Corruption, accountability and transparency — the role of the professional accountant

A strong accountancy profession enhances transparency and accountability in the public and private sectors and underpins economic development

In the fight against corruption, silence must never be the safer option for any individual. The accountancy profession, acting in the public interest, has supported this fight for decades—and at IFAC, we will continue to do so

The International Federation of Accountants (IFAC) President Asmaa Resmouki was in Sri Lanka recently to officiate the CMA Sri Lanka Integrated Report Awards. Founded in 1977, IFAC is the global organisation for the accountancy profession with  180 members and associates in 135 jurisdictions, representing over 3 million accountants in public practice, education, government service, industry, and commerce. Here are excerpts from Resmouki's article in CMA Sri Lanka Magazine

It is my pleasure to contribute this article on the topic of “Corruption, Accountability, Transparency and Good Governance – The Role of the Professional Accountant” to this edition of the CMA Sri Lanka journal.

These themes are central to IFAC’s vision, purpose, values, and strategic objectives, as articulated in our evergreen Strategic Plan. In brief, I would emphasise that fighting fraud, corruption, money laundering, tax evasion, and other illegal practices, as well as enhancing governance, stand out as ways our profession works for the public interest, builds public trust in institutions, and highlights our positive impact across society.

What is IFAC’s Action Plan for fighting corruption and economic crime? 

IFAC’s Action Plan for Fighting Corruption and Economic Crime provides a framework for enhancing the accountancy profession’s role in these efforts. The framework is organised into five pillars: 

• Harnessing the full potential of education and professional development
• Supporting global standards
• Contributing to evidence-based policymaking
• Strengthening our impact through engagement and partnership
• Contributing our expertise through thought leadership and advocacy

The Action Plan also includes more than 30 specific actions, which are meant to evolve over time. While many of the actions will be conducted by IFAC, our Action Plan is for the whole profession. We hope that professional accountancy organisations (PAOs), along with IFAC’s Network Partners and all individual professional accountants, support and implement this plan and continue to engage on how to maximise the profession’s contributions.

The boundaries between the different pillars are not meant to be clear-cut. Our support for the International Ethics Standards Board for Accountants (IESBA) Code of Ethics, for example, is relevant to each pillar—reflecting its central importance to accountancy as a global and trusted profession. 

The pillars are founded on the need for a whole-ecosystem approach, with the global accountancy profession as a core contributor to that ecosystem. Other key actors include political leaders, government agencies, civil servants, business leaders, company management and those charged with governance, global policymakers, law enforcement, other regulated professionals (such as lawyers), and individual citizens and taxpayers. These actors all must work together in an increasingly global—yet still primarily local—policy framework of treaties, legislation, and regulations.

The publication of our Action Plan is just the beginning. While fighting corruption and economic crime have always been central to the accountancy profession’s mandate, the Action Plan gives that role greater clarity and emphasis. The many actions within span ongoing activities, new initiatives for the near term, and new initiatives further into the future. We expect these actions to evolve over time with input from our member organisations and our many global partners. 

I would stress that the accountancy profession cannot solve these problems alone. This Action Plan is an open invitation to engagement and partnership with all anti-corruption stakeholders.

What can a PAO like CMA Sri Lanka do to play a part in tackling these issues?

For PAOs to engage as central allies, it is essential to understand the current situation in the jurisdiction. PAO leadership can come up to speed quickly by reviewing the United Nations Convention Against Corruption (UNCAC) Implementation Review Mechanism, the Financial Action Task Force (FATF) Mutual Evaluation Reports, and the Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention Implementation Reports.

The anti-corruption ecosystem has diverse actors. As a PAO, CMA Sri Lanka has established relationships with many of them—and should aim to strengthen these relationships. Your existing advocacy strategies and plans can inform your engagement. I would also invite CMA Sri Lanka leadership and members to check out the Global Fight, Local Actions: Anti-Corruption Advocacy Workbook for PAOs available on the IFAC website. 

How has the accounting profession played a positive role in tackling corruption?

A strong accountancy profession enhances transparency and accountability in the public and private sectors and underpins economic development. We accomplish this by acting on our bedrock ethical principles, outlined in the IESBA Code, and fulfilling our core values of independence and professionalism wherever and whenever we apply our skills. The accountancy profession is ready to further address constraints to sustainable growth—including corruption and related economic crimes, but also poor public financial management and governance.

