Hello, I'm Gillian Bowen, Public Affairs Manager at Chartered Accountants ANZ, or CA ANZ. This is Small Firm, Big Impact.
Well, it'd be fair to say that none of our members would be enjoying the headlines of recent weeks, especially especially the overwhelming majority who live up to the charge every day and do the right thing. And so what I will say is there is never an excuse for unethical behavior. And you're right, there is a spotlight on the accounting profession right now, how it carries out its work and the role of professional bodies to hold to account those who breached the code of ethics.
It's the podcast giving you and your clients the up to date information you need to do your jobs. Each fortnight I share resources, tools and expert advice provided by CA ANZ and a range of people across our profession. So make sure you're following the pod in your favourite pod app. And if you've got an idea for the show email [email protected] This episode, Chartered Accountants Australia and New Zealand CEO Ainslie van Onselen is back on the podcast. The topic:
the Professional Conduct Framework Review. Ainslie, welcome back to Small Firm, Big Impact.
Hi Gill. Great to be here.
Okay, so on June 7th, 2023, CA ANZ released what is a pretty comprehensive piece of work, the results of the Professional Conduct Framework Review. Now, before I dive into the nitty gritty of what's in it with Ainslie, I just want to set up this situation for our members and for anyone else listening along to the episode. The Professional Conduct Framework Review was announced in July 2022. In August
last year, the Terms of Reference were released. It was also confirmed at that time, former Federal Court Justice the Honorable Dennis Cowdroy AO KC, would be involved - in that - he would carry out an independent review of the recommendations. Submissions by members who wanted to provide feedback on the professional
conduct review closed in November last year. The reviews committee then spent months going through the submissions, benchmarking CA ANZ and NZICA's framework against other leading accounting bodies and other professional associations and doing a range of other work related to the review. Mr. Cowdroy then played his part before all the work was collated and finalised and handed to the CA ANZ board by May 31st as per the Terms of Reference. And then here we are now. So that's the timeline sorted.
Ainslie let's look at some headline points of the review first and then dive deeper. What are the headlines?
Well, Gill I'd say there would be about Three main key parts of the headline. The first is that the review was extensive. It was thorough. It's about ensuring ethics and integrity remain the cornerstone for our profession under a framework that's robust, independent and fair. The second key takeaway is that the recommendations extend the existing disciplinary framework to deal with firm events so that we can better address some of the systemic and cultural issues that
we see today. And thirdly, there's some key recommendations, and these include, for example, a five fold increase in the maximum fines for events involving firms, which shows how we use this process to test the limits of our framework in the public interest and in line with community expectations. Another key recommendation is reinforcing with our members what their
ethical and self-disclosure obligations are. And the third was the ability for our independent disciplinary bodies to investigate former members in Australia, noting that this is already able to happen in New Zealand.
Okay, so firm events that stood out for me and former members, that's also a recommendation I want to ask more about. So looking at the list of consolidated recommendations on the website, it's a dropdown menu for those listening along. Under recommendation two is the information you mentioned about firm events. So it details increasing the maximum fine that may apply collectively to the members who are partners principals in relation
to firm events. So at the PCC level it would become $100,000 under a consent agreement and at the disciplinary tribunal level it would be a max of $250,000, a $250,000 fine for a firm event. The big four, for example. They make a lot of money each year and the big firms have a lot of partners. Will a fine this size even have an impact?
Look, I understand why you could think that and why some of our members might think that, but it is important to understand that we are a membership organisation and we are required to work within our charter and its limits. So these maximum fines are actually quite significant for an organisation like ours. And what is a significant change is that poor behaviour of individuals used to be highlighted and examined. Now firms are also liable for that behaviour if it's
deemed to be a firm event. And in fact our global benchmarking exercise found Gill that this recommendation is either in line with and in some cases it's stronger than organisations similar to ours. And you'll also note in that consolidated recommendations box Gill, that it says sanctions and fines for an individual member who is involved in a firm event and whose involvement conduct may have breached the code of ethics or the bylaws or the rules, remain at
current levels. And so that may apply in addition to any sanctions that apply to the firm event.
Okay. So the recommendations from this review extend, as you say, the existing features of the disciplinary framework to address events involving firms and the systemic and cultural issues underpinning them. There is a spotlight on the profession right now, on the culture within the profession. What's the problem and what is CA ANZ doing about it?
