Cleaning the accountancy stables
Firstly I wish to congratulate The Sunday Times FT for highlighting the current play in the ICA ethics committee on the alleged professional misconduct of two accounting firms. It is public knowledge that one firm used an incorrect valuation method to value the sale price for Sri Lanka Insurance. COPE has highlighted this in their report to parliament and this firm should therefore be taken to task by the government for professional negligence and for the loss caused to the Treasury.
The partners of our audit firms are in the forefront when it comes to good governance but they have no clue about what professional responsibility is all about. The ethics and the social responsibilities of a professional impose on them an obligation to practice his/her profession so as to be of autonomy in defining its professional standards, values and responsibilities.
Since the profession has failed to exercise their powers of self regulation, the state should introduce regulation to protect the unsuspecting public who use their services and use their audited financial statements to make investment decisions.
The Touchwood Financial Statements are a case in point. At least in the future professional conduct should be regulated by law in this country in the absence of self-regulation. Some of our top audit firms are known to show scant respect for professional values.
Very often you find that audit firms while they do the statutory audit, allow their associates and subsidiaries to handle recruitment, restructuring, salary surveys and IT audit for the same company. How can they be expected to be truly independent when they are dependent on the same company for other fees and income? This is a gross violation of professional ethics and conduct.
This conduct is totally frowned upon by the International Accountancy profession. The International Federation of Accountants should provide guidance so that the audit firms operate to protect the public interest and also ensure that the accountancy profession adheres to high quality professional standards.