Professional accountants: Best equipped and placed in fighting bribery and corruption

Tuesday, 2 April 2024 00:48 -     - {{hitsCtrl.values.hits}}

A distinguishing mark of the accounting profession is its acceptance of the responsibility to act in the public interest. In this battle against bribery, corruption and accounting malfeasance, The Institute of Chartered Accountants, Sri Lanka (ICASL) and other Professional Accounting Organisations (PAOs), present and operating in Sri Lanka, can play a more active role in empowering their members to doing what is ethical


Professional Accountants often struggle in deciding whether their overriding loyalty is to the employer, client, boss, profession, the public or self. Adding to this, most organisations believe that a professional accountant employed by them must always act in their best interest over and above any other stakeholder. This is flawed thinking because the maintenance of the trust inherent in the fiduciary relationship which anchors the role of a professional in his/her dealings, whether direct or indirect, with the public and/or client, is sacred and inviolable. A fiduciary relationship exists when there is a significant gap in the level of expertise, and knowledge, between the professional and the client. So much so, that the client trusts, and relies on, the expertise, judgement, opinion, and advice of the professional. Cases in point include a client’s heavy reliance on the expertise of a doctor, financial adviser, professional accountant, insurance agent, lawyer, and construction engineer et cetera, just to name a few. So, if you are a professional accountant and you sign a set of financial statements or make other formal or informal utterances, the public such as investors, banks, creditors, regulators et cetera who use such information as a basis of their decisions, place great reliance on your professional expertise, integrity, honesty, and transparency. In the light of the aforesaid, employers must accept that, notwithstanding the terms of the employment contract, a professional is answerable to the ethical codes of his/her profession.

The hierarchical responsibility of professional accountants

Though not widely known, nor widely communicated, the descending hierarchy of the answerability, and accountability, of a professional accountant, and for that matter any professional, is the Public, followed by the Profession, then the Employer/Client and lastly Himself/Herself. It was the failure to abide by, and uphold, such prioritisation of professional allegiance which has led to financial and accounting shenanigans such as Enron’s Hiding of Debts in 2001, Bernie Madoff’s Ponzi Scheme in 2007, Lehman Brothers Repurchase Agreements in 2008, Satyam’s Falsification of Records in 2009, the Golden Key Credit Card Company Scandal in 2008, Carillion’s Misrepresentation of Financials in 2018, Pattiserie Valerie’s False Ledger Postings in 2019, Kraft Heinz’s ‘Iffy’ Expense Management Scheme in 2021 and FTX s Diversion of Funds in 2023. Similarly, it is professionals placing employer interest and self-interest before public interest which has contributed to Sri Lanka’s economic woes and state of bankruptcy.

Upholding professional integrity

A distinguishing mark of the accounting profession is its acceptance of the responsibility to act in the public interest. Protecting the public interest is a part of their professional credo. This is a responsibility which assumes heightened proportions, presently, where Sri Lanka is suffering, systemically, from the ravages of bribery, corruption, and nepotism. The scourge of bribery and corruption has pervaded, and is pervading, our society with cancerous swiftness and subtlety. It is a malady which the country must treat expeditiously if it is to come out of the economic quagmire which it has been stuck in the past several years. I believe that the professional accounting bodies, and professional accountants, in Sri Lanka are best positioned to spearhead this battle because of their natural familiarity of, and proficiency in, the moral principles and ethics espoused by the profession and, more importantly, demanded by the situation.

These being: 

  • Integrity - straightforwardness and honesty in all professional and business relationships
  • Objectivity - not compromising professional or business judgements because of bias, conflict, undue influences or personal gain
  • Professional Competence and Due Care - maintaining professional knowledge and skill at levels which ensure a professional service, based on technical and professional standards and relevant legislation
  • Confidentiality - arising out of professional and business relationships
  • Professional Behaviour - by adhering and complying with laws and regulations and the codes of conduct demanded of members by the profession

