Merry Christmas to Peter Wilson. When it was suggested that Peter Wilson should be independent of the old board so that we can have a fresh start Peter responded with "That's your issue". Summary of the meeting here: viewtopic.php?f=23&t=594
A good summary of where we are up to by Joe Aston of the AFR, linked to from here: viewtopic.php?f=5&p=4137#p4137
If you are new to this website read the story so far: viewtopic.php?t=321#p1793
Check out some of the AFR articles, too many to list and check out some of the ABC reports: http://www.afr.com/business/accounting/ ... 215-h055ej http://www.afr.com/business/accounting/ ... 211-h02x1d http://www.abc.net.au/news/programs/the ... s,/8626662
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Leadership & Ethical Standards in the accounting profession? CPA & APESB

Discussion about the proposed resolutions to be put to the AGM in May 2018
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Brett Stevenson
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Leadership & Ethical Standards in the accounting profession? CPA & APESB

Post by Brett Stevenson » Wed May 02, 2018 8:30 am

This is a question that the whole CPA Australia saga has raised in my mind. Well the answers are not readily apparent for this journeyman accountant so I thought I might try to glean some useful insights from our ‘premier’ accounting body responsible for setting ethical standards - the APESB (Accounting Professional and Ethical Standards Board).

I think it is fair to say that it was not a ‘happy hunting ground’.

Let me start by stating the Vision and Mission of the APESB to provide some context for the below comments
“We are striving to achieve exemplary levels of professionalism and ethical behaviour in the accounting profession”.
Perhaps you may need to come back to this as you read this article.

APESB and CPA Australia

Do you realise that two of the recent past presidents of CPA Australia (Penny Egan and John Cahill) are directors on the current APESB.

I found that hard to believe. So I thought perhaps I am being a bit harsh, and went to a letter written by Penny Egan to the AFR about CPA Australia on 22nd June 2017 (just a week or two before the CEO of CPA Australia Alex Malley was sacked, (on a handsome $4.9 million termination pay, being three years pay which is three times what public listed companies can do, and of course the board are not to be held accountable for signing such a contract…. but that’s another story) and here it is for you all to read.

AFR 22nd June 2017. Members should be proud of CPA Australia
I have always admired people who show a genuine passion for standing up for what they believe. I often wondered what it might take to incite such passion in myself, and now I know. It is when my own integrity is questioned.

I am a proud life member of CPA Australia, a previous national president and a board director for 10 years. CPA Australia is a credible, financially strong international business. The unrelenting and negative reporting by some media outlets about CPA Australia and its CEO Alex Malley is extremely disappointing. CPA Australia is a business in a challenging international market and it needed to change to remain competitive. It did and it has. It now has a skills-based board appointed by its members.

The appointment of Malley as CEO was, and continues to have been, an excellent decision. Subsequent boards have had no reason to question his integrity, passion and leadership. His remuneration is commensurate of other CEOs leading an organisation of this size. CPA Australia may be a professional membership body but it is also a global business. Members need to acknowledge this and be proud of their organisation.

Penny Egan, FCPA Hobart, Tas
Am I being unfair to say if this is from one of our leaders who was a recent past president of CPA Australia, and a director for nigh on eight of the ten years of the Malley era (2007-2014), and is now one of the six directors on the APESB, and also our representative (and Chair I might add) on the IFAC Compliance Advisory Board, then we have a problem. Bear in mind that the IFAC (International Federation of Accountants) is “dedicated to serving the public interest by strengthening the profession..” and you can surmise what the role of the IFAC Compliance Board involves. Need I add that John Cahill was also a recent past president of CPA for two years during his six year stint as a director 2007-2012, and then moved on to the Representative (a total misnomer in itself) Council (2013-2016) which appointed the directors as the ‘Board appointed’ past presidents representative - a real governance winner eh - the board appoint the representatives who will appoint them.

Of course you can easily refer to the Independent Review Panels Final Report into CPA Australia on the CPA website to get all the ‘gory’ details of the gerrymandered governance regime during the Malley decade.

I leave you to draw your own conclusions but the first insight I gleaned was not that positive. Actually it was pretty negative and made me think is leadership about networking and connections or is it something more than that? Just a thought.

Before you read on just stop and read that letter again. Yes, it’s a doozy. Perhaps no better written example of leadership at CPA Australia can be found than this. Well that’s an exaggeration because The Naked CEO book would have to ‘take the cake’ for that honour.

APESB 2017 Annual Report

I thought surely if I turn to the APESB Annual Report I might find some more positive insights. Well I’m sorry to say it did not improve at all.

Nothing on the CPA Australia Saga.

Just try the 2017 Annual Report (Y/E 30th June 2017) which would have been written and published in the three months after year end so that was when the CPA saga was well and truly exposed and in the public eye. Surely they would have had something to say on the matter given CPA Australia along with CAANZ and IPA are the funders of the APESB and responsible for setting the ethical standards for the accounting profession.

There was no mention of it at all. No-one likes bad news but crikey surely a fundamental ethical principle is that you face up to it and don’t hide from it. Most of us would call that ‘taking responsibility’ and ‘acting professionally’. Try reading the first pages of the report (pages 2 to 6), and especially the vision statement on page 2 to achieve “exemplary levels of professionalism and ethical behaviour in the accounting profession” and sprinkled with phrases like ‘maximise the integrity’, and ‘be consultative and transparent’ and ‘engage with standard setters’. Comprehension of what has been written is not the problem rather it is a problem of reconciling that with the aberrant behaviour of one of its key membership organisations.

Meaningless KPI’s.

