International Accounting


What Accountants Can Do to Stop Corruption

CPAs may not be able to stop corruption on their own, but they should be leaders of their countries' collaborative efforts to oppose it. In particular, they should do everything they can to encourage organizational controls that expose corruption early—and stop it well before auditors have to decide whether to blow the whistle. That's the substance of a new International Federation of Accountants (IFAC) discussion paper, The Accountancy Profession and the Fight Against Corruption.

According to John Gruner, IFAC's director general, the discussion paper is in response to a challenge by World Bank President James Wolfensohn in his keynote address to the last World Congress of Accountants, which was in October 1997. The paper defines corruption broadly to include "special favors and influence" as well as such monetary sins as bribery, fraud and illegal payments. It acknowledges that accountants cannot be expected to tilt against windmills if it puts their livelihoods, and in some environments, even their lives, at risk. The full text of the discussion paper can be downloaded from IFAC's Web site at 
www.ifac.org .

To be effective in their stand against corruption and their commitment to truth and honesty in financial reporting, accountants must practice in an environment where the legal authorities, other professionals and institutions, and the general public are supportive. Accordingly, IFAC encourages its 143 member bodies to "build collaborative relationships with legislative and regulatory authorities, the legal profession and other groups interested in strengthening the framework for good governance"—both corporate and political. IFAC itself has been working with several groups to this end: Transparency International, which is focused on the fight against government corruption; the United Nations, especially the United Nations Conference on Trade and Development (UNCTAD); the International Monetary Fund (IMF); the World Bank; and the Organization for Economic Co-operation and Development (OECD), especially its Financial Action Task Force on Money Laundering and its Anti-Corruption Unit. The paper also asks member bodies to advocate a tax system that disallows deductions for corrupt payments. Gruner notes that the OECD has recommended its members reexamine their policies on tax deductions for bribes and that several members have changed their tax rules as a result. Gruner considers this trend both "a major change"and "encouraging." A progress report can be found on the OECD's Web site at
  www.oecd.org .

In another development, the U.S. Agency for International Development has made its newsletter, Accountability/Anti-Corruption, available online in English (as well as Spanish) at www.respondanet.com .

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