Financial Crime World

Disclosure Level: When Egyptian Accounting Standards Were First Adopted - A Study on the Impact of Corporate Governance and Compliance

Effective Compliance Frameworks and Transparency in Law Firms: Lessons from South Africa

Introduction

A recent study published in the Mustang Journal of Accounting and Finance explored the impact of corporate governance on information disclosure in Egypt when Egyptian accounting standards were first adopted. The findings highlighted the significance of transparency and accountability in financial reporting, particularly for law firms.

Quality of Financial Reporting and Governance Structure

According to Sanni (2011), the quality of financial reporting is closely linked to the level of accountability and transparency in an organization’s governance structure. In South Africa, law firms are accountable institutions that must comply with regulations such as the Financial Intelligence Centre Act and the Protection of Personal Information Act.

Importance of Effective Internal Control Systems and Compliance Frameworks

In a separate study published in Research Journal of Finance and Accounting, researchers found that the low quality of financial reporting can greatly reduce the quality of an institution itself (Kateba, 2010). This underscores the importance of effective internal control systems and compliance frameworks in law firms to ensure transparency and accountability.

Compliance Charter

The Institute of Internal Auditors defines a compliance charter as “a formal document approved by the governing body” that sets out the organization’s commitment to compliance (Institute of Internal Auditors, n.d.). In South Africa, the Law Society of South Africa’s Legal Services Sector Charter (2007) requires regulators to develop and implement an effective mechanism to ensure compliance with the charter.

Effective External Enforcement

Effective external enforcement of regulations is also crucial in ensuring good corporate governance in the legal sector. As noted by Deloitte, the corporate law of compliance extends beyond fiduciary duties and includes substantive regulatory statutes, criminal laws, guidance from administrative agencies, codes of best practices, internal corporate rules, and other governing norms (Deloitte, 2017).

Conclusion

This article highlights the importance of transparency and accountability in financial reporting, particularly for law firms. Effective compliance frameworks and processes are essential to ensure good governance and prevent risk management failures.

Recommendations

  • Law firms should prioritize the development of effective internal control systems and compliance frameworks to ensure transparency and accountability.
  • Regulators should improve the external enforcement mechanism to ensure compliance with regulations.
  • Smaller law firms can engage part-time resources dedicated to compliance, while larger firms can establish a full-time compliance function.

Author Bio

Sipho Nkosi is a legal consultant at Integrity Governance Advisory in Ekurhuleni. He holds a Bachelor of Procurement Law (BProc) degree from the University of KwaZulu-Natal and is a Certified Internal Auditor (CISA).

References

  • Agyei-Mensah, B. K. (2017). Does the corruption perception level of a country affect listed firms’ IFRS 7 risk disclosure compliance? Corporate Governance International Journal of Business in Society, 17(4), 727-745.
  • Deloitte. (2017). Duties of Directors.
  • Deloitte. (n.d.). The corporate law of compliance.
  • Institute of Internal Auditors. (n.d.). What is a Compliance Charter?
  • Jaffit v Garlicke and Bousfield Inc (PFK (Durban) Incorporated and Others as Third Parties) and other cases [2012] 2 All SA 95 (KZP).
  • Kateba, K. (2010). The impact of internal control systems on financial reporting quality.
  • Law Society of South Africa. (2007). Legal Services Sector Charter.
  • Mustang Journal of Accounting and Finance. (n.d.). Disclosure Level: When Egyptian Accounting Standards Were First Adopted.
  • Sanni, O. A. (2011). Corporate governance and financial reporting quality in Nigeria.
  • Strategic Management Services, LLC. (n.d.). When is Having a Part-Time Compliance Officer a Viable Option?