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Assalamualaikum warahmatullahi wabarakatuh, and a very good morning to everyone.
Let me start by welcoming you to the Securities Commission Malaysia.
We are honoured to host the final leg of the Roundtable on Firm Culture and Governance by the International Ethics Standards Board for Accountants (IESBA).
As I understand, this roundtable series forms part of the IESBA’s standard-setting project that is acting upon recommendations made by the Firm Culture and Governance Working Group. The Working Group released its fact-finding report and recommendations in January this year. It highlights the challenges and identifies opportunities for enhancing ethics and integrity in accounting firms and their networks.
As the report asserts – the increase in ethical breaches have been detrimental to the profession’s reputation. We have witnessed high profile lapses involving firms’ audit, tax, and consulting practices globally including in Australia, China and South Africa. It has resulted in severe financial penalties, sanctions, suspensions, and even senior management clear out.
These failures are not just firm-level issues - they are risks that can shake the very foundation of public trust in capital markets, tax systems and even the profession.
This is where the IESBA review comes in, where the underlying objective is to develop principles-based provisions that can effectively promote, support and reinforce high standards of ethical behaviour across all services offered by accounting firms.
Such efforts to engender trustworthy firm culture and governance must be roundly applauded. We all, as stakeholders within Malaysia as well as the wider Asian region, stand to benefit from placing greater focus on cultivating ethical behaviour within firms, and by extension, their professional staff.
Reading your report recently, made me reflect on my own journey in the accounting profession. Some of you may know that I trained first as a lawyer in UK before being called to the English Bar. I found the light as it were and decided to change my career path towards being an English Chartered Accountant and after qualifying in UK as an ACA, returned home to Malaysia to join and build a Financial Service practice in PwC Malaysia. I retired in 2023 after being a partner for 27 years, and its chairman for 11 years. I have also served in the profession in disciplinary roles and also conducted many investigations relating to accountants.
This is to give you context. In my personal view, there are two things that stand out in the report recommendations. I believe that if the profession of auditors is important to the wellbeing of the capital market, then the decision making by the firms needs to have better oversight. So I welcome the need for independent public interest oversight within the firms’ leadership structure. It is crucial to making sure the right decisions are made with the right considerations.
The second thing is inferred but not spelt out clearly in the report, which is the value systems people in the profession uphold. I was brought up on stories of Biggles, Perry Mason, Judge Dredd and other fictional heroes. These fictional characters instilled in me the desire to do extraordinary things for the right reasons. And it didn’t hurt they were always popular with the ladies.
In my real life, I have always admired people in my profession such as Sir David Tweedie formerly of the IASB and some of the partners I trained under in the UK and Malaysia. I remember Sir David once being asked as to why he left a lucrative career as a big 4 partner to set up the IASB, and he replied it was because he was angry. Angry that accountants were being bullied by lawyers and preparers into doing the wrong things.
As a lawyer, I was brought up in the belief I owed a duty of care not just to my client but also to the Court. This instilled in me the values to look beyond my clients’ interest. My proposal is that we extend that thinking to auditors of PIE’s. An auditor must also owe a duty of care to the capital markets and those investors that rely on their opinions. It should be made explicit and the firms be made accountable for their contributory failure to stand up and do the right thing.
As it stands, growing uncertainties and tariffs add to the unprecedented challenges and complexities facing businesses and may even result in diminished revenues.
Such issues, however, must not be allowed to diminish the value of maintaining ethical standards. In fact, in times like this, it is even more crucial to redouble efforts to embed accountability and responsibility into the wider firm culture.
A strong ethical culture within audit firms with established codes of conduct and governance arrangements provide a firm underlying base to guide auditors to do the right thing, to carry out their responsibilities impartially, and to act with integrity.
It empowers them to exercise professional scepticism, be comfortable in voicing their concerns and to intervene, when required, in a timely manner. All these are key factors for better audit quality and consequently, higher standards.
Responsible and ethical behaviour also mitigates unethical practices and reinforces the profession’s role to act in the public interest.
These are precisely the outcomes that we must aspire to, in order to arrest the high-profile ethical failures I had mentioned earlier.
On that note, allow me to wrap up to allow more time to be spent on deliberating the topic on hand.
Looking around the table, we have with us a diverse group of professionals who will certainly provide unique perspectives to this agenda.
The intention is to facilitate the sharing of insights and feedback among regulators, practitioners, and other stakeholders. Your contributions will be useful towards developing sustainable guardrails that can advance ethical firm culture and governance.
Thank you once again for being here. Let us now proceed with what we all are here for - a rich and productive dialogue.
I am looking forward to the outcomes of today’s discussions.
Thank you.
