The Role of Professionals in Preventing & Combating
Fraud & Corruption
In the light of the recent releases of the State Capture Commission’s report, The Helen Suzman Foundation advised that new regulations should be applied to the legal, accounting, management and consulting sectors in order to avoid capture of the state in future.
By Rashied Small,
Executive: Centre of Future Excellence (CoFE) at SAIPA
The foundation said that these four sectors played a prominent role in the capturing of the state and pointed out that “some of the role players have not been properly punished for their dirty role”. In terms of the accounting sector, the Foundation said it facilitated state capture by turning a blind eye to corruption – and sometimes even aiding it. It proposed that regulators must not wait for a crime to be committed in order to act. Instead, it must be proactive.
SAIPA concurs with this sentiment, as we know that accounting and finance professionals are part of the second line of defence in terms of tackling fraud and corruption (together with one’s systems of internal control and governance risk functions). There are standards and regulations that govern the responsibility of the accounting and finance professionals to act when fraud and corruption are identified. These include the Code of Conduct, Code of Ethics, and engagement standards. The reporting of fraud and corruption when identified is governed by
the Companies Act (regulation on reportable irregularities) and NOCLAR.
The Simplified Guidebook to Reporting Corruption and Fraud
The Helen Suzman Foundation was quoted as saying: “Professionals themselves have two obvious duties when they discover malfeasance. The first is not to participate in it. The second is to report it.”
I would like to add that prevention of, rather than later dealing with existing corruption, is the ideal. This can be done by focusing on the processing of transactions. If the professionals in charge of this process ensure that only valid and authorized actions are processed, they should then be able to identify those risks that could result in fraud. Ultimately, fraud generally occurs in those accounting systems used to conceal it, or that allows for it to be processed.
But when fraud is still suspected or identified, there should be clear guidelines on how professionals should act in terms of reporting it.
The Helen Suzman Foundation was quoted as saying: “Professionals themselves have two obvious duties when they discover malfeasance. The first is not to participate in it. The second is to report it.”
The first step in such a scenario is for them to ask themselves: What is my professional and ethical responsibility? By doing that, they can determine if they have an ethical dilemma that they are facing, or whether it is merely a procedural problem. Once they’ve identified and categorised the issue, and it does fit the description of an ethical issue, they can move forward.
The next step would be to ascertain whether their organisation has due processes and procedures to address and raise their issue pertaining to the ethical dilemma. If the professional then goes ahead and follows those procedures, and still believes that the problem has not been addressed appropriately, professional bodies such as SAIPA can be approached and involved.
At this stage, they also need to analyse and determine whether it is a reportable irregularity – and if it is the case, it needs to be reported to the necessary authorities as soon as possible.
Protection and Prevention Measures
Sometimes a matter is not something that can be reported, but the individual knows it is something that could taint their professional status to a great extent. In those cases, they should acknowledge that it is probably best for them to walk away from the particular assignment they are engaged in. This is what is recommended in the Code of Ethics, when encountering ethical dilemmas – “assessing the risk”
And when professionals then do act and take the necessary steps, it becomes even more critical to ensure that their professional bodies provide a certain level of protection. This can be referred to as “simplified whistleblowing”.
It would seem that in the current situation, professionals are saying: Yes, I’d like to be a Fraud Prevention whistleblower with this issue I am facing.
But at the same time, they are also worried:
If I were to speak out, who is going to protect me? Will my professional body have my back?
Professional bodies need to communicate clearly that their members will be protected and give guidelines on how the process works.
And when professionals then do act and take the necessary steps, it becomes even more critical to ensure that their professional bodies provide a certain level of protection.”
Finally, though, we need to concede that the issue of fraud and corruption will never be fully addressed if we do not do more to tackle the root of the problem: The Fact that we are simply not spending or investing enough time and money on the ethical education of professionals.
For many of these professionals, ethics is simply viewed as one of the courses in their qualification; something that they need to get over and done with.
This keeps ethics as perceived as a field of theory, rather than a very practical issue that affects lives and careers.
The industry can make it more tangible by sharing experiences on these ethical dilemmas that we are being exposed to with each other. Support and communication with like-minded peers can make a big difference, especially with the changes in the environment in which we are operating.