Accounting giants 'have strained our trust' - Archbishop

The text of an address by Archbishop Thabo Makgoba to the School of Accountancy at the University of the Witwatersrand:

Students, staff, members of the Institute, friends all:

Thank you for the invitation to be here. It is very encouraging to learn that you are engaged in a process of scrutinising yourselves and your practices with a view to ensuring that you are living up to your duty to serve the public and the nation.

Thank you also for inviting me this evening to lend my voice, my perspectives and my reflections on what I hope is the end of one of the most trust corroding episodes of the past eight years here in South Africa.

I couldn’t help but notice in reading the Professional Code of Conduct on the Institute's website, that there was some very clear language regarding a commitment to integrity. It went on to say that this principle “imposes an obligation on all chartered accountants to be straightforward and honest in all professional and business relationships” and that “Integrity implies fair dealing and truthfulness.”

Professional ethics is the bedrock of the accountancy profession. Ethical behaviour in business is fundamental for public trust and confidence. We in my Church have had to embark on a process of similar self-examination recently, so I know it is not easy – it can be painful and it can, and should, strain old relationships and patterns of doing things.

So, to frame my thoughts today, I’d like to ask you three questions and offer three simple truths.

First the questions:

• What is the role of trust in considering the behaviors and decisions of our troubled accounting industry?
• What responsibility does the troubled accounting industry have in living a set of values that guide every decision?
• How should all of South Africa, the South Africa who relies on the transparency, good governance and reliability of our accounting profession digest these repeated failures to fight against corruption?

To help guide us, some simple truths.

1. In a civil society, trust is the lubricant and the currency of a healthy democracy;
2. All institutions have the responsibility to their employees, to their customers, to their communities and to their country to be operating their businesses on a values-based decision-making platform;
3. All leaders of those institutions have the obligation, duty and accountability to ensure that they, and everyone they lead, say "no" to corruption. Anyone playing a role in governance, who is not ready to do this, is not a leader. and cannot be trusted,

The practices of our accounting giants have strained our trust and become like a drop of ink in a glass of milk.

We live in a country, whose rich culture, allows us to have both a parliamentary government and tribal leaders. I want the world to know that we approve of a monarchy, and in South Africa the law is king. No one is above the law!

• No matter who leads our country THE LAW IS KING.
• No matter who leads our tribes, THE LAW IS KING.
• In our country’s board rooms, THE LAW IS KING.
• As in every free nation in Africa and throughout the world, the RULE OF LAW IS THE KING; and there ought to be no other.

My fellow South Africans, the only way to sanctify our belief in a new South Africa is to shower off the dirt of corruption. This country’s accounting firms had better take a step back before they take their next step forward. They have shattered this country’s trust in them.

And if you cannot trust them, if you cannot trust our accounting firms and chartered accountants’ transparency, integrity or governance, how can we trust the companies they have audited to know whether they are companies we can invest in?

You protect the shareholders of a company from being misled. This leads to sensible investment, the protection of jobs, and therefore the protection of the public interest.

If we cannot trust our accounting firms and chartered accountants, how can we trust the promises, decisions and actions of the government agencies and ministries they audit? And if we cannot trust our South African companies, what then?

My friends, distrust is like a stain. It gets on the walls. It gets in your wallpaper. It gets in your rugs, in your upholstery, and your clothes, and finally in to you.

The World Economic Forum for the last decade has reported, the greatest crisis in the world is the crisis of distrust. We here in South Africa are coming out of an era of distrust. There are many in the world who still today, and for good reasons, do not trust South Africa’s government or business community.

There are many areas within South Africa where we need to rebuild trust. Trust is the true currency of the 21^st century. The recent blatant violations by this country’s leading accounting firms, suggest there is a serious gap between what society expects of accountants and what accountants expect of themselves. Shame on them for how they disrespected our constitution, our country and our future.

If we cannot trust our accounting profession, our chartered accountants, perhaps it is time to consider a law to restore public confidence and trust in the financial reporting by businesses, especially public companies.

On one hand I have always believed integrity has no need of rules. But at the same time, because the accounting industry is now playing ‘catch up’ and candidly, because I believe so wholeheartedly in the integrity of our nation’s chartered accountants, something must be done to reverse the ‘era of corruption’ we are leaving.

