The role of Chartered Accountants (CAs) in eradicating Corruption

The role of Chartered Accountants (CAs) in eradicating Corruption

If the accounting profession is committed to development, then it should commit itself to combat corruption.

Introduction

Corruption is one of the most damaging consequences of poor governance. And the CAs create strong governance through supervision. Corruption is one of the world’s supreme challenges and its detrimental sound effects on the overall sustainable development. None country is free of corruption. There is no doubt that it hampers economic growth by assorted means such as deterring investment and raising transaction costs and hesitation. Although it may be difficult to describe, corruption is generally not difficult to recognize. Cases of corruption are unveiled increasingly frequently even though most of them don’t take place in broad daylight. The solution to this multidimensional phenomenon, which is caused by several factors, should include the enforcement of powerful watch on corporate activities. The use of transparent financial accounting information in supervision of Chartered Accountants (CAs)enhances the effectiveness of the governance process which in turn prevents corruption.   Accounting scandals of high profile companies (e.g. Enron, WorldCom, Global Crossing, and Satyam) have questioned the effectiveness of corporate governance and supervision mechanisms, the quality of financial reports as well as audit.

Role of Chartered Accountants

Chartered accountants play an essential role in society, providing reliable and transparent information, both in the public sector and in the private one. This profession has a significant role to play in anti-corruption. Accountants work in many aspects of business. As public practitioners, accountants are auditors and business advisors in a number of areas. They also hold positions as tax advisors. In addition, accountants serve in key internal positions in organizations in the public and private sector, are internal auditors, and work as educators. Each of these accountants can all play a role in combating corruption. The role of Chartered Accountants (CAs) has been seen as promoting transparency and fairness

CAs are national-level watchdog. By scrutinizing CAs are not specialized anti-corruption agencies: on the whole they are not expressly charged with detecting or investigating corrupt activity but they have expertise in auditing and reporting the facts. CAs have traditionally undertaken financial audits of organizations’ accounting procedures and financial statements, and   compliance audits reviewing the legality of transactions made by the audited body. In recent era many CAs have expanded the scope of their audits to scrutinize the efficiency of management viz; through Forensic auditing, CARO reporting etc.

Most CAs consider their audit mandate sufficient, although some think more investigative powers could be practical. CAs normally does not have the need to prosecute acts of corruption that could lie behind audit findings for general reporting purpose. Others discussed the difficulty in carrying out investigations, in view of the fact that the findings that usually results from the CA's audit work is not usually designed to confirm the management's improper behavior. Those CAs that have investigative authority by terms may expand the audit to collect evidence of improper behavior. Further, it   is argued that specific investigative authority is unnecessary, since the responsibility for investigation and prosecution lies within the sphere of other specialized public bodies and within the management of the audited body itself. They noted that the CA can maintain close collaboration with all these organizations identifying better practices and using these practices as indicators. We generally agree that the primary responsibility for the prevention and detection of corruption rests with the administrative authorities, the police, and other investigative institutions and cannot be counted among the main tasks of CAs. Nevertheless, we also agree that CAs are contributing their efforts in this ongoing struggle, especially by improving overall financial accountability by strong supervision (audit) and thereby creating a climate of transparency and good governance. Here we need to set main goal more in preventing corruption than in the field of actually detecting such illegal activities.

The separation of ownership and control in organizations created problems regarding the stewardship of enterprises. The principal-agent problem or agency problem in the modern corporation and mainly the fact that managers have often different motives from the owners explains up to a point why firms get involved in corrupt practices undertaking great risks and also when there are setbacks in the firm’s performance, management tries to find ways to conceal them or postpone breaking the news to the public, or even to the board, waiting for things to improve. In these cases, transparency and full disclosure in financial reporting are often sacrificed. CAs are the eyes and ears of management and from that position CAs play a significant role in the organization's anti-corruption efforts. CAs establishes control mechanisms that prevent and detect the flaws in the organization. CAs discourages managers and inchoate from falsifying financial statements and at the same time, checking on the internal control system, can contribute to the enhancement of the firm’s regulations.

CAs actively contributes, as auditors, accountants in management (including in private and the public sector), consultants (especially with respect to taxes, information systems, management, insolvency, and corporate finance), internal auditors, and accountants working in academia. CAs performs their duty of honesty and makes valuable efforts towards eradicating corruption.

-       Prateekkumar Patel

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