Professional accountants are a part of governance architectures that tackle corruption. Their positive contribution is amplified where the architecture is stronger. There is a clear correlation between the prevalence of professional accountants in the workforce and more favourable scores on the main global measures of corruption. This correlation is even stronger in countries that have adopted anti-money laundering laws in line with international recommendations.

Our profession, among many stakeholders in the public interest, is part of a never-ending mission to solve an age-old problem. We thrive on partnership, whether within firms, throughout a business or public sector entity, or in relationships with clients. This extends more broadly throughout the profession and to our external stakeholders. 

In the fight against corruption, silence must never be the safer option for any individual. The accountancy profession, acting in the public interest, has supported this fight for decades—and at IFAC, we will continue to do so.

How can the profession understand anti-corruption reporting?

In May 2023, IFAC and Transparency International UK, with the support of the World Economic Forum’s Partnering Against Corruption Initiative, produced a review of anti-corruption corporate reporting by the largest publicly traded companies around the world. Our goals are to help both corporate reporting and anti-corruption stakeholders understand current practices in anti-corruption reporting and to stimulate conversations around how anti-corruption-related issues are transparently addressed by the information companies provide.

I invite CMA Sri Lanka members to review the Understanding Anti-Corruption Reporting publication on the IFAC website.

How do you achieve greater transparency and accountability in the public sector?

To ensure governments and public sector entities around the world make informed decisions for people, the planet, and the economy, they need strong governance and public financial management. The accountancy profession—PAOs and individuals—have an important role to play in supporting fit-for-purpose public financial management and an effective public sector. Working together, the public sector and the accountancy profession can help deliver a more sustainable, inclusive, and prosperous future.

To manage public resources effectively and efficiently, governments need to track the use of resources and verify that they are appropriately allocated against public policy objectives. None of this is possible without strong governance and public financial management.

While frameworks and standards are crucial to strengthening public financial management, having the right people—with suitable training and the right skills and competencies—across governments and public sector entities is a fundamental need. However, in many jurisdictions, there is a shortage of professional accountants in the public sector. Our profession needs to engage with public sector leaders to communicate the skills, ethics, and public interest focus that the accountancy profession brings to the public sector. Together with our government stakeholders, we can create a better world with stronger economies and fairer societies.

What are the benefits of using accrual based accounting for government transparency and accountability?

Accrual-based financial information allows users of that information to evaluate performance—of an individual entity or the whole-of-government where consolidated financial statements are produced—in terms of inputs, outputs, and outcomes. Accrual-based financial information is the bedrock for decision making, transparency, and accountability.

Cash accounting can generate a lack of transparency and even potential for distortions of a government’s actual financial position. This arises when income is not counted until cash is received and due to the exclusion of certain charges, such as asset depreciation.

Under accrual-based financial accounting and reporting, full disclosure of government financial transactions takes place at the time they occur. Additionally, the depreciation of assets is suitably taken into account to reflect the actual value of assets in the financial year under consideration. This results in a more accurate estimate of a government’s financial position. In turn, future revenues and financial positions become more predictable.

Increased disclosure of accounting indicators and reports also allows for governments to be held accountable for decisions as they take effect. Accrual accounting also facilitates better and more effective management of finances, assets, and liabilities.

I also want to highlight IFAC’s digital platform, Pathways to Accrual, which can help governments and other public sector entities forge their own paths towards adopting and implementing accrual-based reporting frameworks.

CMA Sri Lanka: a recognised institution locally, regionally, globally

I would like to recognise CMA Sri Lanka’s leadership in establishing the annual CMA Excellence in Integrated Reporting Awards and to congratulate you and all of the recipients of these honours.

CMA Sri Lanka’s participation as member of both the South Asian Federation of Accountants (SAFA) and the Confederation of Asian and Pacific Accountants (CAPA) are crucial for the profession in Sri Lanka and the greater region. And as a Member of IFAC, these connections truly represent the connectivity of our global profession. 

I wish to acknowledge CMA Sri Lanka President Prof. Lakshman Watawala who has been an ever-present leader in the profession in Sri Lanka and South Asia, having served as President of the Sri Lankan Institute of Chartered Accountants, the South Asian Federation of Accountants, the Organization of Professional Accountants of Sri Lanka, and as the founder and past President of the Association of Accounting Technicians of Sri Lanka. 

I thank every member of CMA Sri Lanka for the magnificent work you do and I wish all of you well.