Let’s keep moving through the report surely it will get better. Well you can skip over the standard meaningless KPI’s page of highlights on page 7 unless of course you think knowing that ‘20% of their Linkedin followers are at manager level’ is an important indicator of how the APESB is performing. Perhaps they copied the approach from CPA Australia which managed to develop an art form of highlighting such meaningless measures in its (wait for it) Integrated Annual Report (if I tell you that Alex Malley has been the longstanding Australian accounting profession representative on the International Integrated Reporting Council you will understand more clearly why integrated reporting and openness and transparency did not mix in the CPA Australia annual reports).

Let’s move on.

Celebrating what?

Skip the ‘Celebrating a decade of setting professional and ethical standards’ spiel on page 8. I just think of Enron, Clerp 9, GFC, CPA Australia and the scandal plagued Big Four accounting firms and realise that the power of positive thinking has its limits. It leads me to ask the question why is it that we need a scandal to get any action in the accounting profession to lift standards? But I mustn’t get sidetracked.

You really do need to take a look at pages 9 to 13. Lots of photos from its ten year anniversary celebration at (wait for it) the RACV Club in Melbourne (that establishment workhorse that never stops providing for..... well the establishment of course) with an aptly titled panel discussion (after dinner of course) Professionalism and Ethics: Current landscapes and future challenges. That is just too beautiful for words. But guess who was on the panel? ASIC Commissioner John Price (yes, that’s the same ASIC that is copping such a beating at the current Banking Royal Commission for not doing their regulatory job very well) and of course Ian McPhee. The independent Ian McPhee who has been the longstanding CPA representative on the international big brother organisation on accounting ethics (IESBA) with Eva Tsahuridu (the CPA ethics ‘expert’) as his advisor. Amazingly he was able to, with all this ‘non-independent’ contact and his endorsement of Alex Malleys book The Naked CEO, recalibrate the meaning of the word independence to head up the $1 million Independent Review of CPA Australia recently.

Is unaccountable leadership ethical?

But what has tweeked my leadership/ethical concerns is something many may not be aware of - that the Independent Review into CPA Australia confirmed all the things that had been exposed plus some yet none of the leadership of the last ten years at CPA Australia is to be held accountable. The Review specifically recommended only improvements and surprisingly to many of the members only conducted a ‘non-forensic’ review. In other words where is the ethical link between woeful leadership and awful consequences at CPA Australia, an independent review with no recommendations on holding any of the leaders accountable with the APESB’s purpose to lift the ethical behaviour in the accounting profession. To have such prominent CPA ‘leaders’ actively involved in the APESB as well as with this ‘decade of decline’ at CPA Australia just adds to the puzzle. To put it simply - leadership without accountability is not very ethical.

I wonder if anyone asked a question of the panel about the ethical issues that were occurring and have been exposed at CPA Australia. Maybe not, as many of the people involved with CPA keep saying they didn’t realise the ‘extent of the problems’. Mmmm, a very convenient excuse eh. Or perhaps that raises another ethical question. Mustn’t get sidetracked.

But they were elegant and handsome. That surely must count?

Well you can look at all the pretty pictures to see who was there. But I can tell you the Big Four (Deloitte, PwC, EY and KPMG) were well represented just as they are on the APESB Due Diligence Committee (page 14). Makes you wonder if they have done any self reflection given some of their own audit scandals of late eh. Even one of CPA Australia’s new directors was there - Merran Kelsall. Lots of ‘famous’ accounting leadership names on those pages but you know what (and I stand to be corrected on this) I don’t recall one of them publicly speaking up about the major issues at CPA Australia until they had been well and truly exposed by the media and some obviously ‘unfamous’ accountants. Makes you wonder what they talk about at these dinners eh?

Maybe whether they would prefer San Pellegrino or Perrier mineral water for after dinner drinks? I hardly think so!

They all look so handsome and elegant and so very professional yet I am still trying to understand the acquiescent silence from them on an obvious elephant in the room (CPA Australia) when here they are celebrating (with much elegant and handsome bonhomie I am sure) accounting professional ethical standards.

Beats me. That’s why I ask is the current accounting leadership and high ethical standards a contradiction in terms?

Well you can proceed to page 15 to see the photos of the past CPA Presidents (during the ‘Malley era’) Penny Egan and John Cahill, along with the rest of the APESB directors. Of course glance at pages 19 and 20 to see their ‘leadership’ CV’s and the influence they have had. I guess that is a positive or a negative depending upon how you view that leadership eh.

Directors remuneration beyond compare.

But let me skip through finally to page 38 and note 13 in the financial report. The six directors manage to gobble up over 22% of the total revenue of the APESB. That is some achievement. With a total revenue of $1.43 million, the directors manage to eke out $316,000 for themselves. For five board meetings (days) per year, that averages out at $10,500 per director per meeting (day). Not a bad lurk if you can get it eh? But as exorbitant as it is it pales almost into insignificance compared to the largesse received by the directors at CPA Australia in 2016 - an average of $150,000 per director for six board meetings (days) per year averaging out at $25,000 per director per meeting (day).

Makes you wonder whether the whole concept of NFP (Not for Profit) needs rethinking to ask just who they are talking about when the word profit is used?

These NFP organisations such as CPA Australia and the APESB have such high-sounding objectives and goals for the accounting profession yet when you look at the leadership displayed in the face of such blatantly wrong behaviour (as we have seen publicly displayed and exposed at CPA Australia) one does ask is there a contradiction between the current leadership of the accounting profession and the ethics propounded.

Things are hopefully on the improve at CPA Australia with a new leadership and a hopefully vastly improved constitution after the AGM on 22nd May. High ethical standards are required of us to be CPA’s. That's mandatory to maintain our designation. Let’s trust we can get a closer alignment between our ethical standards and our behaviour especially at leadership level in the years ahead.

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