The Accountancy Profession and Accountants in Business


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Presentation by Stathis Gould at the ACCA SNAI CFO Conference, New York, USA, September 24, 2013

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  • The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. (inside front cover of CD)Together, this coalition shares the view that corporate reporting needs to evolve to provide a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term. (inside front cover of CD)The International Integrated Reporting Framework is being developed to meet this need and provide a foundation for the future. (inside front cover of CD)The IIRC is chaired by Professor Mervyn King, and Paul Druckman is Chief Executive Officer.List the organisations and people on Council:Alex Malley, Chief Executive Officer, CPA AustraliaAndrew Wright, Treasurer to TRH The Prince of Wales and The Duchess of Cornwall, The Prince’s Accounting for Sustainability ProjectDr.AngelienKemna, Chief Investment Officer, APG Asset ManagementAron Cramer, President and CEO, Business for Social Responsibility (BSR)Atsushi Saito, President & CEO, Tokyo Stock Exchange Group, IncBarry Melancon, President and Chief Executive Officer, American Institute of Certified Public AccountantsCharles Tilley, Chief Executive, Chartered Institute of Management AccountantsCharles McDonough, Vice President and Controller, The World BankProfessor Dr.ChristophStueckelberger, Executive Director and Founder, GlobethicsDavid Nussbaum, WWF-UK Chief Executive, WWF InternationalDennis Nally, Chairman, PwC InternationalEdward Nusbaum, CEO, Grant Thornton InternationalErik Breen, Member of the Executive Board, EumedionHans Hoogervorst, Chairman of the Board, International Accounting Standards BoardHelen Brand, Chief Executive, Association of Chartered Certified AccountantsHerman Mulder, Chairman, Global Reporting InitiativeHuguette Labelle, Chair, Transparency InternationalKoushikChatterjee, Executive Director and Group-Chief Financial Officer, Tata SteelJean-Charles de Lasteyrie, Vice-President, Fédération des Experts CompatablesEuropéensJim Turley, Chairman and Chief Executive Officer, Ernst & YoungLi Yong, Vice Minister of Finance, President of Chinese Institute of Certified Public AccountantsMarco Geovanne Tobias da Silva, Executive Director of Governance and Holdings, PreviMargaret M. Foran, Chief Governance Officer, Prudential FinancialSir Mark Moody-Stuart, Chairman, Foundation for the Global CompactMartin Van Roekel, CEO, BDO InternationalProfessor Mervyn King, Chairman, International Integrated Reporting CouncilMichael Andrew, Global Chairman, KPMG InternationalMichael Izza, ICAEW Chief Executive, Global Accounting AllianceMichelle Edkins, Chair of the Board of Directors, ICGNMindy Lubber, President, Ceres and Director of INCRProfessor Nelson Carvalho, Universidade de São Paulo, Brazil and Chairman 25th Session of UNCTAD’s ISARPaul Dickinson, Executive Chairman, Carbon Disclosure ProjectPeter Bakker, President, World Business Council for Sustainable DevelopmentRichard Chambers, President and CEO, Institute of Internal AuditorsRichard Samans, Chairman, Climate Disclosure Standards BoardProfessor Robert Eccles, Chairman of Sustainability Accounting Standards Board and Professor of Management Practice, Harvard Business SchoolRobert Greenhill, Managing Director and Chief Business Officer, World Economic ForumRoberto Pedote, Senior Vice President of Financial and Legal Affairs, NaturaCosmeticosRussell Picot, Group Chief Accounting Officer, HSBCSandra Guerra, Chairman, InstitutoBrasileiro de GovernançaCorporativaStephen Almond, Chairman of the Board, Deloitte Touche Tohmatsu LimitedThomas Kusterer, Chief Financial Officer, Energie Baden-Württemberg AGVedatAkgiray, Vice-Chairman, International Organization of Securities CommissionsWan Ling Martello, Executive Vice President, NestléWarren Allen, President, International Federation of AccountantsWolfgang Engshuber, Chairman, Principles of Responsible Investment
  • -The Standard & Poor’s stock market index of the top 500 publically traded American companies. -This graph demonstrates that:- In the 1970’s 80% of a company’s market value could be traced through to the financial statements.Today, only around 20% of a company’s market value can be accounted for by its financial and physical assets. Other factors, particularly relationships, intellectual and human capital, make up an increasing proportion of a company’s value. Corporate reporting needs to evolve in order to reflect this change. <IR> enables the clear and concise communication of value creation, allowing investors to evaluate how all relevant factors that a business uses and affects are incorporated.The IIRC are not trying to monetize everything and value a business (which is a common misperception), but rather we are trying to ensure investors have the information they need to assess the ability of an organization to create value over time.
