'Delighting' clients undermine accounting industry's moral courage - KPMG SA chair

"Delighting" clients has become the primary aim for accounting firms and this undermines accountants' moral courage to stand their ground when things are not right in a business, according to KPMG SA chair Professor Wiseman Nkuhlu.

Nkhulu was part of a panel discussion at the SA Institute of Professional Accountants Indaba in Cape Town on Tuesday. The discussion was on how trust is earned in the accounting industry.

KPMG has in the recent past been embroiled in various auditing scandals relating to Gupta-related entities and has also been subject to revelations of irregular audit practices. The audit firm is presently on a path of "renewal" and has since put various measures in place.

"There are questions about how the accounting profession can go back to its basics. How it can be more honest and more drastic when dealing with concerns about its independence and integrity as well as the quality of audits," said Nkuhlu.  

"It is also about how accounting and auditing firms define themselves - seeing themselves as commercial entities and creating a culture of the client being centric."

In Nkuhlu's view, it is this culture that has undermined the integrity of the industry and must be changed.

"Very few (accounting) firms talk on a regular basis about protecting the investors of a company they audit. They focus more on responding to the needs of the client. This can undermine their integrity," said Nkuhlu.

"As assurance providers, auditors forget they are doing the work of the shareholders – and that is where the problem lies. I don't have a problem with there being large audit firms. For me, the client relationship with an auditor can create a conflict of interest. If you have been the auditor of a client for so long, you get to know the client too well perhaps. So, what do you do then if he asks you to do something you are not comfortable with?"

In his view, auditors can protect themselves by meticulously following the prescribed standards for the profession.

"For me accounting ethics is about moral courage or the lack of moral courage to stand up to the strong characters in the private sector. We fail to meet societal expectations and we must acknowledge that and do something about it," said Nkuhlu.

"We must also care about whether our actions will do harm to society. This is what leaders in (auditing) business should focus on. It is not just about focusing on the interest of the client. Leaders in the industry must acknowledge that we have a role to play in this regard and strengthen the role of the regulator."

Saleem Kharwa, a professional accountant, said during the panel discussion that professional judgement and professional scepticism should apply across the accounting profession.

In the view of Robert Cameron-Ellis, an independent forensic accountant, the profession needs to change its role and adopt an ethical stance.

"We need to define what that stance is and what makes us useful to society. We must also look at the pressures we have to resist in our profession and how we reject those pressures. We must learn to take off our blinkers," he said during the panel discussion.

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