King IV - creating an ethical culture

With recent events scarring the appearance and reputation of chartered accountants, the King IV movement cannot have been implemented at a better time. Replacing King III, King IV only further builds and introduces the need for better corporate governance and transparency. The King Codes have instilled these standards for the last few years and have been the core framework for governance. Consideration should be given as to how all stakeholders can once again make the South African industry one to be considered of high standard and quality. 

We have all heard the proverb of the “bad apple” but can one, or a few in this case, really spoil the whole bunch? Have the choices of a few brought the reputation of all members of the accounting and auditing community to a questionable point and what is the way forward?

The core values incorporated in the King Codes consistently emphasise ethical leadership, sustainability and good corporate citizenship. In any entity, it is the responsibility of those charged with governance to act in the best interest of the company as well as all stakeholders. These entities are expected to establish sound governance structures that create an “ethical culture” and thus ensure they are seen to be a responsible corporate citizen. The economy at the moment is one which comes with many challenges; mindful application of the Code can provide a solid base of principles, which will assist in navigating around these challenges.

Companies face various challenges, some experienced during the audit process but just how important is this and what are the benefits generated? The International Regulatory Board of Auditors (IRBA) has reminded us that auditing provides an important service to a country’s economy. The profession remains a vital component in creating credible financial markets, in turn, attracting the required investment which benefits all citizens. It is thus important for all auditing firms providing such service to ensure proper management of ethics and risks to ensure stability and high quality to clients.

Any system is only as strong as its people and these people are the best advocates for the business. We are all too familiar with the fundamental Code of Professional Conduct, and at times we may find ourselves in a position that requires us to make a decision at a significant consequence and loss. The South African Institute of Chartered Accountants (SAICA) states that it will “deal decisively with members who have acted unethically”. Any improper conduct will be referred to SAICA’s disciplinary committee by the body’s professional conduct committee. SAICA by-laws make provision for the cancellation of membership of any member “who has been removed from an office of trust on account of proven misconduct or convicted of theft, fraud or forgery”. Is it worth it? I’ll leave that decision up to you.

The industry has suffered a setback but it is a learning curve for all existing chartered accounts and those aspiring ones. SAICA has affirmed its absolute commitment to maintaining the integrity and ethical standards of the chartered accountancy profession in South Africa.

Organisations should ensure that the values it professes are followed and that its employees are able to live by them. Having values that are espoused on a company website and walls is easy. What matters, however, is that they are followed in the way the entity operates. It all starts with the ensuring that the organisation is built around purpose – an understanding of not just what it does, but why it does it. Ultimately, leaders have the responsibility to create an environment where pressures from both inside and outside of the organisation are less likely to cause people to stray from their values. The biggest challenge for leaders is to ensure that when these pressures arise - whether it is due to the ever-changing economy, technology or any number of reasons -  their organisation’s structures, culture and people are all pulling together so that these challenges are avoided or tackled constructively. The recent events have illustrated that we live in a world where these pressures will always be present, even at some of the world’s respected organisations.

Claire Claassen

Trainee Accountant, Durban

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