  • IR not intended to replace existing forms of reporting<IR> draws on financial reporting, as well as other forms of reporting, such as sustainability reporting, management commentary, governance and remuneration reporting, carbon reporting, etc., and other communications, such as analyst calls and the investor relations section of an organization’s website. It draws together information from these other sections as they relate to strategy, governance, performance and prospects, and makes the links and connections between them to provide a clear, coherent, and importantly, concise communication about the ability of the organization to create value.
  • 5. The Framework Feedback received in response to the Consultation Draft will be analysed over the second half of this year and will shape the direction and content of the initial version of the Framework thatwill be released in December 2013. This is why it is critical that we receive feedback from the Consultation Draft.
  • The Accountancy Profession and Accountants in Business

    1. 1. Page 1 | Confidential and Proprietary Information The Accountancy Profession and Accountants in Business Stathis Gould ACCA SNAI CFO Conference New York, USA 24 September, 2013
    2. 2. Page 2 | Confidential and Proprietary Information IFAC’s Focus • Global organization of the accountancy profession • 173 member bodies and associates in 129 countries • Public interest mandate and vision: “The global accountancy profession will be recognized as a valued leader in the development of strong and sustainable organizations, financial markets, and economies.” IFAC
    3. 3. Page 3 | Confidential and Proprietary Information Defining “in business” IFAC Public Practice •Audit/Assurance •Large & small firm In Business •Commercial •Public sector •Not-for-profit 2.5m Professional accountants in business include commerce, industry, financial services, the public sector, education, and the not-for-profit sector
    4. 4. Page 4 | Confidential and Proprietary Information What IFAC Does • Establish high quality global standards • Adoption and implementation of standards • Support the capacity development of the accountancy profession • Provide a global voice and representation • Support professional accountants in business IFAC and its PAIB Committee
    5. 5. Page 5 | Confidential and Proprietary Information Overview of IFAC Service Delivery (1) Standards & Guidance (2012: US $17 million) – Developing international standards: • Auditing, assurance, and quality control • Ethics • Public sector accounting • Accounting education – Representation & Guidance: • Professional accountants in business (PAIBs) • Small and medium practices (SMPs) IFAC and its PAIB Committee
    6. 6. Page 6 | Confidential and Proprietary Information Overview of IFAC Service Delivery (2) Adoption & Implementation (2012: US $2 million) • Promoting adoption of international standards and guidance • Providing high-level advice on technical and legal approaches to adoption • Facilitating availability and accessibility of international standards and guidance, including translations • Developing / facilitating sharing of implementation material and tools • Assessing the effective implementation of new international standards IFAC and its PAIB Committee
    7. 7. Page 7 | Confidential and Proprietary Information Overview of IFAC Service Delivery (3) Quality & Development (2012: US $4 million) • Implementing Member Body Compliance Program • Advocating / supporting capacity-building initiatives to strengthen professional accountancy organizations • Increasing awareness of PAIBs, and supporting Member Bodies in enhancing PAIB competence IFAC and its PAIB Committee
    8. 8. Page 8 | Confidential and Proprietary Information Overview of IFAC Service Delivery (4) Representation of the Profession (2012: US $4 million) • Commenting on issues relevant to the profession • Developing / maintaining relationships with stakeholders • Developing policy positions addressing issues relevant to the profession IFAC and its PAIB Committee
    9. 9. Page 9 | Confidential and Proprietary Information Professional Accountants in Business Objectives • Increase awareness of important role professional accountants play in creating, enabling, preserving and reporting value for organizations and their stakeholders • Supporting member organizations in enhancing the competence of their members through development and sharing of good practices and ideas. IFAC
    10. 10. Page 10 | Confidential and Proprietary Information Areas of Importance • Roles, Domain and Competency of PAIBs • Governance and ethics • Risk management and control • Sustainability and corporate responsibility • Financial and performance management • Business reporting IFAC all areas of critical importance to professional accountants in private and public sector organizations
    11. 11. Page 11 | Confidential and Proprietary Information • Awareness raising • Ensuring that professional accountancy organizations and employers support relevant knowledge acquisition • Helping accountants in business to acquire the skills and mindset needed What is the Profession’s Role?
