by George W. Russell
Anton Colella, Chief Executive of the Institute of Chartered Accountants of Scotland, explains the importance of staying globally relevant amid a changing international regulatory landscape to George W. Russell.
As the lead-up to Scotland’s independence referendum last year became increasingly emotional and partisan, Anton Colella saw a valuable role for the country’s leading accounting institute: as a source of useful but apolitical information.
Drawing on the expertise of its 19,000-strong membership, as well as specialist committees and technical staff, the Institute of Chartered Accountants of Scotland initiated discussion in a wide range of financial and economic policy areas. “It was pleasing to see the way ICAS played its role in informing the debate while maintaining political neutrality,” Colella, who is Chief Executive of ICAS, tells A Plus.
ICAS expressed concerns over a perceived lack of details in the pro-independence camp’s tax policies as well as worries over the future of pensions in an independent Scotland. However, Colella says he is open-minded about Scotland having more influence over its domestic concerns. “I’ve seen the benefits of devolution since it began in 1999,” he acknowledges, referring to the steady decentralization of power from London to Edinburgh.
The vote in September 2014 favoured a continuation of Scotland’s existence within the United Kingdom, but the significant support for pro-independence – 45 percent of votes cast – signalled a continuation of “devolution.”
That means ICAS, which did not issue a vote recommendation, will continue to examine fiscal policy issued from Holyrood, the seat of Scotland’s legislature. “The view of ICAS is that with more powers come more accountability and the Scottish parliament will have to adapt to ensure there is sufficient scrutiny of the use of those powers in the stewardship of the country’s finances.”
Colella sees ICAS’s remit as a continuation of the part it has played since 1854, when two of its predecessor organizations, the Edinburgh Society of Accountants and the Glasgow Institute of Accountants and Actuaries, were founded. “Our overall role is to build the profession and to maintain its professionalism in the eyes of the business community, regulators and the public at large,” he says.
Headquartered in a country of just 5.3 million people, ICAS could be forgiven for concentrating its efforts on local Scottish issues. “We are a relatively small institute,” Colella acknowledges, yet half the organization’s members work outside Scotland. “Our aim is to be one institute, serving the needs of its members wherever they are in the world,” he says.
That aim is central to the strategy to create a virtual ICAS, what Colella calls a “digitally connected institute,” that would move as much as possible of its current activities online for a potential global audience. From this vantage point, ICAS hopes to address a dynamic worldwide professional accounting community. “Regardless of where our members are located, relevance and professionalism are two key themes that transcend the globe.”
ICAS is already a prominent voice of accounting throughout the U.K., Europe and globally. “Historically, we have played a leading role in the development of many national institutes and we continue to do this, particularly in Africa,” says Colella. “As the oldest and first institute, we always feel a certain responsibility to share what we have learned and support the growth of the profession, especially in emerging economies.”
Colella says a key strand of the ICAS strategy is the ability to exert influence. “It is not just about [being able to] critique,” he says. “It’s about providing solutions and innovative ideas to support the development of government policy and accounting and auditing standards. Additionally, we seek to influence the key global standard-setting bodies, and we are firm proponents of the need for global standards in our profession.”
Many senior accountants in Hong Kong’s history have been members of ICAS, which has existed under its present name since 1951, and were major influences on the formation and development of what is now the Hong Kong Institute of CPAs. Strong links continue, Colella notes. “ICAS members are very active and influential in Hong Kong and we are delighted with the very close relationship we enjoy with the Hong Kong institute,” he says. “We are very respectful of the Hong Kong institute’s achievements and we hold its members in high esteem.”
In his previous post as CEO of the Scottish Qualifications Authority, Colella established an office in China. While that is not on the current ICAS agenda, Colella says he respects the pace of the accounting profession’s development in China. “We have collaborated very closely with Chinese authorities on initiatives in recent years,” he says.
Like its Hong Kong counterpart, ICAS is a founding member of the Global Accounting Alliance. “The GAA is a very positive partnership, particularly in the exchange of information and sharing of expertise,” says Colella. “Increasingly, with the mobility of professional accountants, members are experiencing the benefits of accessing services available from the GAA member institutes.”
Learning from mistakes
Colella is not always upbeat. In October 2014, he marked ICAS’s 160th anniversary with a warning, expressing continuing concerns over corporate governance, suggesting a post-global-financial-crisis return to profit would encourage British business to “brush some of the systemic cultural issues under the carpet.”
Six months later, Colella laments that he continues to see examples where corporate governance has failed. “This is a very significant responsibility and a very challenging one,” he says. “Corporate governance is about setting the tone and protecting the value of the company for its shareholders.” Directors, he adds, must ensure that an ethical culture is embedded within their company.
There have been constructive conclusions drawn from the global financial crisis, Colella points out. “Our members have learned different lessons, depending on their roles, but one thing is clear: the profession must continue to be vigilant and identify all risks that can reasonably be determined.”
The crisis, he adds, illustrated the interconnectivity of the world’s economy and the need for global standards. While the role of national standard-setters has decreased in recent years, Colella believes that they still have a vital role to play. “National standard-setters are best placed to help support the work of the International Accounting Standards Board and to create standards for entities which are not required to use full IFRS,” he says. “And they are best placed to know the needs of the local business and wider stakeholder environment.”
As an oversight body, professional institution, advocacy group and an association that acts in the public interest, ICAS has a complex mandate. “By necessity, professional institutes fulfil a number of key functions, both statutory and also in relation to their purpose of building the profession,” says Colella. “These are not mutually exclusive and are not, in my view, in conflict,” he adds. “Attention to each enhances the standing of the members.”
The Scottish institute is a recognized supervisory body under the U.K.’s Companies Act for the registration and supervision of auditors (Scotland, as part of the U.K., follows standards set by the Financial Reporting Council). “We do maintain an element of self-regulation, which we take very seriously,” says Colella.
The EU continues to be a force for change in the U.K. audit sector: Britain is in the process of implementing the requirements of EU audit legislation finalized in May 2014, which introduces mandatory audit firm rotation and greater restrictions on the types of non-audit services that audit firms can provide to their public-interest-entity audit clients. “Such changes will undoubtedly have an impact on the structure of the audit market, but we would hope that they will not adversely impact audit quality,” says Colella.
He believes the overall standard of U.K. financial reporting is very high but acknowledges that issues remain. “There is a lingering challenge about the accessibility of accounts and their wider relevance to investors and shareholders. Unfortunately, transparency to some extent is being camouflaged by the detail,” he says, referring to a “voluminous level of disclosure” that ICAS has actively sought to reduce.
Audit quality is also high in the U.K., Colella insists. “However, we are not complacent and have focused our attention on where we believe auditors could provide greater insights into an organization,” he says.
Colella welcomes the introduction of expanded audit reports. “They have certainly provided greater insights into the significant audit judgements made by auditors,” he says, adding that the institute also praised recent revisions to International Standard on Auditing 700, which, he notes, contains similar provisions as in the U.K.’s audit reporting standards.
Despite all the best efforts of organizations such as regulators, professional bodies and companies, whether national or multilateral, Colella believes ultimate responsibility rests with individuals. “The future of the profession depends on young men and women who see accounting as part of their identity and their responsibility for the rest of their lives.
“Only if this is the case can we ensure our proper place in society,” he insists. “People can know that there are men and women whose primary purpose is to seek the truth – quaere verum, the motto of ICAS. Only by doing so can we rebuild trust in business.”
The Global Accounting Alliance facilitates cooperation among 11 of the world’s leading professional accounting organizations, including ICAS and the HKICPA.
This article was originally published in the April 2015 issue of A Plus. You can also read the pageflip version.