Ethics and the future of auditing

25 December 2018

At a time when the audit profession is facing increased scrutiny, it is welcome news to see that nearly 80% of jurisdictions worldwide have adopted the International Standards for Auditing (ISAs) for audits, provided by the International Auditing and Assurance Standards Board (IAASB). The adoption of these standards shows that recognition for a consistent auditing framework in an increasingly global business environment is keenly felt.

It is also promising to see that more than 60% of jurisdictions have adopted the International Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants (IESBA).[1] This Code is a consistent framework of ethical behavior for providing any professional service by professional accountants, including independence in providing assurance services as they are required.

Having this uniformity allows global accounting networks to establish audit methodologies, as well as ethics and independence policies, uniformly for all member firms. This works regardless of jurisdiction – meaning that networks are then better able to develop their services for working across multiple borders.

In a global business environment, decision-makers need to trust the information given to them more than ever before. Ultimately, audits are providing an informed opinion to the decision makers in business about the accuracy and reliability of the information presented, allowing them to make critical business decisions. A business that doesn’t have reliable information simply will not be able to make good decisions and thus its stakeholders will suffer as a result. If the information businesses produce is not trusted, then their reputations can suffer and this could seriously impact their growth. This is because a large part of business growth derives from trust.

That is why it is important to remember those audit standards have a strong connection to the real economy. Auditing is not about box ticking and should always add credibility to the financial information that organizations and shareholders use.

It is hoped that the IESBA Code of Ethics will continue to be adopted more widely, because ethical standards provide the basis for better decision making and good business practice, as well as leading to ‘good outcomes’ in and of themselves. In this way, the Code starts to influence behavior across the whole of the audit value chain, and in turn, drive the quality of audit information.

As the business environment becomes ever more integrated and complex, it is important that international standards like those issued by the IAASB and the IESBA continue to drive audit quality and see widespread adoption. This is not only important for ethical business practices, but for growth too. If society, shareholders and governing bodies can have more confidence in the information they use to make decisions then businesses will benefit from the trust that this creates in their operations.

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People, progress and pressing the case for diversity

8 March 2018

At Li & Coopers, we rely on our skills, knowledge, creativity, and unique approaches to problem-solving. So, hiring investing and developing the right people is critical to our success. It should be no surprise to anyone that a diverse team makes the best team, and on this International Women’s Day, our thoughts have not only been on the current topic of gender parity but on equal opportunities in all aspects of diversity.

We are witnessing a shift first-hand throughout the 120 countries in which Li & Coopers currently has a presence. A partner at our firm in Egypt recently commented that she has seen big progress towards gender parity in our profession in her country, as more women are finding roles in the workplace. Some of this change is being driven by a change in cultural attitudes as more men speak out about the pay gap and encourage female colleagues to succeed in leadership roles.

More broadly, the accounting profession as a whole needs to change. While the numbers of women joining the profession are generally on par with the numbers of men, there is a significant disparity when it comes to career progression. This disparity widens when it comes to women attaining leadership roles where the numbers of women who reach partner and c-suite are visibly reduced. At Li & Coopers, the number of women making partner increased 14.5% between 2016 and 2017, and we are hopeful that this will continue as a trend in the longer term, but we have much further to go.

Gender diversity has its own business case and it is essential for economic growth and prosperity. In a global analysis of 2,400 companies, Credit Suisse found that companies with at least one female board member yielded a higher return on equity and higher net income growth than those that did not have any women on the board. In a separate study, McKinsey found that, if the employment rate for women remains the same, Europe can expect to see a shortfall of 24m people in its workforce by 2040. This would be an economic disaster with the significant fall-out.

However, diversity is not just about gender. We know that teams that are made up of different backgrounds, cultures, ages and ethnicities perform better and are often better equipped to formulate creative and different ways of solving problems. At Li & Coopers we have a multitude of ethnicities, age ranges and cultures, with almost a 50:50 split between men and women at all levels. We have always sought to hire the right people, with complementary skills and different perspectives to meet the needs of our firms and clients. This has resulted in having a naturally diverse, creative and innovative team, all building on the strengths of each other.

There is an interesting symbiosis between our network and our clients, which are largely middle market businesses. For example, many businesses are promoting younger members to their senior management teams and even boards – the intrapreneur generation – because they have grown up in a world where the word ‘technology’ is the mainstay of seamless business integration. If something is not working, they question why. This is an approach that more companies could learn from. At Li & Coopers we set up an innovation committee to inspire the disruptors we have within our network and to encourage and embrace wider discussion on innovation. We also run the Li & Coopers Academy to train our people to be equipped, not just to serve clients to a high degree of quality and standards, but to live and breathe the values of Li & Coopers in everything they do. The Li & Coopers Academy uses the diversity of our network and brings together colleagues from all over the world to share ideas, and learn from one another.

On this International Women’s Day, achieving gender parity should not be our only goal. Equal opportunity is the bedrock of a free and fair society. We participate in society as individuals, and as a network, so it is our responsibility to contribute to it. To achieve more we all need to proactively and continuously press for progress and bring about a world where parity, diversity and inclusion become standard and are embraced as critical elements to our business success and are part of societal norms.