    12. 12. Page 12 | Confidential and Proprietary Information Preparing & Promoting Professional Accountants • The Role and Expectations of CFOs • Preparing professional accountants for finance leadership – Individuals – Professional accountancy organizations • Encouraging regulators and organizations to ensure professional accountants fulfill CFO roles IFAC
    13. 13. Page 13 | Confidential and Proprietary Information • What does it require to be a leader? • What does it take to balance stewardship and partnership? • How does the CFO integrate & navigate? • Why is a professional so important in the CFO role? What are the Expectations of a CFO?
    14. 14. Page 14 | Confidential and Proprietary Information The CFO as a Professional • The CFO should be a professional and bring professional qualities to the role and the organization. • Strong ethical leadership – Tone at the top – Applying their ethical principles of integrity, objectivity, professional competence and due care, confidentiality and professionalism • Applying professional qualities, such as professional judgment, can involve reconciling conflicting commercial, financial, sustainability, and stakeholder interests IFAC
    15. 15. Page 15 | Confidential and Proprietary Information Recommendations for Institutes and Employers • Understand and meet organizational needs • Ensure scope of qualification and training of professional accountants incorporates broader professional and managerial capabilities and skills • Foster and encourage a commitment to lifelong learning among professional accountants • Flexible HR strategies that deal with – Cultural and geographical differences – Offering broad business experience – Flexible approaches to development and training IFAC
    16. 16. Page 16 | Confidential and Proprietary Information Global Financial Crisis • Governance in name but not in spirit; ethical flaws • Regulatory overload, leading to legalistic compliance • Risk & control systems too narrowly focused on only financial reporting controls Conclusions: • Appropriate application of governance, risk management and internal control standards and principles is often the main problem • PAIBs should support their organizations in taking a broader approach in governance, risk management and internal control
    17. 17. Page 17 | Confidential and Proprietary Information IFAC Response • Encouraging better governance, risk management and internal control • Encouraging alignment of global risk and control guidelines through liaison with COSO & ISO 31000 • Developing additional International Good Practice Guidance, particularly in governance, risk management and internal control, and financial management IFAC
    18. 18. Page 18 | Confidential and Proprietary Information Global Survey on Risk Management & Internal Control • Received over 600 responses from around the globe, including 117 (20%) from public sector organizations Main conclusions: • More awareness of the benefits of risk management and internal control systems should be created • Risk management and internal control should be better integrated into organizations’ overall governance, strategy, and operations • Risk management and internal control requirements and guidelines should be further aligned internationally
    19. 19. Page 19 | Confidential and Proprietary Information Global Survey on Risk Management & Internal Control > Proposed Next Steps • Bringing various risk management and internal control standard setting organizations (such as ISO 31000, COSO, and Risk Oversight & Governance Board) and their guidelines closer together through active participation • Collaborating with experts on development of guidance for PAIBs on risk management and internal control • Engaging in dialogue with issuers of governance codes around the globe (OECD, G20, UNCTAD, World Bank)
    20. 20. Page 20 | Confidential and Proprietary Information Evaluating and Improving Internal Control in Organizations • Highlighting areas where practical application of internal control standards often fails in many organizations • Designed to establish a benchmark for good practice in maintaining effective internal control in response to risk, and help PAIBs and their organizations create a cycle of continuous improvement for their internal control • For all types of organizations, as all organizations—whether private or public—should have appropriate internal control • Being used in e.g., New Zealand as part of overall internal control assessment for the government
    21. 21. Page 21 | Confidential and Proprietary Information Next Steps • Contributing to OECD review of its corporate governance principles • Influencing better governance in the public sector • Promoting the role of accountants in good governance • Further guidance in Integration of Risk & Control: • In practice, risk management and internal control are often silos managed in a disjointed and unconnected way • Principles on how PAIBs can support their organization with better integration of risk management and internal control into the organization’s overall governance system • Integrated reporting
    22. 22. Page 22 | Confidential and Proprietary Information IFAC Framework for Public Sector Organizations (1) What are the main challenges for good governance in public sector organizations? • Sovereign debt crisis • Shortage of funding / rationalization • Short-termism • Internationalization/technology/complexity • Corruption • Application of good governance practices
    23. 23. Page 23 | Confidential and Proprietary Information IFAC Framework for Public Sector Organizations (2) What can a governance framework accomplish? • Establish benchmark for good governance in public sector • To help public sector organizations create a cycle of continuous improvement for their governance systems • Emphasizing how critical public financial management and accountability is to any public sector governance system
    24. 24. Page 24 | Confidential and Proprietary Information IFAC Framework for Public Sector Organizations (3) Openness and full stakeholder engagement. Defining outcomes: Determining and delivering outputs, to optimize achievement of intended outcomes Developing capacity of organization, and capability of its leadership and individuals within Managing risks and performance through robust control and strong public financial management Implementing good practices in transparency and reporting Strong commitment to integrity, ethical values, the rule of law, and working in the public interest.
