The International Federation of Accountants is the global organisation for accountancy serving the public interest by strengthening the profession via contributing to the development of international economies.
Currently IFAC is comprised of 175 member bodies and associates in more than 130 countries around the globe. This means it represents nearly 3 million accountants across public practice, education, government, industry, and commerce.
With the recent global cyber security attacks and online fraudsters getting more and more intelligent by the day, Accountancy Age discussed the role that the accounting profession has to play in preventing fraud and corruption with Russell Guthrie, CFO at IFAC.
IFAC has two primary roles; one supporting independent standard-setting boards that deal with standards of audit in areas such as ethics and education. About 60 percent of its budget goes towards supporting the work of these boards.
Guthrie said: “They operate independently from us and make their own decisions to make sure they are operating with transparency and due process.
“The second primary role we play is speaking out as the global voice for the accountancy profession.”
It is about identifying areas in which the accountancy profession plays and important role, such as corporate governance and ethical practice. IFAC teamed up with the International Bar Association ahead of the G20 summit this year and framed an event around this exact topic, also extending into the different roles accountants play in organisations.
They are particularly keen on providing necessary support to the small to medium-sized businesses. Guthrie called SMEs “the engine of most of our economies.”
Collaborating with the International Bar Association
IFAC’s partnership with the IBA is a fairly new, but important one. In the last few years they started to find themselves on panels together, particularly in activities sponsored by the OECD and then made a formal connection in autumn last year around common policy areas.
Guthrie said: “One area where we had real resonance is recognising that, as accountants and lawyers, we play an important role in mediating most significant transactions and so with that there comes the obligation to help in the fight against fraud and corruption.
“We have been working hard to be more active in the B20 and G20 space over the past few years to demonstrate that the profession really is committed to playing its part, so we had the opportunity in Buenos Aires to have this side event with a number of important folks in the B20/G20 activity stream.
“The IBA agreed it would be great for us to demonstrate our professions’ respective commitments to play our part in this whole area. Really the joint statement that we signed is new and the participation in Buenos Aires is just the beginning.
“We think if we can join with the accountants and lawyers at national level then we can develop significant initiatives at that level that will really put more flesh on the bones, if you will.”
Fighting fraud and corruption
The overwhelming takeaway from the IFAC-IBA event was the importance of ethics and the role it plays in tackling global fraud and corruption. It was agreed that the problem cannot be solved without collective action.
Guthrie said: “It has to be all these institutions working together and it can’t be seen as the sole responsibility of anyone.”
Technology was also a highlight. A key point was the fact that with technology comes opportunity. It brings so much more transparency and the chance to create a money trail which can be used to detect corruption.
The introduction of a new accounting standard also featured in the event.
Guthrie said: “The new standard basically elaborates the reporting framework that the professional accountants should follow and the big change was it does permit the professional accountant to move beyond the boundaries of the company and transcend the client confidentiality and if the company doesn’t react in response to that reporting it does allow the accountant to report to the appropriate authorities.”
Impact of security threats on accountants
Guthrie reminded that the purpose of an external audit is not to detect fraud but to determine whether financial statements are correct.
“If you happen to find something that looks bad, smells bad then you have an obligation to pursue it, but it isn’t really the objective of why you’re there.”
An accountant’s responsibilities are changing with the opportunities technology is creating.
When Guthrie first trained as an audit, he explained that a very common procedure was sampling, where you look at a very small subset of a very large pool, whereas modern auditing techniques, for example with the ability to run certain programs against whole data sets, you can look at 100 percent of transactions.
“I think what technology has done is allow us to delve much deeper into the transactions that are being carried out which in theory should mean more anomalies are spotted, so that’s just one way that we should have much better knowledge of clients’ business sentiments and transactions.
“The other area that really lends itself to this is blockchain because of the transparency of the technology and the ability to validate the transparency of the transactions at any point.”
In the coming months, Guthrie explained that IFAC hope to take their relationship with the IBA to the next level in their continued fight against fraud and corruption.
“We aim to identify a good, national-level initiative so we can both promote and share how we are fighting fraud throughout our network.”