Bribery and corruption – where are the accountants and auditors?

Research commissioned by The Australian Council of Superannuation Investors (ACSI) considers ‘Anti Corruption & Bribery Practices in Corporate Australia‘, (October 2011), in the top 100 and 200 companies in corporate Australia. Transparency International also tells us where perceptions of bribery and corruption are most likely to be found in the world. Australia is perceived to be relatively squeaky clean but is also surrounded by a sea of perceived corruption within which its businesses must sink or swim.

In one testing comment the ACSI report states “The first section of the report defines bribery and describes how it is distinguished from a facilitation payment‟, as though there is a difference. Of course, there is a difference in terms of free cash flow models of valuing the business as facilitation payments in Australia are tax deductible and, hence, add relative value to the business, whereas bribes are not tax deductible and have less efficacy from the stock market view of the world.

Also telling are the following rationales for facilitating tax deductibility (p.7):

“In line with the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions a bribe is defined as a favour or gift offered or given with the intention of influencing behaviour or opinions of foreign public officials in order to obtain business or other improper advantages.

The OECD Convention identifies facilitation payments by the circumstances in which they are made. A payment is a facilitation payment, and not a bribe, where it is paid to government employees to speed up an administrative process where the outcome is already pre-determined.”

In both cases behaviour is being influenced. It is just a question of the extent. The problem is that with facilitation payments or a bribes – facilitation payments are to bribes as marijuana is to heroin. Does one behaviour or practice lead to the other? Are lives severely influenced because of the first tentative steps down the path, or does it take several or many steps? Or are the behaviours unrelated? The jury is out. Can lives be influenced badly by business commencing with infant facilitation payments. Is it just a question of what is acceptable behaviour by the authorities in modern society? Professional accountants and auditors can influence the debate.

On the face of it poor standards seem to be slipping into Australia under the radar because of the extension of top company business into countries where considerable bribery and corruption are the norm. Sustainability reports can reveal the preference of companies for such slippage. From the US/UK perspective it might seem that Australian companies are laggards that needs to be brought into line with the UK and US laws and standards on bribery and corruption. Or is Australia just closer to the action and more pragmatic in the sea of corruption in which growing volumes of business takes place?

Where are the accountants and auditors when we need an opinion and some assurance on these issues?  Not a single mention of accountants, auditors, audit or assurance services appears in the ACSI report. The important role that such professionals could have in helping reframe the discussion or to reconsider whether facilitation payments and bribery both seek to change behaviour in illegitimate ways, with both being allowed to influence corporate value through tax deductibility, or neither. Where are the accountants that can help us get rid of this false divide in practice?


One comment

  1. Intersting blog and perspective on corruption and facilitation payments, Roger.

    I have to agree with you regarding the fine line between facilitation payments and bribery. It is a slippery slope, and how can it be proved that the administrative process is predetermined? particularly when dealing in an emerging market?

    I know of companies operating in some emerging economies who have attempted to pursue an ethical and legal approach to dealing with government, approvals and permits, and so they are unprepared to engage in either facilitation payments or bribes. As a consequence their permit is in a holding pattern, where there is no approval or rejection… they have been advised to continue operating in the country as if there was a permit. This is the effective consequence of not engaging in the corruption process.

    Interesting stuff, and challenging decision for many companies to decide.

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