Maintaining trust in business – and the profession – is at the heart of what accountants are, and must be, all about. So how are we doing?

ACCA recently held a symposium of the chairmen of its global forums, the expert groups which advise us on technical and policy issues. Trust was the number one topic of interest.

To inform the discussion, we invited Laurence Evans, the president of the consultancy firm Edelman-Berland, which produces the Global Trust Barometer, the leading global study of trust and reputation, as a guest speaker.

Mr Evans drew out a number of key findings from his firm’s 2013 survey. They confirmed the common wisdom that the problem of trust in business among the general public since the Global Financial Crisis was widespread. Although it was noted that for all the banking scandals, tax avoidance controversies, executive pay furore and incidents such as the BP Deepwater Horizon oil disaster, people still trust business more than they do politicians. This was because business for all its faults, was seen as being able to get things done, while governments were deemed ineffectual.

The problem for business, Mr Evans said, was more one of perception rather than performance. It was governance and incentives that were questioned – the public had lost faith that decisions were being made for the right motives. Bank remuneration was an obvious example.

The key to reversing this trend of public scepticism, he stressed, was for business to make a strong commitment to transparency. Companies had an opportunity to create a ‘virtuous circle’ of trust by engaging in open and honest communication with stakeholders and the general public. And they would be foolish not to, for the debate about their performance would take place on social media, anyway, without their involvement. Accountants are in an ideal place to shape corporate communications, with regard to developments such as integrated reporting, which can demonstrate transparently the real value drivers in business.

There was another finding of specific interest to accountants. People generally placed more trust in the word of subject experts within a business than they do in CEOs. So accountants should step forward and speak for their companies – their expertise and knowledge is likely to be respected. And professional bodies have too a key role to play – as the only institutions that have enhanced their reputation during the crisis are non-governmental organisations, or NGOs. So there is much here we can take heart from.

But every silver lining, it seems has a dark cloud. Last month’s report by the UK Parliamentary Commission on Banking standards concluded that auditors ‘fell down’ in their ‘duty’ to ensure that accounts provided an accurate view of the financial position and risks in banks. The report blamed ‘conflicts of interest’ and too cosy relationships between auditors and their clients. The MPs’ report asserted that this meant that ‘at best auditors did not act as the last line of defence against banks questionable reporting on their own businesses and at worst they were cheerleaders for it.’

Such tempting sound bites could be seen as politicians trying to boost their own reputation at the expense of others, in order to reverse the pecking order of public blame, identified by Edelman’s survey. But it would be wrong for the profession to duck responsibility – after all Hans Hoogervoorst, chairman of the IASB, told the commission that auditors tended to rely on regulators to identify problems too much, such as the difficulty of qualifying bank accounts and risking a run on that institution. ‘I think that auditors were relying on the regulators to take care of going concern to tell you the truth. That’s a reason why they were not so very critical. I think they need to be more critical.’

While the specifics of audit improvements will be the subject of long debate – and ACCA sympathises with the commission’s nod to enhanced auditor commentary as a possible way forward – it is clear that accountants must keep in mind the bigger picture. Trust, transparency and taking responsibility is essential, if public confidence in business and our own profession is to be regained and retained.

Ian’s previous blog post

Do investors have a say in financial reporting?