    25. 25. Page 25 | Confidential and Proprietary Information IFAC Framework for Public Sector Organizations (4) Collaborating in International Reference Group • World Bank (chair) • OECD • IMF • INTOSAI • UNCTAD • GAO • IPSASB • CIPFA • IFAC OECD Public Sector Integrity Network
    26. 26. Page 26 | Confidential and Proprietary Information A Journey Through Business Reporting Accountability Financial and Regulatory Reporting Transparency ++ Sustainability Reporting Overall business value story Integrated Reporting INTEGRATED THINKING & MANAGEMENT
    27. 27. Page 27 | Confidential and Proprietary Information Financial Reporting and a Sustainable Economy Enhancing Transparency Through Reporting • Financial statements are the core but do not tell the whole performance story • Reflecting environmental/social issues in financial reporting standards, e.g., disclosure of financial results related to pollution emissions; environmental opportunity/risks in management commentary/MD&A • Concern with financial reporting is not new and various initiatives have attempted to deal with the challenges
    28. 28. Page 28 | Confidential and Proprietary Information Sustainability Reporting and a Sustainable Economy Enhancing Transparency Through Reporting • Sustainability reporting growing; involves the support of the profession at various levels • Provides the structure for transparent reporting covering environmental, social, economic and governance (ESG) areas • Provides preparation for integration by increasing maturity and understanding of ESG areas
    29. 29. Page 29 | Confidential and Proprietary Information Integrated Reporting and a Sustainable Economy The Opportunity of Integrated Reporting • How an organization’s strategy, governance, performance and prospects lead to the creation and preservation of value • Business model and capitals focused so covering all non- financial business drivers of performance • Complements rather than replaces
    30. 30. Page 30 | Confidential and Proprietary Information NGOs Companies Investors Accounting Standard setters Regulators Chair: Prof Mervyn King CEO: Paul Druckman The International Integrated Reporting Council
    31. 31. Page 31 | Confidential and Proprietary Information More than Financials
    32. 32. Page 32 | Confidential and Proprietary Information strategy, governance, performance, prospects Financial reporting Other reporting concise communication about value A New Focus
    33. 33. Page 33 | Confidential and Proprietary Information Discussion Paper Prototype Framework December 2013 The Framework Framework (2013) Emerging <IR> Database Behaviour Change Summary of comments Background Papers Pilot Programme Yearbook 2014 Work Plan The Journey So Far
    34. 34. Page 34 | Confidential and Proprietary Information Integrated Thinking and Reporting • What comes first: integrated management (the chicken), or reporting (the egg)? • Both reinforce each other. Reporting drives behavior within an organization; transformational change derives from integrated thinking • A big opportunity for the accountancy profession and accountants to influence sustainable value creation
    35. 35. Page 35 | Confidential and Proprietary Information • Guidance on business reporting processes • Professional accountants in business: Embedding sustainability practices and accounting for sustainability Recent IFAC Initiatives (1)
    36. 36. Page 36 | Confidential and Proprietary Information Recent IFAC Initiatives (2)
    37. 37. Page 37 | Confidential and Proprietary Information • For further information please contact: • Stathis Gould at • Visit