Panel calls for stricter accounting ethics

(August 6, 2003) An international panel of experts has set out guidelines aimed at cleaning up the accounting industry and corporate reporting.

The International Federation of Accountants (IFAC) released a report entitled “Rebuilding Public Confidence in Financial Reporting: An International Perspective,” which calls for the creation of codes of conduct and ethics for the corporate world.

“Failure to recognize the fundamental responsibility to report fairly has been a major contributor to the financial scandals of recent years,” states John Crow, former Bank of Canada governor and now chair of IFAC’s Credibility Task Force.

Since corporations are increasingly global in nature, the IFAC task force says the credibility of financial reporting must be addressed at both the national and international level.

The task force’s key recommendations include:

• Effective corporate ethics codes need to be in place and actively monitored; and supported by training.
• Codes of conduct need to be put in place for other participants in the financial reporting process — such as investment analysts and lawyers — and their compliance should be monitored.
• Incentives to misstate financial information need to be reduced, and companies must refrain from forecasting profits with an unrealistic level of precision.
• Audit effectiveness needs to be raised, primarily through greater attention to audit quality control processes.

The IFAC task force is made up of members from Australia, Canada, France, Japan, the U.K. and the U.S., with experience in not only accounting and auditing, but commercial banking, international economics, academia and law.

Filed by ADVISOR Staff.

(08/06/03)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.