Caroline Lee, incoming Deputy Chair of the International Ethics Standards Board for Accountants (IESBA), has first-hand experience of how hard it can be to speak up when encountering an ethical challenge at work. “I think it is a very Asian thing that we don’t want to rock the boat and cause disharmony or discord, but it is important to have the courage to speak up and tell someone when something isn’t right, even though it is difficult,” she says.
Having the opportunity to bring an Asian perspective to the IESBA was one of the main factors that motivated Lee to sit on the board when she was first nominated by her firm, KPMG in Singapore, nearly five years ago. “Although the IESBA is an international board, I felt that discussions about the International Code of Ethics for Professional Accountants didn’t always fully consider nuances about the Asian experience or unique perspective from the East, so I wanted to bring that Asian voice to the board,” she explains.
She adds that she has also benefited from being able to broaden her own outlook and perspective through working with a diverse group of people from different backgrounds at the IESBA, including the board’s Chairman Dr Stavros Thomadakis. “The two of us have very different backgrounds and experience. He is very respectful of my views and perspectives as a practitioner, just as I am equally respectful of his views given his past experience as a financial economics professor and regulator,” she says. “We have the common goal of developing international ethical standards in the public interest, and I think that encourages us to be thoughtful, strategic and to be innovative in our ideas.”
Encouraging adoption of the code
When Lee takes up the post of Deputy Chair of the IESBA at the beginning of 2021, her new role will require more interaction with the Consultative Advisory Group, the Public Interest Oversight Board, the Forum of Firms and other stakeholder groups, as well as greater connectivity and coordination with the International Auditing and Assurance Standards Board (IAASB).
One aspect of the position she is particularly looking forward to is working to expand the influence of IESBA’s code and encourage greater adoption. “The board developed the code of ethics to provide professional accountants a strong foundation of ethical principles, values and standards to under pin trust in the global accounting profession,” she says. “This trust is exceptionally important in this disruptive, dynamic, uncertain world that we are currently in and from that perspective it is important that the code is accepted on a global basis.”
While the code in its revised and restructured form has been adopted in almost 100 countries and jurisdictions, and is used by most major accounting firms in performing transnational audits, Lee would like to see it adopted more widely not only by other jurisdictions, she also thinks other professionals, such as directors and business advisors, should adopt it as well. She explains that one of the biggest challenges professional accountants currently face in their work is that not everyone in the financial ecosystem has the same high ethical standards that they do. “If you have a situation where the professional accountant is the only person in an organization or financial ecosystem who feels they have to be the ethical party, it is easy for them to be influenced by group think and want to conform with the behaviour of the larger group,” she says. To this end, Lee would like the IESBA to engage more with different stakeholders in a bid to encourage professional accountants and other financial professionals to adopt and accept the code.
A large part of Lee’s work on the board will be continuing to promote the IESBA’s Strategy and Workplan for 2019 to 2023. The plan has three main themes, namely advancing the code’s relevance and impact, and ensuring it remains fit for purpose in the changing environment; deepening and expanding the code’s influence; and expanding the IESBA’s perspectives through outreach and engaging with a wider group of stakeholders.
Lee adds that, after issuing a revised and restructured code, which came into force in 2019, the IESBA is now working on various projects including non-assurance services, fees, and a project to review the definition of public interest entities and listed entities. “These are huge projects that impact the international independence standards and are important to strengthening public trust in the auditing profession. Auditor independence is key to that public trust, and a perception of a lack of independence is best addressed through clear requirements and transparency of disclosure,” she says.
While the IESBA hopes to approve its final pronouncements on the first two topics at its December meeting, an exposure draft on the definition of public interest entities and listed entities is anticipated in early 2021. Another project on tax planning and related services is still at the information gathering stage, as in-person meetings with various stakeholders have been impacted by COVID-19.
Caroline Lee has more than 30 years of experience in the public accounting profession and is a partner at KPMG and Asia-Pacific Head of Quality and Risk Management.
A changing environment
Lee thinks the code is particularly relevant in the current environment, as the COVID-19 pandemic has heightened the need for professional accountants to have strong ethical values. “When you have times of crisis and companies are not performing well financially, professional accountants might come under increased pressure, so their ethical values must come to the forefront.”
She explains that the code aims to equip accountants with the direction needed to deal with tough situations through specifying a principles-based conceptual framework approach that all accountants are to apply to comply with the five fundamental principles they need to follow, namely integrity, objectivity, professional competency and due care, confidentiality, and professional behaviour. “They are broad enough fundamental principles that are easy to follow,” she says. At the same time, she points out that organizations also have a strong role to play in building a culture that incorporates the same principles and values.
To help professional accountants through the current volatile environment, the IESBA has created a COVID-19 page on its website, bringing together resources and a series of “questions and answers” to remind accountants what is expected of them under the code and to help them navigate ethics and independence issues that might arise during the pandemic. The IESBA has also working with national standard setters, including the Hong Kong Institute of CPAs, to develop non-authoritative material on specific topics to help accountants during this period.
