Promoting a Worldwide Commitment to Integrity, Objectivity and Professional Competence Marilyn PENDERGAST Chairman, IFAC Ethics Committee Managing Director, Urbach Kahn & Werlin Advisors, Inc United States

WORLD CONGRESS OF ACCOUNTANTS Promoting a Worldwide Commitment to Integrity, Objectivity and Professional Competence Marilyn Pendergast, Chair IFAC Ethics Committee

Crisis In Public Confidence

Executives Have Responsibilities Moral as well as legalMoral as well as legal Management for the benefit of shareholdersManagement for the benefit of shareholders Honest communicationHonest communication Strong, principled ethical conductStrong, principled ethical conduct

Boards Have Responsibilities Ensure management operates with integrityEnsure management operates with integrity Exercise oversight over managers and over the independence and work of the outside auditorExercise oversight over managers and over the independence and work of the outside auditor

Auditors Have Responsibilities Ethical StandardsEthical Standards Auditing StandardsAuditing Standards Accounting StandardsAccounting Standards

Lenders and Analysts Have Responsibilities Scrutinize borrowers’ creditworthinessScrutinize borrowers’ creditworthiness Project business opportunities and growthProject business opportunities and growth Assess and interpret and numbersAssess and interpret and numbers

Regulators Have Responsibilities Consistent and meaningful regulationConsistent and meaningful regulation Timely review of filingsTimely review of filings Enforcement of standardsEnforcement of standards

Investors Have Responsibilities Recognition of RisksRecognition of Risks

Responsibility of Member Bodies Provide ethical requirements to ensure the highest quality of performance and maintain public confidenceProvide ethical requirements to ensure the highest quality of performance and maintain public confidence The international code serves as a model on which to base national guidelines.The international code serves as a model on which to base national guidelines. Give consideration to the public service and user expectationsGive consideration to the public service and user expectations

Achieving Harmonized Standards International Solutions for Global IssuesInternational Solutions for Global Issues

Fundamental Principles Applicable to All Professional Accountants IntegrityIntegrity ObjectivityObjectivity Professional competence and due careProfessional competence and due care Professional BehaviorProfessional Behavior ConfidentialityConfidentiality

Integrity

Objectivity

Professional Competence And Due Care

Professional Behavior

Confidentiality

INDEPENDENCE The Foundation for Public Trust

INDEPENDENCE FOR ACCOUNTANTS IN PUBLIC PRACTICE ThreatsThreats –Self-Interest –Self-Review –Advocacy –Familiarity SafeguardsSafeguards –Created by the profession, legislation or regulation –Within the assurance client –Within the firm’s own systems and procedures

INDEPENDENCE FOR ACCOUNTANTS IN PUBLIC PRACTICE Independence-- the Conceptual ApproachIndependence-- the Conceptual Approach –Independence of Mind –Independence in Appearance

Some Areas of Current Interest Technology servicesTechnology services Internal auditingInternal auditing The “revolving door”The “revolving door”

Activities Not Allowed for Audit Clients Authorizing transactions on behalf of clientAuthorizing transactions on behalf of client Determining recommendations to be implementedDetermining recommendations to be implemented Reporting in a management roleReporting in a management role Valuation of material matters involving subjectivityValuation of material matters involving subjectivity Making management decisions related to client personnelMaking management decisions related to client personnel Promoting or underwriting sharesPromoting or underwriting shares

Role of the Accountant in Management Conflict of loyalties Presentation of financial information Professional Competence Support for Professional Colleagues Accountants in Management Roles

It’s not easy but it must be done