The accountancy and auditing professions have been in the public eye over the past few years, as scandals and bankruptcies raised questions – many of them misguided – over their role in preventing them. As the release of the Panama Papers raised fresh questions, the chairman of the Malta Institute of Accountants, Franco Azzopardi, wanted to set the record straight.
What is the role of the MIA when there are scandals? What can you – or should you – be doing?
The MIA is a members’ institute, the voice of the accountancy profession. Our tagline attempts to capture our mission: supporting the accountant, promoting the profession and serving the public interest.
Since 1942, we have put considerable effort into the profession. We engage with students to help them qualify; we educate members once they qualify – they need 25 hours of continuous professional development (CPE) each and every year.
When something happens – as recently – it attracts gossip and gets blown out of proportion.
We have 2,700 members, which is 90 per cent of all those withwarrants. You will always have a failure rate, in every profession.
The perceived failure – and I stress that it is as yet just perceived – is insignificant when you look at the numbers.
But I need to underline that the institute does not have the investigative powers that the police, the Financial Intelligence Analysis Unit and the Accountancy Board have. We have disciplinary powers but all we can do is suspend or revoke membership.
Well. That is hardly going to put the fear of God into digressors!
Yes, but only the Accountancy Board has the power to issue and revoke warrants. That is not within our remit.
But it does matter if we suspend membership.
Your mission includes the public interest. To whom do you owe duty of care as at the end of the day, an accountant is an employee who is given instructions? What moral right do you have to determine how a private company should or should not conduct its dealings?
Our genetic code has a universally acknowledged defect, which is greed. Humans are the only animals that want to hoard and become wealthier. The most common denominator is money. The currency of how we survive is money.
To ensure that there is an equilibrium in society, you have to have rules and regulations, making an effort to push for the wellbeing of all society by curbing criminals.
Our genetic code has a universally acknowledged defect, which is greed. Humans are the only animals that want to hoard and become wealthier. The most common denominator is money
Ethical behaviour is dictated by the society you live in. And with globalisation, the standards of what is right apply in all countries – and as society becomes more and more educated, expectations become higher and higher.
As an institute we feel obliged to dedicate as much effort as possible to the essence of humanism in this respect. We are rightly seen as the gatekeepers of transactions, respecting the behaviour that society requires.
The profession is directly involved in this currency as our job is to record and advise… People invest in the stock market, for example, on the basis of those statements.
If a housewife purchases food from the supermarket, there is a sense of confidence that the till is correct – not just because of IT systems but because of the whole structure.
Supermarkets are hardly the best example to choose, given the Price Club and More’s spectacular collapse… Are you surprised that the public does not trust accountants, that they are seen as employees who do their employers’ or clients’ bidding... Not as a profession with a duty of care to society?
It all boils down to the ethical behaviour of the accountant. If I were an accountant in a company that was involved in corrupt or wrongful practices, I would be the first to leave. My upbringing and my training would determine my choices.
Professionals cannot be regulated by morals alone. Doesn’t your warrant state that you should not break the law even if your employer asks you to?
Yes. Absolutely. The institute’s code of ethics is identical to that issued by the Accountancy Board. There are around 132 pages in the document. But it is not the volume of the document which gives it weight: it is our third objective – to serve the public interest.
Humanism makes it clear that to keep the equilibrium, for the sake of ourselves, our families, our country, we need to observe rules and not do anything of which we would be ashamed.
You can write as many rules as you want; there will always be someone who manages to stay just within the rules… or one step ahead. Transactions have become so much more complicated, motivated by whatever you want to call it: from greed at one end of the spectrum to optimisation of profits at the other.
We have suspended members in the past. Our members are unhappy that a minority should tarnish the rest. And they are unhappy when any members are mentioned in the public in a bad light.
If you are engineering structures for any form of optimisation, there is tax legislation and anti-money laundering legislation and so on. And if you break the rules, there are severe repurcussions.
But you can stay within the rules – and companies pay specialists to optimise the returns within the rules. People who pay all their taxes may see it as unfair, but this is the way it works unfortunately.
But things must surely change… Society no longer finds it acceptable that companies stay within the law but ‘optimise’ their taxes. What is the future of accounting?
Legislation will definitely evolve. We will remain obliged to serve the business community but within the equilibrium and expectations of society. The accountant needs to remain vigilant and attentive to all these shifts. I can’t see any other way.
You said you had suspended members: what for?
There were different reasons. Some cases were in the media, but basically there were disciplinary procedures and if we found that the member had tarnished the reputation of the profession – such as when there was a police investigation – then their membership was suspended.
We will remain obliged to serve the business community but within the equilibrium and expectations of society. The accountant needs to remain vigilant and attentive to all these shifts
What will happen if Malta’s tax structure is challenged in any way?
The Maltese are survivors. I am sure that we will come up with a strategy to re-engineer our financial services.
We speak to the pharma industry, for example, about the Bolar exemption which is soon ending, but operators still believe that we have created a centre of excellence and so Malta will still be attractive for a number of reasons.
The same applies for financial services. It will have an impact if our effective tax rate is challenged but Malta has over the past 30 years created a wealth of intellectual property. I am pretty sure that this will have a bearing on decisions taken by foreign companies as to whether to stay in Malta. I don’t believe the only reason why foreigners invest in Malta is tax. Malta has many advantages which remain an attraction.
Accountants are in short supply… Would all that is happening now deter students from choosing it as a career? Who would want to be squeezed between public opinion and their employers?
It can have a negative effect. The professions and the business community feel the lack of supply of accountants, with demand running to hundreds.
Professional service firms try to import foreigners but it is very hard to get work permits, especially for those from the Philippines, where there are many well-educated accountants who hold international qualifications in line with Maltese ones.
The problem is that today accounting has become so complex compared to 25-30 years ago, that you cannot have what we used to call ‘partly qualified’ accountants filling the gaps. The typical bookkeeper who used to get as far as filling in tax returns would find it hard to keep up.
We are articulating our presence out there in an attempt to mitigate all the negative perceptions. The profession has been good to many people. And we know that 60 per cent of Fortune 500 CEOs started off in finance.
How do the MIA and the Accountancy Board interact?
We collaborate with the Accountancy Board in an administrative role. It does not have the manpower to update technical pronouncements, or monitor CPE etc. We have two members on the Accountancy Board, nominated by the MIA. We do a lot of work for the board, and give a lot of technical contribution.
When I look ahead, I foresee that the accountancy profession will have a more complex future, but if we do what is ethically correct, the accountant will have all the answers, on all the topics we cover, from finance to accounting law and tax law. And with the training you get once you join a firm, you know full well what is correct and what is not.
However, there is only so far that an institute can go… The ingredients that need to be nurtured are the family and the rest of society.
You cannot, as you rightly said, depend on morality, but it is a significant ingredient to ensure that you do not merely maximise returns without taking into consideration the interests of all the stakeholders – whether tax authorities, banks or people.