By FCPA Jim McFie, A fellow of ICPAK
Continuing Professional Development Enables Accountants to Maintain and Enhance Their Professional Competence
The 2023 Handbook of the International Code of Ethics for Professional Accountants was published by the International Ethics Standards Board for Accountants (IESBA) on 19th September 2023. IESBA is quick to point out that it is an independent global standard-setting board but one must remember that IESBA is supported by the International Federation of Accountants (IFAC).
IFAC was founded on 7th October 1977 in Munich, Germany, at the 11th World Congress of Accountants; there were sixty-three founding members from fifty-one countries: included in these sixty-three members were six from Africa and the Middle East, including the Institutes of Chartered Accountants of Ghana, Nigeria, South Africa and Zimbabwe, thirteen from Asia, including the Institutes of Chartered Accountants of Bangladesh, India and Pakistan, four from Australia and Oceania, twenty five from Europe, eleven from South America and the Caribbean, and four from North America.
Over the years, IFAC’s membership has grown to one hundred and seventy-five members and associates in more than one hundred and thirty-five countries and jurisdictions: there are one hundred and ninety-five recognised countries in the world according to the United Nations: one hundred and ninety-three are member states of the UN and two are non-member observer states, namely the State of Palestine and Vatican City.
IESBA’s mission is to serve the public interest by setting ethics and independence standards as the cornerstone to ethical behavior in business and organizations, and to public trust in financial and non-financial information, that is fundamental to the proper functioning and sustainability of organizations, financial markets and economies worldwide. IESBA maintains the international Code of Ethics for Accountants to serve as a model for all codes of ethics developed and used by national accountancy organisations. The Code applies to all accountants, whether they are in public practice, industry, commerce, the public sector or education. IESBA also develops interpretations of the Code of Ethics for Accountants to address questions that have broad implications. IESBA supports the global adoption and implementation of these standards, promotes good ethical practices globally, builds and strengthens working relationships with stakeholders, and fosters international debate on ethical issues.
A fact that many people in Kenya may not be aware of is that Paul Muthaura is a member of the Board of IESBA. There are seventeen members on the Board. Paul’s term of office began on 1st January 2023 and will end on 31st December 2025. Currently he is the CEO of the Africa Carbon Markets Initiative. He is also a Board Member of British American Tobacco Kenya Ltd, and of ICEA LION Asset Management, an Independent Member of the Financial Sector Deepening Trust, Kenya, and a member of the Securities Advisory Board of the Toronto Centre for Global Leadership in Financial Supervision. He is an Advocate of the High Court of Kenya, a Fellow of the Institute of Certified Public Secretaries and a Certified Executive Coach and Systemic Team Coach from the Academy of Executive Coaching. Prior to his present appointments, he has been the CEO of ICEA Lion General Insurance Kenya, and the first African member of the Financial Stability Board Task Force on Climate-Related Financial Disclosures (TCFD) insurer pilot group.
Before that, he was the Chief Executive of the Capital Markets Authority (CMA) of Kenya: during his term of office at the CMA, he was the Africa and Middle East Regional Committee Chair on the Board of the International Organization of Securities Commissions (IOSCO), the Chairman of the Consultative Committee of the East African Securities Regulatory Authorities, and a member of the Financial Stability Board (FSB) Regional Consultative Group for Sub-Saharan Africa. So, the next time you meet Paul, please congratulate him on my behalf.
Today, relativism is the predominant philosophy behind people’s thinking. Moral relativism is the view that moral judgments are true or false only relative to some particular standpoint (for instance, that of a culture or an historical period) and that no standpoint is uniquely privileged over all others. It has often been associated with other claims about morality, notably, the thesis that different cultures often exhibit radically different moral values. Relativism denies that there are universal moral values shared by every human society and the insistence that we should refrain from passing moral judgments on beliefs and practices characteristic of cultures other than our own.