“When you have times of crisis and companies are not performing well financially, professional accountants might come under increased pressure, so their ethical values must come to the forefront.”
COVID-19 is not the only challenge professional accountants face, with Lee pointing out that the increased use of disruptive technology is also making the accountants’ work and the services they provide increasingly complex. The IESBA has formed a Technology Working Group to consider the ethics implications of technological advances in areas such as artificial intelligence, robotic process automation, big data and data analytics for people in accounting, assurance and finance functions.
Lee explains that the working group found and reported in a 2019 publication that as the code is principles-based, rather than being rules-based, it already provides high-level guidance for most of the ethical issues relating to technology that professional accountants might encounter. Even so, it still identified areas in which the code could be enhanced and developed specific recommendations, including in relation to strengthening the provisions for auditor independence where firms sold or licensed technology to audit clients, providing examples of the additional technical and enabling skills professional accountants needed in the digital age, and stressing the importance of accountability and transparency. The progress on the various recommendations are being actively monitored and, in some cases, progressed by an IESBA Technology Task Force which recently issued two surveys to inform its work.
The IESBA also plans to gather additional information on blockchain, cybersecurity, the Internet of Things and data governance, to understand better what impact these areas could have on professional accountants’ ethical behaviour. Lee suggests that in order for accountants to keep pace with technology, they need to develop additional skills in this area to gain a greater understanding of how the technology works. “Technology is great in helping us with our work but as accountants, we need to understand the algorithm on which the technology is built, otherwise it is difficult to know if the solution is doing what it is supposed to be doing.” She adds that even when technology is being used, professional accountants should still remember that their responsibility to act in the public interest remains the same.
Lee has been a board member of the IESBA since January 2017 and of its Planning Committee since January 2019, and has played an instrumental role on its projects to revise the fee-related provisions.
A background in audit
Lee started her career at KPMG in Singapore more than 30 years ago, joining the firm after graduating from the National University of Singapore with a Bachelor of Accountancy. She decided to go into audit as this area interested her and she enjoyed working with different clients who operated in very different industries. “Every day you see something new, something different,” she says.
For Lee the most memorable moment of her career was when she was made a partner 16 years ago. “Subconsciously, I might have aspired to be a partner, but on a conscious level, it was more important to me that my work was of value and made a contribution, and that I acted with integrity,” she says. “But being recognized and admitted as a partner, notwithstanding the fact that I was in a non-client-facing role that wasn’t revenue generating, was one of the highlights of my career.”
She became involved in ethics and issues relating to independence following the Enron scandal in 2001, which led to significant rule changes governing accountants’ independence. She credits her experience in this area with helping her with the work she does at the IESBA.
“It was more important to me that my work was of value and made a contribution, and that I acted with integrity.”
Lee says ethical issues have always resonated with her because of the importance she places on acting with integrity in both her professional and personal life. Five years ago, she took up the role of KPMG’s regional head of Quality and Risk Management in the Asia-Pacific region, having previously led the Risk Management and Ethics and Independence teams in Singapore. “My current role gives me the opportunity to see more than just Singapore, and to interact with colleagues from across the region. This has really helped me bring perspectives from Asia to the board in the work I do in the IESBA.”
She adds that having to guide leaders in KPMG’s APAC firms to make the right decisions can sometimes be difficult, but she has a good relationship with her colleagues, and they understand that she is coming from a position of integrity.
Lee says the biggest challenge she faces in her work life is fitting everything in, as the IESBA makes a lot of demands on her time and she has to juggle it with her role at KPMG. This challenge is made worse by the fact that the IESBA board members all come from different time zones, so virtual meetings are often scheduled late at night for Lee in Asia in order to coincide with working hours in Europe, Africa and the United States. “It can be challenging at times, but it is worth every minute because it is very fulfilling,” she says.
Lee jokes that when she is not working at KPMG, she spends most of her spare time working for the IESBA, although she adds that one of the few benefits of the COVID-19 pandemic is that she no longer has to travel. “I used to have to travel for my regional role and for IESBA meetings four times a year, three of which would be in New York, with the fourth tending to be in North America or Europe. Now I get the chance to be here in Singapore with my family which is a positive. Spending time with family is really precious.”
Lee encourages both professional accountants and those in related professions to volunteer to do work with the IESBA. “The international standard-setting model is undergoing a transition, so we will be coming out with new skills matrix for board members. If anyone has skillsets that match these requirements, it would be a good opportunity for them to join and contribute. I think it is a wonderful opportunity to be involved with an international standard setting body,” she says.
IESBA has formed a Technology Working Group to consider the ethics implications of technological advances in areas such as artificial intelligence, robotic process automation, big data and data analytics for people in accounting, assurance and finance functions. More details on their technology project can be found on www.ethicsboard.org.