In a bid to enhance corporate governance and check corrupt practices, the global regulatory body of accountants has adopted a new accounting standard for professional accountants and auditors. In this report, Olaseni Durojaiye looks at the economic impact of the new code of ethics, which has been adopted by ICAN
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 economy. Dubbed, â€œResponding to Non-compliance with Laws and Regulations,â€ 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.
There is the expectation that, on the public sector side, the new standard would boost the current administrationâ€™s anti-corruption fight and its Voluntary Assets and Income Declaration Scheme. It is expected to bring more transparency into financial reporting and corporate governance in private sector concerns.
The current administration is according expansion of the tax net a lot of attention due to the disturbing rate of tax evasion in the country, a practices that is often aided by accounting professionals.
Nigeriaâ€™s tax to GDP growth is the lowest in the world. Speaking during the launch of VAIDS in Abuja recently, and quoting figures from the Nigerian Bureau of Statistics, the acting president, Professor Yemi Osinbajo, lamented that Nigeria had a taxable population of nearly 70 million people but only 14 million were in the tax net.
Osinbajo said, â€œTaxes are not only about boosting government revenues. When people pay taxes, they hold the government to account moreâ€¦
â€œAll of these 214 Nigerians who pay N20 million or more in taxes annually are to be found in Lagos State. Iâ€™m sure in this room (and Iâ€™m not looking at anyone), there are another 214 people who earn more than N80 million annually. Tax evasion is not limited to wealthy Nigerians and also not limited to individuals. Many companies maintain three sets of books.â€
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.
Findings also reveal that, among others, the standard seeks to address the code of confidentiality acting as a barrier to the disclosure by professional accountants of potential non-compliance to public authorities in the appropriate circumstances. Expectations are also high that it will address the practice before now whereby auditors simply resign from clients without NOCLAR issue being appropriately addressed. This is often because there is a no clear guidance to guide professional accountants and auditors on how best to respond to cases of non-compliance with extant laws and regulations, especially in terms of alerting the appropriate authorities.
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.
According to the letters of the NOCLAR code, professional accountants and auditors are required to inform the management and board of breaches when such are discovered. The new standard also requires the professional to escalate it further if the management and the board failed to take action. The standard also states that any auditor who failed to disclose same will be deemed to be in collusion in the non-compliance issue.
Opinions of Experts
Accounting professionals have been reacting to the newly adopted standard and insist that it means well for private establishments and governments. Those who spoke to THISDAY include President of ICAN, Ismaiâ€™lla Zakari, and author of a book on financial reporting and banker, Dr. David Isiavwe. They said the NOCLAR code would impact the Nigerian economy as well as aid the current administrationâ€™s anti-corruption battle and the recently launched VAIDS initiative.
Others add that it would force accounting professionals, whether as accountants or auditors, to ensure that corporate organisations comply with regulations regarding the filing of the tax obligations and the prevention and detection of other forms of financial fraud.
Isavwe, a chartered accountant, said, â€œThe adoption of NOCLAR is a significant development for practising accountants and auditors across the world. it is a significant step towards further sanitising the corporate governance space to ensure that business leaders do the right thing always.â€
Isiavwe, a general manager in the audit section of Union Bank Plc and author of Corporate Disclosure in the Banking Industry, Evidence From Nigeria, said, â€œNOCLAR is very much in alignment with the anti-corruption drive of the federal government and is, thus, a major boost to it as it with compel accountants to urge companies to fulfil their tax obligations to governments at all levels.â€
On his part, Zakari, who is the 53rd president of ICAN, argued that the adoption of NOCLAR â€œraises the ethical bar for global accountancy profession and provides an opportunity for it to demonstrate its unflagging commitment to act in the public interest.
â€œIt 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.â€
Another chartered accountant based in Lagos, Subomi Owoseni, stated, â€œNOCLAR is a welcome development for the practice globally, especially in Nigeria. Its coming at this time is timely, it will add fillip to the President Muhammadu Buhari administrationâ€™s anti-corruption fight. And on the side of the private sector, it will help to make financial reports of companies more believable.â€