IESBA’s approach is markedly different. The Code of Ethics promulgated by IESBA sets out the fundamental principles of ethics for all accountants. But in reality, every member of society should abide by these principles. Accountants, because of the nature of their work, have an added responsibility for the public interest. If these principles are not followed by the vast majority of the members of a country, the country ends up being a place of disorder, of dishonesty and ultimately of widespread crime. Crime becomes the way of life in that country. Life becomes unbearable and people try to flee the country to live in a place where “normal” living can be experienced. Because of a decay of morals in many countries today, many people live miserable lives. I was listening to the BBC a few minutes ago.
On the programme was a sixteen-year-old young lady whose driving force in her life was to “have fun”. Like many sixteen-year-olds, what “having fun” means precisely was not interrogated by the presenter of the programme. Torsten Bell, the chief executive of the Resolution Foundation, writing in The Guardian Newspaper a year ago, quotes some recent studies that “prove scientifically” that the idea of moral decline in society today is nonsense; he claims that there is huge progress on some issues, for example accepting LGBTQ+; his argument is that society was just as corrupt in the past as it is today. Praveen Medikundam, a partner in the legal firm ILBSG in the US, agrees with Bell when he writes: “Moral decadence is an issue as old as society itself. At every point in global history, communities and nations discussed the problems of moral decay and depravity. It is difficult to imagine an older person who does not judge or blame younger generations for being unethical, immoral, or decadent”. But he then adds: “Unfortunately, moral decadence is not merely a problem of generations. It is an objective reality. No one will deny the fact that society has dramatically transformed. Life in the second decade of the 21st century differs from the way it used to be a century ago. Violence has become rampant. Sexual harassment and corruption have become an everyday occurrence. Money and material well-being are priority goals for millions of people, who would easily give up their moral principles for financial gain or authority. This moral decadence has adverse effects on society, because it changes cultural, moral, and social norms and sets new but lower standards for appropriate behaviors. It promotes public acceptance of violence, justifies discrimination and injustice, and limits opportunities for social development that is so important to keep societies flourishing”. Doctor Yog Raj, a Professor of Public Administration in the Government College in Banjar in India states that declining moral values among youth is an important contemporary issue in India. He points out that: “Society today is marked by violence, greed, theft, drug addiction and especially an increase in the crimes against women. Discipline today is lacking among young children. They do not obey their elders and often disrespect them. The youth are the future of India. The future of a country depends on values received by students during their learning years. They are expected to have moral values so that they can face harsh times in life”. Sri Sathya Sai, writing for the International Organization which bears his name states that: “A man without morality cannot be called a human being in the real sense of the term. One can earn respect and attain a place of honour in society only when one has morality. No society can exist without morality. Therefore, spread morality in society.
A society that is based on morality will promote love for God. On the other hand, if society is without any moral base, there will be neither fear of sin in its members nor love for God. Therefore, it is the foremost duty of people to safeguard their morality”. Josue Okoth, writing in The Monitor a couple of years ago, claims that moral decay in Uganda has reached alarming levels. He argues that every aspect of life is affected; there is an urgent need to establish the cause of the problem and search for a solution. He points out that leaders often “talk hard” but are corrupt. Wael Alwazir, writing in Medium, observes that the consequences of moral decay are far-reaching and affect multiple aspects of society. Firstly, it leads to a breakdown of social cohesion, with communities becoming fragmented and individuals feeling disconnected; trust is compromised, leading to a sense of insecurity and vulnerability. Moral decay undermines institutions and erodes faith in leadership. The gradual erosion of ethical principles, values, and social norms within a society manifests in various forms, such as a decline in empathy and compassion, a disregard for honesty and integrity, and a lack of accountability”.
