. As a profession, we have obligations and responsibilities to build good relations with the whole community – to be productive and contributing members who make a positive difference to society.”

Furthermore, “A quality professional framework that is supported by the profession and the regulators will underpin these vital goals. Trust will flow on from a robust framework that is supported by members and regulators and shown to have ‘teeth’. The profession’s disciplinary process must be transparent, fair and deliver penalties that match the expectations of the regulators and the community and reinforce best practice behaviours within the profession.”

“The bottom line is that increased community respect will drive the profession’s ‘value proposition’ which will translate into a number of positive outcomes for your business and for you. Some of these outcomes will include increased client stability, growth and profitability.” For more information, also refer to the FPA Code of Professional Practice issued in July 2011.

A research perspective on “Professionalism”

The academic research literature suggests that an understanding of “profession” and “professionalism” cannot ignore a post-professionalism perspective. Professions and the notion of professionalism are undergoing rapid change in a new global information age which necessitates new theories and explanations.

Post-professionalism is characterized by loss of exclusivity, increased segmentation through specialization of knowledge and the growth of technology. As a result, the services previously delivered exclusively by members of formal professions can now be delivered by general professionals or even non-professionals. The 1980s and 1990s witnessed a proliferation of studies of professionals, professions and processes of professionalization. Professional closure is often discussed in relation to education practices and struggles between the state and professional associations about regulations over practice rights and, similarly, professional regulation is typically viewed as involving struggles over accounting and auditing laws and standards.

A recent research study offers an innovative approach to the research on “professionalism” for a specific profession, that of the Certified Financial Planner (CFP). The study uses a framework which distinguishes between the ‘what’ and ‘how’ aspects. The ‘what’ aspect of the experience is the direct object of experiencing the professionalism of financial planners; the ‘how’ aspect is the act of experiencing the phenomenon. The indirect object that is the intention behind the act is not the focus of this study (see Figure 1 below).

This study considers the CFP certification requirements in Australia, Hong Kong and the United States. These requirements establish a framework for professionalism, but they are not the only influences. CFP professionals are also influenced by their work through the behaviour and standards of their employer and by government licensing and regulation. This paper describes the variations in how CFP professionals experience professionalism in each country.

The significance of this study is that identifies the elements of professionalism that CFP’s experience as being part of the professionalism of financial planners. Much of the existing research on the professions and professionalism focuses on historical perspectives and on identifying the characteristics that distinguish a profession and a professional from a sociological viewpoint.

In summary, the purpose of this paper is to present the preliminary findings of conceptions of professionalism of CFP’s from each of the three countries independently. The major finding of the research is that CFP professionals experience professionalism in ways that reflects the factors that influence their professionalism. Professionalism is experienced as putting the client’s interest first, being knowledgeable as evidenced by professional credentials, following a planning process and being guided by regulation and standards.

For more information, see the research paper “What and how financial planners experience professionalism: a phenomenographic study (preliminary findings)” by: Associate Professor Ken Bruce (CEO/Campus Director, CQU Institute of Higher Learning); Dr Abdullahi Ahmed (Senior Lecturer in Finance, School of Commerce & Law, CQUniversity, Rockhampton, Australia); and Dr Helen Huntly (Professor, Dean, School of Education, CQUniversity, Bundaberg, Australia).