Ethics and governance in the European Financial centers

A guidance paper by the auditor unit of IFAC explores how setting the right tone can positively influence audit quality. The title is Tone at the Top and Audit Quality.

"Leaders of accounting firms have a responsibility to ensure that the commitment to quality is clearly embedded in their organisation’s values, code of conduct, training, and reward policies," David Maxwell, Forum of Firms chairman, said.

IFAC Deputy President Robert Bunting commented on the importance of the tone at the top in finding the right balance between governance, oversight and business growth: “If the CEO’s message is aggressive growth and ‘make the numbers’ first and foremost, then the organization will reflect those priorities. If the CEO emphasizes transparency and integrity, as well as performance, then the organization will respond accordingly.”

The fish rots from the head. If partners a not rigorous and are lax, staff will be lax.

There must be no support for drifts and negligence. But unfortunately, as Francine McKenna explained ,"the firms often have a hard time disciplining their own. They've asked them to join the brotherhood after a long and arduous vetting process. It's hard to admit they made a mistake or let the Peter Principle take hold. Any criticism of any one of them means criticism of the 50-100 partners that sponsored or "gave soundings" (a PwC term) on the guy before electing him to the partnership".

An this is definitely the worst attitude : not facing collectively risks and responsibilities.

Read article from AccountancyAge.com

Read Richard Murphy's comment

Read press realease

The Public Company Accounting Oversight Board (PCAOB) a few days ago voted to issue for public comment a proposed policy statement that identifies the factors relevant to “full reliance” by the Board on the inspections systems of its non-U.S. counterparts that are sufficiently rigorous to meet the level of protection for investors that is required by the Sarbanes-Oxley Act of 2002.

Comments are requested by March 4, 2008. I gonna comment on poorly rigorous behaviours based on public and official sources that are the visible part of the iceberg.

Reliance would be based on the level of independence and rigor demonstrated by those entities.

Five broad principles would allow the assessment:

1. Adequacy and integrity of the oversight system – The Board would weigh whether the non-U.S. system effectively works in the public interest to protect investors by seeking to improve audit quality.
2. Independent operation of the oversight system: The Board would weigh whether the entity and the system within which it operates are free from interference or undue influence by the audit practitioners and/or audit firms under the entity’s supervision.
3. Independence of the system’s source of funding: The Board would weigh whether the non-U.S. system has the ability to obtain and deploy the financial resources necessary to carry out its mandate without interference or undue influence by the audit practitioners and/or audit firms under its supervision.
4. transparency of the system: The Board would weigh the extent to which the entity is accountable for the discharge of its duties through a transparent framework. The Board would review whether the entity publicly discloses information on its structure, governance, policies and operations.
5. System’s historical performance: The Board would weigh whether the non-U.S. oversight entity or the system within which it operates has a record of adequate disciplinary proceedings and appropriate sanctions

Big four entities in the small European financial centers may be upset.


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Martin A. Sullivan analysed Switzerland in the last issue of TAX NOTES dated December 10, 2007.

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Read what the Tax Justice network says