You must help to restore trust in government and business, and no one is in a better position to do that that you. We must take the responsibility of integrity to a higher level and pay more attention to their financial controls and reporting for companies of all sizes. This would include:

• Ensuring compliance with laws and regulations;
• Safeguarding company assets;
• Ending falsification of information in financial records;
• Stopping putting the interests of clients above everything else, which leads to unprofessional decision-making, including the practice trying to hide anything that might appear negative about the client’s firm from the shareholders and the public;
• Deterging fraud, padding, falsification of financial records or any other activities that may lead to misleading financial reports.

Ethics and ethical dilemmas surround our lives. Television, radio, newspapers, magazines and World Web sites feed us with stories of ethical violations in politics, sports, religion, and business.

Integrity is the first chapter in the book of wisdom. My father taught me a very important lesson about integrity, he said, “Whoever is careless with the truth in small matters, cannot be trusted with important matters.”

We are seeing evidence of both a great challenge and a great opportunity to the community and country’s respect and trust of accounting as a profession. The challenge is centred on the profession’s need to strengthen public confidence in its effectiveness and ethics. Social concern regarding accounting ethics in South Africa has focused on the interaction of ethics and professionalism and has emphasized the importance of self-regulation and a priority of ethical, values-based decision making.

As you weigh your choices, think of your parents, family, children and ask, “how you want them to see you and your life’s work?”

To wrap up my remarks, let me take a step back.

No one has more opportunity to shape tomorrow’s South Africa than you.

As we move into the third decade of our democracy, we must reflect on what we can learn from our country's “great struggle” of the last century and ask: Are we not again confronting the reality that we can achieve equality, security and well-being for all of us if we embark on a second “great struggle”, or what I call the “New Struggle” for South Africa?

It has long been my view that the greatest, most serious inequality we face in South Africa is the inequality of opportunity. It is here that we can see the interrelationship between all the other inequalities. Access to opportunities is an important predictor of future outcomes. Access to quality basic services such as education, health care, essential service delivery infrastructure (like water, sanitation and electricity) and early childhood development provides an individual, irrespective of background, the opportunity to advance and reach his or her unique human potential.

The New Struggle starts by agreeing that it begins with the rational and emotional acceptance that after 20 years of democracy, we need to regain our moral compass. The New Struggle requires that we must come together to realise the potential of this blessed country.

It takes integrity to acknowledge we can do better, but it also takes courage actually to do better. We must do better.

It takes courage to confront those of our comrades in the great struggle of the past, and to clean house: to expose corruption and self-dealing and to put us back on a path, in the words of the Code I quoted from earlier, where there is “fair dealing and truthfulness”.

In promoting the New Struggle in the past few years, I have said that despite what we were going through, we could look forward with confidence and hope. The events of the past few months have borne that out – indeed, the road ahead is less bleak than it looked a year ago. But we have a long way to go, not only to clean up what has gone wrong in recent years, but in facing new challenges, which are rooted in what I raised in my opening words, and that is the injustices inherent in our economic system.

You are at the epicentre of tomorrow’s South Africa.

Our economic system’s integrity is in your hands in how you guide, advise and lead our leaders in terms of financial reporting, transparency and good governance.

My hope lies in the fact that, unlike during the struggle of the past, we are a democracy, and our democracy is vibrant. South Africa is not broken. We have a sound Constitution and we have seen that we have resilient institutions. We have the courts, especially the Constitutional Court, we have civil society, the media, whistle-blowers in the government and private sector, and we have millions of honest and hard-working citizens, both in the public and private sector.

South Africa has never needed you more, than now.

And, I believe I can say, we have you, accountants and auditors dedicated to the highest ideals of the profession, dedicated to good corporate governance and to the highest ethics of your profession.

I’ve already asked too many questions today, sounding like the serial educator I’ve always tried to be. But if you’ll indulge me, one last question to leave you with:

On life’s balance sheet, will your career’s work be an asset or a liability?

Thank you for inviting me here today. God bless you. God bless your families. And God bless South Africa.

God loves you and so do I.