Champions against corruption

Whether engaged in management, auditing or advisory or whether engaged as an employee, partner, or consultant, professional accountants are in positions which seamlessly link corporate governance, ethical conduct, financial management, data analysis, internal controls, and risk management. Such positioning makes them natural participants in the battle against bribery, corruption, and other forms of skullduggery. The technical expertise ingrained in them through examinations, apprenticeships and ‘on job’ exposure gird them with the tools and techniques to navigate complex financial landscapes, uncover irregularities, sniff out frauds and malpractices and ensure financial dexterity. Furthermore, their regular interaction with investors, regulators and other stakeholders adds to their skill in promoting, and pursuing, financial compliance and reporting transparency on a continuously evolving basis. Their professional scepticism, widely displayed by those in the auditing practice, makes them natural guardians of transactional integrity and economic efficiency. A quick perusal of the who’s who of professional accountants in Sri Lanka reveals that there is a considerable number who sit in important boards, business and trade associations, regulatory bodies, et cetera and are advocates, and architects, of open financial practices in government, government institutions, state-owned enterprises, and public and private companies. In such roles, they contribute to designing frameworks which promote clear ethical guidelines and block and/or deter corrupt practices. These have established a benchmark base which enables governance practices to be subjected to regular scrutiny and accountability. There is little doubt that professional accountants can, and must, play a bigger role in fighting bribery and corruption.

 Playing a more active role

In this battle against bribery, corruption and accounting malfeasance, The Institute of Chartered Accountants, Sri Lanka (ICASL) and other Professional Accounting Organisations (PAOs), present and operating in Sri Lanka, can play a more active role in empowering their members to doing what is ethical. Firstly, they can place more emphasis on ethics education as a part of the curriculum of, and training leading to, their professional qualifications. There is consensus, globally, among professionals and academic researchers that the quotient of ethics education currently prevalent in accounting programs is inadequate and must be increased. Whilst ethics are discussed as a part of audit, accounting, business law and corporate governance components in such programs, there is a case for stand-alone ethics modules which will enhance the skills of the participants in identifying ethical dilemmas and addressing them, employing ethical reasoning in resolving issues, particularly where there are conflicts of interest among different stakeholders and reinforcing ethics driven decision making. Secondly, they can establish ‘access friendly’ structures which provide instant guidance and support to those members wishing to do the right thing. It is an open secret that professional accountants working in public and private companies, state-owned enterprises or providing services as an employee of a professional services firm face numerous ethical improprieties and ethical dilemmas in their day-to-day activities. In such circumstances, they require personal values such as moral awareness, competence, discretion, courage to pursue their conviction and the character to resist temptation in resolving the subject issues. However, moral courage comes at a price. For example, they may have to either play ball with the unethical requirements of investors, board or top management or risk losing their jobs. In instances where the solution proposed by the hierarchy crosses their ‘red line’, they may have to submit their resignation in order to preserve their professional pride. This is not an easy price to pay against the background of economic hardships and the scarcity of alternative employment in present Sri Lanka. In the absence of paying the price, the result will be a continuing state of eroding ethics which will lead to unbridled corruption.

Moral support

In such an environment, professional accountants, whether they be in Sri Lanka or elsewhere, look for moral support from their professional accounting bodies, and employers, in the various dilemmas they face in discharging their duties. The Royal Netherlands Institute of Chartered Accountants (NBA) has introduced several innovative activities to support their members both in terms of education and reinforcement. In terms of education, their services include:

  • Mandatory ethics component in post-qualification training 
  • Mobile devices which assist in increasing the awareness of challenging ethical issues, supporting problem-solving and dissecting/discussing new ‘iffy’ situations every week
  • Sharing member dilemmas in selected group conversations thereby fuelling case study publications
  • Participating in an annual Fraud Film Festival where thought provoking/relevant films are used in immediate member education and in subsequent member events. 

In terms of reinforcement activities, the NBA provides:

  • A database of moral case studies 
  • Courses on moral courage and competence
  • A member helpline and the services of a confidential counsellors’ group
  • A ‘moral intervision’ model, this being a practical and simple framework which helps members decide what, or what not, to do in situations where they are required to make a moral assessment. 

The NBA also invites enablers such as Chairpersons of Board Audit Committees, et cetera to share thoughts on peculiar situations which do not have straightforward answers. All this strengthens the ability of professional accountants to fight bribery and corruption.

Strengthening ethical standards

While I am not a proponent of ‘fear-based’ persuasion, I believe that the ICASL and other PAOs in Sri Lanka must signal more seriousness in enforcing the ethical behaviour of their members, including student members, through policies and procedures which deal with members’ failure to observe specified standards of professional conduct and with breaches of regulations. These include conduct which brings, and is likely to bring, discredit to the subject accounting body and to the accountancy profession and irregularities which give rise to public concern. Sanctions must be timely and must hurt if they are to be effective. They may take the form of admonishment, suspension of membership, fines, temporary or permanent removal of practicing licences and/or expulsion.

