No Nelsonian Eye: Supreme Court Justice Warns Against Turning Away from Corporate Malpractice

COLOMBO (News 1st): Sri Lanka’s corporate sector must never pursue profit at the expense of national interest, employees, minority shareholders, consumers, or the integrity of capital markets, Justice Yasantha Kodagoda, PC, of the Supreme Court cautioned in an address that placed clear ethical guardrails around the work of accountants and auditors.

Delivering a strongly worded reminder of professional duty, Justice Kodagoda said support extended to employers to achieve corporate business objectives must be anchored in fairness and public interest. 

“Support to employers to achieve corporate business objectives should never be at the expense of wider national interest of our country,” he declared. 

Emphasizing that corporate ambition cannot override stakeholder rights, he added: “Assisting corporate employers… should not, and I repeat should not, come at the expense of the employees, transacting third parties, interest of minority shareholders and the rights of consumers.”

Calling accountants pivotal to the ethical spine of the private sector, Justice Kodagoda noted their “proximity… to every aspect of business activity” confers a duty that goes beyond the immediate financial interests of the company.

“The true measure of professionalism and integrity of accountants, financial analysts and financial advisors lie in balancing corporate success with fairness being meted out to all shareholders. In my opinion, accountants are not mere servants of profit, but custodians of balancing trust.”

Drawing a clear distinction between internal financial stewards and external gatekeepers, he underscored that auditors serve a broader constituency, appointed by and reporting to shareholders, and, when it comes to listed entities, bearing an additional obligation to the general public and the wider corporate ecosystem. Their role, he said, is central to safeguarding transparency in capital markets by ensuring investors and citizens are informed of the true financial status of enterprises. “It is through such fair and truthful reporting that external parties, including existing and prospective shareholders, can take well-informed decisions.”

Justice Kodagoda described auditors as investigators whose task is to independently and effectively investigate, verify, and ascertain the truth, rather than endorse a curated financial picture.

He urged the profession to look beyond narrow self-interest and mere baseline compliance with auditing standards. “No responsible auditor can or should afford to turn a Nelsonian eye to any form of financial malpractice, including misappropriation, fraud, corruption, [or] the use of the company as a vehicle to perpetrate crime.”

He was unequivocal about the standard for audit opinions: “An audit report must reflect the truth, and the whole truth, as opposed to averments in diplomatic jargon which only touches upon the surface of the actual financial status of the company being audited.” 

Only through in‑depth, truthful reporting, he argued, can confidence in corporates be strengthened.