Institute of Chartered Accountant of Nigeria Adopts New Standard On Corporate Governance
In a bid to enhance corporate governance and check corrupt practices in accounting ethics and practices, the International Federation of Accountants (IFAC) has adopted a new accounting standard for professional accountants and auditors. Professional accountants now have to act in the public interest by complying with the Codes and its principles, which include integrity and confidentiality.
The adoption of a new global accounting standard by the International Federation of Accountants has begun to elicit optimism among experts who feel it would positively impact the Nigerian economy. Dubbed, “Responding to Non-compliance with Laws and Regulations,” the Institute of Chartered Accountants of Nigeria (ICAN) has signed on to the new standard. ICAN believes its adoption would raise the bar of ethical behaviour among professional accountants and auditors, and in the long run, reduce the level of sharp practices in both public and private organisations.
The standard is premised on the major role that accounting professionals play in the perpetration and detection of sharp practices in both public and private sectors. Some of them might have been handicapped by previous ethical codes. The argument for the new code, findings show, gains more plausibility considering the fact that accounting professionals often hide under the cover of confidentiality to indulge in corporate governance breaches. The new standard is set to address that.
A professional accountant in business may encounter or be made aware of non-compliance or suspected non-compliance with laws and regulations in the course of carrying out professional activities. The purpose of this standard is to set out the professional accountant’s responsibilities when encountering such non-compliance or suspected non-compliance, and guide the professional accountant in assessing the implications of the matter and the possible courses of action when responding to it. This section applies regardless of the nature of the employing organization, including whether or not it is a public interest entity.
Non-compliance with laws and regulations (“non-compliance”) comprises acts of omission or commission, intentional or unintentional, committed by the professional accountant’s employing organization or by those charged with governance, by management, or by other individuals working for or under the direction of the employing organization which are contrary to the prevailing laws or regulations. In some jurisdictions, there are legal or regulatory provisions governing how professional accountants should address non-compliance or suspected non-compliance which may differ from or go beyond this section. When encountering such non-compliance or suspected non-compliance, the professional accountant has a responsibility to obtain an understanding of those provisions and comply with them, including any requirement to report the matter to an appropriate authority and any prohibition on alerting the relevant party prior to making any disclosure, for example, pursuant to anti-money laundering legislation. (IESBA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS Section 360- Responding to non-Compliance with laws and regulations.)
Though IFAC remains the global regulatory body for accountants, responding to NOCLAR is a creation of the International Ethics Standard Board for Accountants, which is the body, saddled by IFAC with the task of setting code of ethics for professional accountants. Accounting sector stakeholders opine that NOCLAR sets out a first of its kind framework to guide professional accountants in what actions to take in the public interest when they become aware of potential illegal acts committed by clients or employers in any jurisdiction worldwide.
Interestingly, many companies have suffered setbacks in the past due to avoidable corporate governance issues. Cadbury Nigeria is one, others abound. In some of the cases, the auditors insisted that they were handicapped in reporting same due to the confidentiality code which prevents accounting professionals from disclosing non-compliance. The new standard has removed that lacuna.
Accounting professionals have been reacting to the newly adopted standard and insist that it means well for private establishments and governments. The President of ICAN, Ismai’lla Zakari, who is the 53rd president argued that the adoption of NOCLAR “raises the ethical bar for global accountancy profession and provides an opportunity for it to demonstrate its unflagging commitment to act in the public interest.
“It provides clear pathway for auditors and other professional accountants to disclose potential non-compliance situations to appropriate public authorities in certain situations without being constrained by ethical duty of confidentiality. Of course, it also stimulates greater accountability among organisations.”