Symbolising the importance they attach to the autonomy of a profession, governments and regulators allow members of a profession to be judged by their peers rather than by political appointees or by other judicial mechanisms. Society, too, is willing to grant such liberties to a profession. However, it does keep a close watch in ensuring that the duties expected of the profession are discharged in line with public expectations. Lapses in performance will result in a lowering of the stature of the profession in the public eye. This, obviously, is not good for a professional accounting body. The public’s respect for a professional body must be such that a reasonable person would not dare approach a member of that professional body with any suggestion of improper dealings. I may be utopian in my thoughts. I probably am! Given the current state of our country we, the citizens, must believe in achieving the impossible by seeing the invisible.

Employers, too, can play an important, and effective, role in facilitating the ethical behaviour of professional accountants. Anglo American Corporation (Central Africa) Limited (Anglo), where I worked a good part of my younger life, placed great emphasis on business and professional ethics. I can recall Anderson Mazoka, my boss over a period of 16 years, telling me, “Ronnie you are the Finance Director, and you are the conscience of the Anglo Group in Zambia”. In my twenty-five years with Anglo and subsequent fifteen years with John Keells Holdings PLC (JKH), there was never any instance when the Board or the ‘hierarchy’ ever asked me, or forced me, to do anything unethical. At JKH, Vivendra Lintotawela, Susantha Ratnayaka, Ajit Gunawardena, the members of the Group Executive Committee (GEC), the Board and all my other associates and colleagues were of one mind in their desire to do what was legally, ethically, and morally right in terms of finance, accounting, and business practices. All employees in the JKH Group, from the Chairman/CEO downwards, were bound by a strong, “living’ Code of Conduct. Though encouraged to be business partners, the professional accountants in the Group were expected to effectively perform their stewardship roles and be warriors against bribery, corruption, and accounting malpractice. They were the facilitators and reinforcers of ethical accounting. All this was cemented through a strong, independent, functional reporting line to the Group Finance Director.

There are corporate leaders, professional accountants, accountants and non-accountants who believe that the mastery of accounting and/or audit technique is the sine qua non of the accounting profession. As observed by Leonard Brooks, Professor of Business Ethics and Accounting, University of Toronto, very few unethical practices or accounting scandals are caused by the misapplication of techniques. Most of them are caused by the deliberate use of a wrong technique or deliberate non-disclosure of information. While there may be the rare instance of misinterpretation of the problem due to its complexity, a sizable number of the shenanigans and scandals arise because of the lack of attention to the ethical values of honesty, integrity, objectivity, due care, confidentiality, and the commitment to the interest of others before those of oneself.

I joined Anglo when I lost my job with my first employer in Zambia in February 1979. The owner, and Managing Director of that company, asked me to maintain two sets of accounts, one for the company and one for the ‘taxman,’ and labour officials. I was twenty-seven and I had burnt my bridges in an austere Sri Lanka to find riches in flourishing Zambia. I was accompanied by my wife and two young daughters, and I was responsible for their well-being. My choice was brutal. Comply with the request or lose a lucrative job. I refused to follow his orders and I lost my job. Although it was a hard call, I know in hindsight, and with the benefit of greater professional maturity, that it was the right call. I am certain that there are many professional accountants facing similar situations in present Sri Lanka. My advice to them is to say a firm “NO” to any request, or order, of an improper nature. That is your first move in joining the vanguard in fighting corruption.

Leveraging professional accountants in the fight against corruption

An International Federation of Accountants (IFAC) article on ‘Building Trust and Ethics’ notes:

  • Where governance is strong, the role played by professional accountants in tackling corruption is amplified
  • Professional ethics, education and oversight which is at the core of the global accountancy profession, are key to the positive role which can be played in tackling corruption. 

It goes on to say that professional accountants are uniquely positioned to make a positive contribution because of their work throughout the global economy. They work in public and private sector organisations, in small- and medium-sized practices, in larger global networks that provide audit and tax services, and in academia—conducting research and helping to educate our next generation talent. Professional Accountants in Sri Lanka are no different. They are well-equipped, and placed, in fighting bribery and corruption. It is time that ICASL, PAOs and Employers collaborated more in leveraging this capability.

(The writer is currently a Leadership Coach, Mentor and Consultant and boasts over 50 years of experience in very senior positions in the corporate world – local and overseas.

Recent columns