Ethics, of Course; Introducing the “We Are IESBA” Series
I recently had an opportunity to sit down with three of the public members on the International Ethics Standards Board for Accountants® (the Ethics Board, IESBA®) to ask them about their backgrounds, insights, and contributions to the board as representatives of the public at large.
Ethics is fundamentally tied to culture and, thus, arguably one of the most difficult areas in which to set international standards for the accountancy profession. Against the backdrop of cultural and regulatory differences around the world, the IESBA Code of Ethics for Professional Accountants (the Code) is principles-based. Principles, as opposed to rules, can be interpreted and applied using sound professional judgment by accountants around the world, regardless of the country, culture, religion, or legal system.
Even so, arriving at appropriate, practical, enforceable principles is no easy task, and those who accept the challenge commit themselves to many hours of research, drafting, public consultation, reviewing, debating, revising, and more drafting. Their work is paying off—the IESBA Code has now been adopted or used as the basis for national ethics standards in over 100 jurisdictions around the world. Supporting further adoption, as well as consistent implementation, is a strategic priority for the board.
Introducing the IESBA
For the first set of “We Are IESBA” interviews, I talked to three of the current public members of the board—a former Big 4 partner and standard setter; a professor; and an auditor general:
- Atsushi Kato, former member and vice chair of the Accounting Standards Board of Japan; former partner at PwC, Japan;
- James Gaa, professor of accounting at the University of Alberta (Canada); and
- Caroline Gardner, Auditor General for Scotland.
What Exactly Is a Public Member?
There are three types of members on the Ethics Board—practitioner, non-practitioner, and public.
The public members of the board “are expected to reflect, and are seen to reflect, the wider public interest” [IESBA 2013 Annual Report]. Although all members of the IESBA must sign a pledge to act independently without undue influence from their sponsoring organization or country, public members of the board—who come from a variety of backgrounds—are independent of the profession, and thus potentially less susceptible to bias, conscious or not. Because of this, public members are a critical part of the IESBA’s operating structure, which also includes independent oversight by the Public Interest Oversight Board and input from the Consultative Advisory Group. These elements ensure that due process has been followed and that the board’s decisions and actions ultimately serve the public interest. The IESBA has no less than three public members at any given time. (There are 6 vacancies on the IESBA for 2016, of which no more than four can be practitioners. Learn more & nominate a candidate.)
Excerpts from the Interviews
The interviewees were thoughtful and candid, and you can read the interviews in their entirety in the IESBA News portion of www.ethicsboard.org: Atsushi Kato, James Gaa, and Caroline Gardner.
In talking to this particular group, I couldn’t resist asking their thoughts around the phrase that one interviewee aptly described as defying definition—“the public interest.” We also discussed the myriad pressures that accountants face in today’s world that can influence ethical behavior and the key factors influencing the development of global ethics standards in the future. Here are some excerpts from the series:
On Serving the Public Interest
AK: As members of the IESBA, each one of us must commit to act in the public interest, which means that we should not represent the views of our nominating organization—in my case, the Japanese Institute of CPAs—and also our jurisdiction—in my case, Japan. However, acting independently is easier said than done. In fact, our culture is probably ingrained in us in ways that we don’t even realize.
JG: [Serving the public interest as a public member is] having sort of a disinterested, more neutral point of view and trying to bring that to the table. As a concept, the public interest is almost impossible to define. IFAC and the Ethics Board have tried. And there is much literature in the sociology profession that tries to define the public interest. I think it defies definition partly because it probably means a number of different things. But one thing it means is to try to separate out our deliberations from the private interests of specific sectors of the economy, occupations, industries, or companies. So to me, it means not favoring any one group or any one segment.
CG: As professional accountants, we are required to think through the consequences of our professional conduct and decisions, not just for ourselves and our own financial interests or those of our colleagues or employer, but much more widely than that. And, depending on what role we play as professional accountants, that group may vary. It could well include the investing public, the suppliers and customers of the companies that we work for, or the wider, general public when we talk about accountants in health and safety or employment practice. Holding that very broad frame of reference in mind, and considering the effects our actions will have, is very much a part of the challenge of what it means to act in the public interest. It’s also a key part of what makes us valuable as a profession.
On Pressures/Challenges in Today’s World
AK: Unfortunately, major accounting and auditing scandals continue to occur in Japan and around the world, even after Enron…. In some cases, the credibility of the auditor’s report has been called into question by the users of this information. These high-profile scandals may also cause some to question the ethics of accounting professionals. However, many are taking steps to improve audit quality and that is a positive development.
JG: I think there is more demand on people’s time and attention. I think that’s important, because assessing the ethical dimension of a person’s behavior requires being reflective and thoughtful. And to the extent time demands are higher, it could restrict people’s ability to consider their situation, and assess aspects of what is going on with their job.
CG: The world that we’re operating in continues to become more and more complex … Our complex environment means that ethical dilemmas are becoming more prevalent, and making the most ethical decision is becoming more challenging.
On Setting Ethics Standards for the Global Profession
AK: I think the most important thing in developing a global ethics Code is recognizing that different ethical norms do exist—between organizations, industries, and countries. Even though now everything is globalized, including economies and business practices, and so on, there are still differences among different organizations, industries, and countries. So the way that a professional accountant operates in different environments should also be different. The important thing is to maintain a balance between local and global.
JG: I think one of the factors is more attention and interest in regulatory oversight and legal requirements. That impacts the Code, of course, and the Ethics Board. It also increases our visibility and the importance of demonstrating our commitment to the public interest.
CG: I think the challenge is seeing the Code as part of a wider system of laws and regulations, and developing it in a way that is really leading expectations of ethical conduct while recognizing that it can’t be a substitute for an effective legal and regulatory framework, good judicial processes, and a culture where ethical behavior is expected. It’s a fine balance for us to get right.
About the “We Are IESBA” Series
The purpose of this series is to bring the work of the International Ethics Standards Board for Accountants (IESBA) to life, adding context and color to the people who carry out the activity of ethics standard setting for the international accountancy profession. The series aims to further increase the transparency of the board’s activities. Transparency is written into the board’s due process, and indeed, into its operations. The IESBA’s agenda papers and meetings are public (you can register to attend and observe any meeting, or listen to meetings and summaries via our iTunes channel). To learn more about the board, follow along via Twitter and email: Follow @Ethics_Board and subscribe to IESBA eNews. For additional developments related to ethics and other areas of the profession, subscribe to topics from the Global Knowledge Gateway.