Well, it'd be fair to say that none of our members would be enjoying the headlines of recent weeks, especially especially the overwhelming majority who live up to the charge every day and do the right thing. And so what I'll say is there is never an excuse for unethical behavior. And you're right, there is a spotlight on the accounting profession right now, how it carries out its work and the role of professional bodies to hold to account those
who breached the code of ethics. So extending our disciplinary framework through the recommendations we've released are about ensuring that ethics and integrity remain the cornerstone of our profession. And specifically, as I mentioned, there are recommendations to deal with firm events. Now. The review itself was started many months ago and it's come at the right time. And in addition, we offer
services to our members. So some include, for example, the Mentor Exchange program, but there's also the advisory group, which is a counselling and support service for our members. It's confidential. Members ring up and speak to very senior members of the profession and get assistance on things like ethical challenges that they may be facing or where they need professional support. And of course, there's also work for the firms to do in this space regarding their culture within their firms
to make it productive, ethical and fair for employees. And we will work with them on that. We've also taken a number of steps recently to ease the pressure on auditors in particular and chartered accountants, including, for example, asking for an increase in the skilled migration cap. And because we know we've got a talent shortage right now, and then also making it easier, not harder to do accounting and finance degrees, we've seen the number of finance accounting graduates,
almost half in Australia alone from 2018 to 2021. So we must address that. It's a great profession to be involved on and so we really need to continue to put a spotlight on the attractiveness of the profession.
Have you reached out personally to executive management of the big firms about behaviour and ethics in recent times?
Look, I talk regularly to members right across the profession, and in fact I've written to all 135,000 members about this review, the recommendations and its findings. And I've also reached out to the leadership of the Big Six, and I expect to have continued discussions with members from across the profession about this review. And I'm really looking forward to everyone's feedback to the report and future engagement of this vital issue.
Look, the recommendations relating to former members. Let's talk about that now. What can you tell me more about that recommendation?
Well, we're proposing to change the current situation in Australia where CA ANZ can't undertake an investigation into the conduct of former Australian members, noting, of course, that this is not the case in New Zealand, and New Zealand we can. What this will do is allow the disciplinary bodies to investigate regardless of membership status. So, for example, this would close a loophole that allows members to avoid disciplinary action by terminating their membership.
So then are there former members from the past that CA ANZ would go after if that recommendation was endorsed?
Well, this isn't about going after anyone in particular. This change is about bringing us in line and aligning ourselves with our framework in New Zealand. The details of how this will be implemented requires some further work, but this particular recommendation will go to a member vote later in the year and we will spend the time in the lead up to that vote looking at how best those powers will work in practice.
Okay. So the review found that the disciplinary framework meets or exceeds standards set by IFAC and meets or exceeds peer and international benchmarks, and that it responds appropriately and proportionately to proven academic misconduct by provisional members in relation to assessments and exams undertaken for the conferral of the TESQA accredited CA Program. Did the review go far enough?
Well, IFAC requires CA ANZ to conduct periodic reviews of the system and we continue to do so as part of our commitment to continuous improvement. So this review included an extensive external benchmarking exercise. We looked at other PIOs around the world and we also looked at other professional membership bodies such as the Law Society of New South Wales and the Law Society of New Zealand, Engineers, Australia and Engineers,
New Zealand. It was a really extensive comprehensive benchmarking exercise. We also looked of course at IFAC requirements and examined those and then finally there was significant engagement with stakeholders. So we invited submissions from all CA ANZ members and members of the disciplinary bodies as well. And then of course we had the independent review of our recommendations by the Honorable Dennis Cowdroy AO KC. So the upshot of that is, I believe it was
an extensive and thorough process. And it's through this process that recommendations have been able to be developed that will extend the existing features of the disciplinary framework to address events, for example, involving firms and the systemic cultural issues underpinning them, as well as recommending a range of procedural and efficiency improvements in the process.
So on transparency, there's also a recommendation on that. It's included in item six of the consolidated recommendations for those listening along and perhaps taking some notes as we discuss this, on fairer and clearer publication and confidentiality requirements. What should we point out there?
