Professional accounting bodies' disciplinary procedures: accountable, transparent and in the public interest?

Abstract

This paper critiques the public interest proclamations of accounting professions with particular reference to the role of disciplinary procedures in protecting these interests. It is argued that professions' widely declared concerns for the public interest, often conceptualized as encompassing a commitment to public accountability and transparency, are frequently used as a convenient mechanism for avoiding criticism and maintaining the power and privilege of delegated self-regulation. This argument is developed by examining the role played by disciplinary procedures, in particular the reporting of their results, in creating a perception that the profession acts in the public interest. The critique is supported with data derived from an investigation of the disciplinary procedures of one accounting body, the Institute of Chartered Accountants in Ireland (ICAI). The results of this examination indicate that the ICAI process appears deficient in terms of its accountability and transparency and further that there is little fairness or equity in terms of the penalties applied to members for offences committed. This tends to support prior research which suggests that disciplinary procedures (and the ethical codes they purportedly enforce) fulfil a 'profession protection' as opposed to a 'society protection' role aimed at insulating the profession from inspection and assessment from outside parties. Implications for the accounting profession and for future research are discussed.

On professional accounting body complaints procedures

“…Further evidence suggests that these arrangements are highly likely to shield accountancy firms, especially larger ones, and their individual members (particularly partners) from public scrutiny (Sikka and Wilmott, 1995a;Sikka et al, 1989;Mitchell et al, 1998a). The recent work of Canning and O'Dwyer (2001, 2006 in the Irish context provides additional support for the above findings. Their examination of the operation of the ICAI disciplinary procedures has revealed predominant private interest motives driving their operation, particularly throughout the 1990s before major procedural changes were instigated [2].…”

“…Much of the research to date specifically critiquing the rhetoric and public interest claims of accountancy bodies regarding their disciplinary and complaints procedures has primarily focused on examining: the external reporting of disciplinary cases (Canning and O'Dwyer, 2001;Parker, 1987); historical analyses of the development of ethical codes (Parker, 1994;Preston et al, 1995); and internal and external media (Canning and O'Dwyer, 2003;Neu et al, 2003). This study is unique in that it examines a specific complaint process using original documentary sources produced as part of the process.…”

“…This role is reflected in their concern with protecting the economic interests of professional members' clients and third parties [1] who place reliance on the pronouncements and advice delivered by professional accounting bodies and their members (Abbott, 1983;Millerson, 1964;Parker, 1994;Preston et al, 1995). Recent research, however, challenges this proclaimed public interest role, in particular in the Irish, UK, US, Canadian and Australian contexts (Bedard, 2001;Canning and O'Dwyer, 2001, 2006Fisher et al, 2001;Lee, 1995;Mitchell et al, 1994;Neu and Saleem, 1996;Parker, 1994;Preston et al, 1995). This research implies that these codes and arrangements form part of a strategy involving the use of explicit professional signals aimed at providing a public interest face to what is effectively a process driven by private (economic) interests (Lee, 1995;Baker, 2005;Bedard, 2001;Citron, 2003;Fisher et al, 2001;Mitchell et al, 1994;Parker, 1987Parker, , 1994Preston et al, 1995;Sikka, 2001a, b;Sikka and Willmott, 1995a, b;Velayutham, 2003;Willmott, 1990).…”

“…Moreover, its political attraction derives from cushioning politicians and civil servants from any perceived regulatory failures since they can then be easily blamed on the self-regulating accounting body. From the accounting bodies' perspective, they are granted a monopoly by the state over certain areas of business such as the preparation of audits and are accorded responsibility for public policy making in the area of setting and enforcing the (accounting and auditing) standards that formally regulate their work (Canning and O'Dwyer, 2001;Sikka and Willmott, 1995a;Willmott et al, 1993). However, in return for their quasi autonomy, the accounting bodies must accept "public" interest objectives and, as such, the state pressurises them to accept and respect these (often dimly defined) responsibilities (Sikka et al, 1989, Sikka, 2001aWillmott, 1986;Willmott et al, 1993).…”

The Accounting Profession's Engagement with Accounting Standards: Conceptualizing Accounting Complexity through Big 4 Comment Letters

“…Motivation is often linked to several perspectives, including that accounting firms act in the: (1) private and/or client-focused interest of the profession (Canning and O'Dwyer 2001;Dwyer and Roberts 2004;Gendron 2011, 2013), or (2) public interest in protecting the public or users of financial statements (Willmott, Cooper, and Puxty 1993;Roberts, Dwyer, and Sweeney 2003). Studies on the motivation of accounting firms to participate in standard setting have centered on whether client-auditor relationships impact the positions accounting firms take on standard-setting proposals.…”