Speaking at the launch of the first edition of Managing Culture - A good practice guide, a collaboration between the Institute of Internal Auditors - Australia, The Governance Institute, The Ethics Centre and Chartered Accountants ANZ, ASIC commissioner John Price said auditors and accountants played a key role in identifying red flags in an organisation’s culture.
“Internal auditors are probably one of the areas where they have visibility right across the organisation. I think they are in a very privileged position; it is a very important position,” said Mr Price.
“Companies should be interested in culture because as many studies have shown, good culture is good for business and generates long-term shareholder value.
“Although we think culture is widely important for the organisations we regulate, we don't intend to dictate the kind of culture the company should have. Instead, we see a role for ourselves in influencing behaviour change,” he added.
“By speaking about culture, by supporting good practice, by turning attention to cultural issues, we're encouraging firms to shine a light on their own culture.”
Mr Price also noted the International Ethics Standards Board for Accountants recently released the NOCLAR standard, which came into effect 15 July 2017, as an example of the obligation that accountants and auditors have when identifying poor culture within an organisation.
Regnan chief executive Pauline Vamos said the uptake of integrated reporting meant that organisations were starting to realise the impact of corporate culture on their bottom line.
“I think what's changing the landscape is the growing acceptance of integrated reporting, the whole global move towards reporting on those intangible risks because up until now, auditors and accountants' focus have been pure dollar numbers, not intangible risks on the long-term bottom-line,” said Ms Vamos.
“It is just starting in Australia, it is certainly more accepted and utilised in the UK but I think the demand from shareholders and other stakeholders, including ASX and the regulators will see a big change in that.”
Likewise, ASX corporate governance committee chair Elizabeth Johnstone believes the role of auditors is evolving to address the intangible risks involved in culture.
“I do think auditors are looking at their role differently… I think internal auditors roles have evolved over the years and they are now serious risk professionals,” said Ms Johnstone.
“Certainly the external audit firms are very engaged in making sure they are having those independent discussions with the board and more than that they want to talk about culture, they want to ask what we are doing as a board to be sure we understand cultural challenges, cultural issues etc.
“I think the larger audit firms are certainly acutely aware of how they need to step up and are doing so.”