Finance Indaba hears unethical accounting persists, even with tech in the mix
With or without machine learning, unethical accounting practices must be stamped out, say panellists.
The accounting profession has seen its fair share of scandals globally in recent years. The one that hits closest to home is the Steinhoff saga, which CNBC called “one of the biggest cases of corporate fraud in South African business history”.
Accountants are considered the custodians of financial data. But this seemingly growing practice of ‘cooking the books’ to inflate financials has delivered a blow to the credibility of the profession, particularly the role of external auditors.
“When you look at companies going down and you investigate what was behind the downfall, these days it’s not competition related, it’s about ethical behaviour, so when those ethical issues come out in the media, the share price drops and investors are pulling out of the company,” said Johannesburg Housing Company’s Nguquko Nyathi. Nguquko was addressing a panel discussion on ethics in accounting at the Finance Indaba underway in Sandton.
In the era of Big Data, there are growing concerns about technology being manipulated for dubious financial practices. Pat Semenya, market head at the Association of Certified Chartered Accountants (ACCA) and panel moderator, pointed out that machines are programmed to follow orders, so data manipulation and unethical practices are ultimately created by humans.
Standard Bank’s ecommerce business manager Christine Shongwe agreed, pointing out that professionals cannot blame accounting irregularities on technical glitches.
“For a computer to make decisions, those decisions are programmed by a human being.”
Corrupt corporate culture stems from toxic leadership, said Professor Kato Plant from University of Pretoria’s Department of Auditing. “It really depends on the governance structure. When I explain this to students I use the umbrella analogy. Every organisation need a strong governing umbrella body. The wiring of the umbrella is the ethics: have you ever tried to use an umbrella when one wire is broken? The umbrella will collapse.”
The panel encouraged delegates to speak out when they spotted financial irregularities, saying that every human is capable of ethical awareness. The problem is stopping unethical behaviour. “We are not speaking up, we don’t have that moral courage to stand up, we have that bystander effect,” said Kato. The panel concluded that in order for the accounting profession to survive the mounting scandals, employees must become “activists for ethics”.
New technologies and software are ultimately improving the way accountants work by speeding up processes, automating tedious manual labour and delivering more efficient results. But it also places large troves of user data in their hands.
There must be solid ethical codes of conduct governing the use of this data as the technology evolves, to minimise scandals at the hands of dubious practitioners.