Ty Francis, chief advisory at LRN Corporation, explores why accountancy firms should look to adopt practical approaches for monitoring supplier practices, especially in the area of ethics and compliance training.
As with many industries, accountancy has become essential to boosting productivity, lowering costs and remaining competitive in an ever-changing landscape. So with regulatory compliance more critical than ever, it
is essential that firms manage risks, especially within third-party relationships.
Earlier this year, the UK’s Serious Fraud Office (SFO) launched a task force alongside France and Switzerland dedicated to improving prosecutorial collaboration in complex, cross-border corruption cases. This initiative
aims to strengthen cooperation between national authorities, streamline investigative and legal strategies, and intensify efforts to combat bribery and corruption between national authorities, streamline investigative and legal strategies, and intensify efforts to combat bribery and corruption.
With this increased focus on cross-border cooperation, UK businesses and financial professionals, including accountants, must remain vigilant and aware as they will face greater scrutiny in ensuring compliance with anti-corruption laws.
Effectively monitoring third-party suppliers is a tapestry of risk mitigation. Combining rigorous onboarding, continuous oversight, and proactive communication with third parties are all crucial in ensuring alignment with an accountancy firm's organizations' standards and objectives.
Of course, most organizations will already have basic due diligence for third-party suppliers in place. It should include – but is not limited to – background checks, assessing supplier’s past performance, reputational
risks and compliance with regulatory standards, firms can avoid potential disruptions later. An accountant plays an important role in due diligence through the assessment of financial statements, credit reports, and payment histories to get a good idea of the reliability of the business in question. By carrying out these ‘healthchecks’ accountants enable businesses at risk of insolvency and hedge off any potential downfalls.
For instance, accountants could help support compliance audits by conducting forensic accounting investigations to detect financial fraud, bribery or discrepancies in transactions. Not only this, but proactive financial oversight helps prevent regulatory breaches that could lead to severe financial penalties. This can include regular audits, site visits and performance reviews.
So what can businesses do to protect themselves further? The answer: comprehensive ethics and compliance (E&C) training. E&C training is indispensable for businesses creating a shared understanding of values, ethics, and regulatory obligations among third parties. Training programs also help prevent misconduct by educating suppliers on identifying and addressing compliance risks.
Firms should be looking to develop training for the different roles and risk profiles in the organization. For example, auditors or financers dealing with complex regulatory frameworks should receive specialized training on compliance with financial reporting or money laundering laws. This tailored approach ensures that suppliers are equipped to navigate the challenges of
their industry. Not only this, but accountants who work in high-risk sectors with cross-border transactions should implement targeted training programs to ensure the firm will be well equipped to deal with any challenges that come its way.
Most mature programs will focus on helping employees identify red flags associated with financial misconduct, such as unusual transactions or conflicts of interest. However, adding training into the mix would cover the best practices for ensuring compliance with niche regulatory obligations.
To maintain compliance, businesses must ensure that training is not a one-time event but a continuous process. Regular refresher courses help reinforce ethical guidelines and regulatory updates, meaning that regular training sessions also provide opportunities to share case studies of past incidents, enabling firms to learn from real-life examples.
By doing so, companies emphasize not only the importance of closely monitoring third-party activities, but also the need for businesses to cultivate a compliance-driven culture with their external partners. It encourages viewing third parties as integral extensions of the company’s own compliance framework. One effective approach to strengthening these partnerships is by promoting the adoption of similar training and ethical standards for third parties, aligning them with those expected of the company’s internal employees.
Encouraging third parties to participate in customized compliance training can help create a more unified alignment between the company and its partners. Those suppliers should be required to certify that they
understand and will adhere to the training received. Implementing a certification process not only formalises suppliers’ commitment to ethical standards, but also ensures that all parties are accountable for upholding
the business’s values and regulatory requirements.
Monitoring non-compliance with regulations can help firms mitigate the risk of fines, litigation and reputational damage. Companies that prioritize integrity and accountability will avoid pitfalls and build resilient,
sustainable businesses. This not only protects their interests, but also contributes to the overall stability of the financial sector.