El Salvador is the smallest country in South America, with a population of 6.5 million people. The value of its exports at US$8.491 billion, is very similar to Kenya’s. The country was once synonymous with rampant gang violence and a high murder rate. It has undergone a remarkable transformation under the leadership of President Nayib Bukele. Known as the “Arabian Stallion” due to his Palestinian heritage, Bukele has executed bold strategies that have significantly reduced crime and restored safety to the nation. In less than three years, El Salvador transitioned from one of the world’s most dangerous countries to one of the safest, a feat that has drawn both admiration and controversy. Additionally, Bukele made global headlines by introducing Bitcoin as legal tender, further showcasing his innovative approach to governance. Nayib Bukele’s roots trace back to Palestine. His grandparents emigrated from the town of Bethlehem, seeking a better life away from the strife and economic hardship in their homeland. They settled in El Salvador, a country with a small but growing Palestinian community. Bukele’s father, Armando Bukele Kattán, became a prominent businessman and an influential community leader. He was also an imam, blending his entrepreneurial spirit with deep cultural and religious ties.
The International Code of Ethics requires all accountants to comply with the fundamental principles of ethics. The Code also requires them to apply the conceptual framework to identify, evaluate and address threats to compliance with the fundamental principles. Applying the conceptual framework requires having an inquiring mind, exercising professional judgment, and using the reasonable and informed third party test. The conceptual framework recognizes that the existence of conditions, policies and procedures established by the profession, legislation, regulation, the firm, or the employing organization might impact the identification of threats. Those conditions, policies and procedures might also be a relevant factor in the accountant’s evaluation of whether a threat is at an acceptable level. When threats are not at an acceptable level, the conceptual framework requires the accountant to address those threats. Applying safeguards is one way that threats might be addressed. Safeguards are actions individually or in combination that the accountant takes that effectively reduce threats to an acceptable level.
I am sure that all of you know the five fundamental ethical principles but let us go through them again. The first is integrity: an accountant must be straightforward and honest in all professional and business relationships. I would add that s/he must be honest in every sector of her/his life. The second is objectivity: an accountant must exercise professional or business judgment without being compromised by bias, conflict of interest or undue influence of, or undue reliance on, individuals, organizations, technology or other factors. Number three: the accountant must have professional competence and do his/her work with due care; all accountants must attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organization receives competent professional service, based on current technical and professional standards and relevant legislation and act diligently and in accordance with applicable technical and professional standards. The fourth is confidentiality: the accountant must respect the confidentiality of information acquired as a result of professional and business relationships. Lastly, the accountant must act with professional behavior; that is s/he must comply with relevant laws and regulations, behave in a manner consistent with the profession’s responsibility to act in the public interest in all professional activities and business relationships and avoid any conduct that the accountant knows or should know might discredit the profession. All accountants must comply with each of the fundamental principles.
An accountant must comply with the principle of professional competence and due care, which requires the accountant to attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organization receives competent professional service, based on current technical and professional standards and relevant legislation. An accountant must act diligently and in accordance with applicable technical and professional standards. What is it to act diligently? Doing something diligently means doing it thoroughly and well: it is the opposite of doing it lazily or shoddily. If you are tireless, persevering, and do things with great care, then you do things diligently. This is a word that goes with hard and careful work. Workers who do their job diligently tend to get promoted. When someone uses this word about something you have done, it is a huge compliment. Serving clients and employing organizations with professional competence requires the exercise of sound judgment in applying professional knowledge and skill when undertaking professional activities. Maintaining professional competence requires a continuing awareness and an understanding of relevant technical, professional, business and technology-related developments. Continuing professional development enables the accountant to develop and maintain the capabilities to perform competently within the professional environment. Diligence encompasses the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on a timely basis. In complying with the principle of professional competence and due care, the accountant must take reasonable steps to ensure that those working in a professional capacity under the accountant’s authority have appropriate training and supervision. Where appropriate, the accountant must make clients, the employing organization, or other users of the accountant’s professional services or activities, aware of the limitations inherent in the services or activities s/he offers.
Just imagine if all accountants, and all employees and service providers in Kenya, were to work with care and skill: Kenya would be a different country.