Well, Gill, among the opportunities is a recommendation to consolidate the disciplinary decisions into a single online public register, which will display all the disciplinary decisions made at all the levels so PCC, DT, AT, in addition to the annual report, the register will also include statistics and data about complaints dismissed and grounds for dismissal. This one stop shop, if
you like, will increase transparency and accountability. And the purpose of the register is to centralise and streamline how this information is captured and shared. So again, it's about increasing transparency and continuous improvement.
I want to ask about the KPMG matter which occurred prior to the Professional Conduct Framework review starting last year. Let's assume the recommendations are endorsed by members. If a firm event like that happened again, would the firm be fined?
Potentially it could. This review has really honed in on firm events, and you'll see in the report that we're broadening our focus to ensure we can deal with them more effectively. So what I will say is, yes, you could potentially see a different response to firm events moving forward to address systemic and cultural issues.
What about the names of those involved? If a similar situation happened again, would they be published?
If a similar situation happened, potentially it could look different. As I said, the review has identified a number of opportunities to enhance the conduct and disciplinary framework and its processes and procedures, and we're broadening our focus to ensure we can deal with firms effectively. And that could mean a different response.
What are the key changes for New Zealand members?
Well, in addition to the ones I've already mentioned, there are a range of other recommendations, including for New Zealand optional firm membership as well as the power of the PCC to engage a panel of experts in appropriate cases and to allow those experts to confer throughout the process and the use in New Zealand of a conciliation process.
Okay, so let's whip through some questions members might be thinking about. What's the process and timeline now, for example, for implementation?
Well, some of the recommendations can and have been actioned as a matter of course, but others will require amendments to the CA ANZ bylaws or the NZICA rules and therefore a member vote. Members will hear more about the voting process in the lead up to our AGM in October this year.
Okay. So on that, what recommendations require a vote?
Okay. Well, some of the recommendations that require a vote include a five fold increase in maximum fines for events involving firms, introducing voluntary firm membership in New Zealand, which then will align with the Australian approach and enabling investigations into former Australia members, which will then align with the New Zealand approach.
So why don't they all require a vote?
Because not all the recommendations Gill, require an amendment to the CA ANZ bylaws or the NZICA rules. So for example, recommendations 3, 6.1 and 6.2. And then also some of the elements of recommendation five, which are around procedural enhancements. They don't require any change to the bylaws or the NZICA rules, so no requirement for member approval. We will get on with that as business as usual.
So if you're following along at home, you can find all the consolidated recommendations - so that's a combination of the review's recommendations and Mr. Cowdroy's feedback laid out for you. On the CA ANZ website. There's a tile to the review on the home page, but there is also a link to the direct page in the email Ainslie sent to members early on the morning of June 7th. And we've also shared that link on social media if you follow
the CA ANZ accounts, you can find that there. So why can't members vote now?
Well that work to draw up the bylaw changes and the NZICA rule changes is underway now. We'll communicate that to our members and information on how to vote in the lead up to the AGM in October.
Well, on that, what's your message to members listening along?
Well, I'd invite them, Gill, to take the time to read the material. There is a lot of it and we've tried to make it as easy to digest on the website as we can with the consolidated recommendations. And there's a good executive summary as well in the in the final report. And if you've got questions, ask us, you know, I'm sure there's going to be a wide range of views. There always is when you've got a
professional membership body of 135,000 people. So keep an eye out in your inbox in the lead up to the AGM in October for the information on how to vote. There'll be a range of recommendations and as I've mentioned, that require members to have their say.
Now, I just want to say members have been inquiring with the CA ANZ about the PwC Tax Practitioners Board matter. There is a statement on that on our website confirming the Professional Conduct Committee investigation. And given that there is now an Australian Federal Police investigation underway, it's not wise for us to comment on that matter in this podcast. Nobody wants to prejudice the confidential Professional Conduct Committee investigation
or the AFP investigation. That is all we have time for. If you want to find out more, if you're a Member, check your inbox for an email from Ainslie and our board chair, John Palermo. Of course, everything is on the website, including the Professional Conduct Framework Review final report, the independent review by Mr. Cowdroy of the recommendations and the committee's response to the independent review and some FAQ's. There is
a lot of reading. I'll put a link to the website in the show notes as well so you can find it there if you want to. Thank you Ainslie van Onselen for joining me on Small Firm, Big Impact.
Thanks Gill. Always a pleasure.
Bye bye.