May you live in interesting times — and have an accountant to lead the way

Business and political leaders around the world are living in “interesting times.” But, out of turbulent times comes an exciting leadership challenge—and that’s where the world’s accountants step in.

The phrase ”May you live in interesting times” is apocryphally described as a Chinese curse, used to embody our preference for the peace, order and tranquility of “non-interesting” times.

These are interesting times, indeed. There’s little doubt that institutions, both private and public, are these days cursed with low approval ratings, which gives rise to increasingly nationalistic and protectionist policies. And our digitized, globalized world—which has opened doors for many innovative entrepreneurs—has thrown many stalwarts of our traditional economy into chaos.

Out of turbulent times, though, comes an exciting leadership challenge—and I believe this is where the world’s accountants step in. Recently, the International Federation of Accountants (IFAC)—upon whose board I’m proud to serve as Canada’s representative—released a report titled Build Trust, Inspire Confidence: The Global Accountancy Profession’s Call for Action by G20 Countries.” In it, we outline the unique opportunity being presented by this shifting landscape—one that can only be seized upon if government, business and professional leaders collaborate to make sure the benefits of the new economy are enjoyed by all.

The IFAC report boils down to two key recommendations: (1) build stronger governance (for trust and confidence in business and government); and (2) create an effective, coherent and transparent global economic environment (for growth, confidence and stability).

This sounds good, but just how will we do that?

RAISING GOVERNANCE STANDARDS ACROSS ALL ECONOMIC SECTORS

IFAC has identified five things that would go a long way toward raising governance standards around the world:

  1. Collaborate to tackle corruption and advance responsible conduct. By creating formal mechanisms for interchange between international regulatory, policy bodies and the private sector, we will be better able to fight fraudulent or corrupt activity.
  2. Promote focused investment in secure technology infrastructure across all G20 countries. By doing so, we can allow businesses, governments and citizens to participate in a secure, trusted digital environment.
  3. Embrace integrated reporting in all G20 countries. Integrated reporting is an opportunity to focus on long-term value creation, and improve on a largely fragmented, complex and compliance-driven system.
  4. Adopt a consistent and comprehensive approach to defining and requiring high-quality governance in public and private sector organizations throughout the G20. That includes adopting the G20/Organisation for Economic Co-operation and Development (OECD) Principles of Corporate Governance.
  5. Enhance public sector financial management through the adoption of accrual-based financial reporting with International Public Sector Accounting Standards (IPSAS) for all public sector entities.

FOSTERING GREATER TRANSPARENCY AND REGULATORY CONSISTENCY

The second part of the challenge—creating greater global transparency and consistency—is equally important to the task of rebuilding trust. In our report, IFAC identified five ways to accomplish that:

  1. Enhance the Small- and Medium-sized Enterprise (SME) economy. SMEs are the engines of economic growth and innovation globally; their perspectives need to be heard and considered at all levels of G20 policy-making.
  2. Collaborate on a coherent international tax system. We must renew efforts for coordinated implementation of the OECD Base Erosion and Profit Shifting (BEPS) Actions, and implement a properly resourced international taxation dispute resolution mechanism.
  3. Make regulation smarter and more effective across the G20. IFAC has surveyed senior executives and experts around the world, and they shared some of their key principles for smart regulation, including clear objectives in the public interest, a proportionate and balanced approach, and evidence-based assessment. Let’s formalize those principles on a global scale.
  4. Create a consistent, transparent global regulatory environment. Once you have principles, you must have the means to enforce them. We are asking the Financial Stability Board (FSB) to set up a more formal mechanism for continuous and systematic cross-border dialogue between national regulators to improve consistency and transparency.
  5. Implement internationally accepted standards. Our global economy and financial system is underpinned by confidence; adherence to global standards, like the International Financial Reporting Standards (IFRS), will help enhance that confidence.

Often these days, it seems like the world is spinning out of control and that there is a leadership vacuum. But what accountants have proved, for several centuries now, is that we have a unique ability to bring order to chaos—to make sense of a seemingly senseless environment.

Let us seize upon this opportunity to help rebuild trust and confidence in the global economy.

KEEP THE CONVERSATION GOING

What are your thoughts on the IFAC recommendations? Post a comment below.

About the Author

Joy Thomas, MBA, FCPA, FCMA, C. Dir.

Joy is the president and CEO of CPA Canada, and a member of the board of directors of the International Federation of Accountants (IFAC). Joy is also a member and chair of the Audit Committee with the Financial Planning Standards Board Ltd.

You may also be interested in:

A new report from CPA Canada shines a spotlight on the growing problem of income inequality in this country—a challenge felt most acutely in our biggest cities. Luckily, the news isn’t all bad.