Comments from ACCA to the International Federation of Accountants, March 2011.
ACCA is pleased to have this opportunity to comment on the Exposure Draft of IFAC Position Paper #4, A Public Interest Framework for the Accountancy Profession.
ACCA welcomes the initiative of IFAC to identify the nature of the public interest as it affects the profession, and the profession's regulatory and professional bodies. The credibility of the profession, and the standards which it issues, is crucially dependent on society recognising that the profession should, and does, act in the wider public interest.
ACCA agrees that it is impossible to define precisely 'the public interest', particularly in light of the international dimension of the policy paper. ACCA would encourage IFAC to give consideration to how it delivers 'public value', which as a concept is capable of aligning, and providing a rationale for, much of what IFAC seeks to achieve. In contrast, public interest is not an easy concept around which to develop practical policies and strategic direction.
Advocacy of, and facilitation of understanding of, the value which professional accountants bring to wider society is key to ACCA's own continuing commitment to delivering public value. For ACCA, 'the public' is the global community. ACCA firmly believes that accountants and the accountancy profession are integral to delivering public value globally, as proponents of good corporate governance, facilitators of access to finance and appliers of consistent global professional and ethical standards; all of which are ingredients essential in developing a business environment and creating long term sustainable economic growth.
ACCA would also like to see IFAC address within the framework the issues around the accountant's responsibility to work in the public interest if to do so could be contrary to the direct interests of the accountant's employer or client. In addressing this, ACCA believes IFAC must make it clear that where there is such a conflict the interests of the wider public should take precedence.
ACCA believes that the use of the term scalability creates confusion for users of the framework. It could be interpreted to imply that the public interest can be considered to be more or less important dependant on the size of the entities being looked at. To clarify the intent of the term, ACCA suggests the framework consistently refers to proportionality instead and the impact rather than the importance.
The paper defines the public as being 'individuals and groups of all jurisdictions sharing an international marketplace for goods and services'. ACCA believes this could be construed as limiting the application of the paper to activities and standards relating to global or cross-border activity. The paper should, therefore, seek to identify the public interest in relation to all the activities of IFAC and its member bodies, even where they are wholly domestic. There should not be one benchmark for domestic activity and another for cross-border activity.
ACCA also believes that the definition of 'the public' should be sufficiently wide to encompass not only direct stakeholders, such as those listed in the exposure draft, but society in general. Individuals and groups who do not have a direct interest in the work of accountants should still be entitled to expect that accountants operate in a way which acknowledges an obligation to act in an ethical and socially responsible way.
ACCA believes there should be greater clarity as to whether the paper is addressed to, and intended to be acted upon, by professional bodies and other accountancy institutions as opposed to individual members of the profession. IFAC should address the inconsistency in terminology and phrasing around the audience for the framework. In the section on interests, the examples listed vary between responsibilities of individual accountants and responsibilities of professional bodies. ACCA believes the framework would be more focussed and effective if addressed to member bodies rather than individual accountants.
ACCA questions the necessity of this criterion as it is currently phrased and believes that it has the potential to cause unnecessary controversy. Instead, ACCA suggests IFAC restrict itself to saying that it would expect member bodies, when conducting relevant activities, to ensure that a thorough assessment has been made of whether the expectations of society are likely to be met. IFAC could go on to suggest that such assessments are best made in a certain way, while not mandating what it regards as 'democratic' processes. To that end, ACCA suggests retaining just the final paragraph of this section.
The framework outlines that a global interpretation of the public interest must be based on universal values, yet does not suggest what these are or might be. The assertion that ethics vary from one society to another also seems to contradict the IESBA Code of Ethics for Professional Accountants.
ACCA believes this section does not clearly link back to the three criteria. ACCA suggests IFAC articulate this explicitly. This may be achieved by the inclusion of a case study to illustrate the application of the framework by IFAC in its work.
It could help to clarify the intent of the policy paper if the following paragraph (reworded for this purpose) from page 11 was brought to the beginning of the paper:
Ultimately, the framework presented in this paper cannot exhaustively determine what is in the public interest; however it does provide the means to consider the question more systematically and with greater depth. This enables us to consider and address, with greater consistency, emerging issues as the accountancy profession continues to evolve.
We hope these comments will be found to be helpful. ACCA believes the proposed changes should enable a more easily understood and deliverable framework to be developed for global implementation.