UNCTAD EXPERT GROUP AGREES GUIDELINES FOR PROFESSIONAL ACCOUNTANTS
Press Release
TAD/1866
UNCTAD EXPERT GROUP AGREES GUIDELINES FOR PROFESSIONAL ACCOUNTANTS
19990224 GENEVA, 24 February (UNCTAD) -- Some hundred accounting experts from 53 countries have agreed upon a guideline for the qualifications of professional accountants, including a model curriculum for their technical education. The guideline was adopted on 19 February under the auspices of the United Nations Conference on Trade and Development (UNCTAD), at the conclusion of a three-day session of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR). Some 15 professional organizations participated in the meeting, which was chaired by Professor Alicja Jaruga, Head of the Accounting Standards Committee in Poland.The guideline (contained in document TD\B\COM.2\ISAR\5) covers general and technical education, the examination system, practice requirements, continuing professional education and a code of professional ethics, or values. It was developed by ISAR experts for the benefit of the international community as a whole in order to promote the global harmonization of professional qualification requirements.
An International Definition
The ISAR meeting also successfully recorded an important footnote to history. Luigi Pacioli, an Italian considered the father of modern accounting, invented double-entry bookkeeping in the late 1400s. However, for over 500 years, there has been no workable definition of a "professional accountant". Under the leadership of its Rapporteur, Domenico Da Empoli (Italy), ISAR formulated a definition of a professional accountant as follows: "a professional accountant is a person who is qualified to be, or who is, a member of a recognized professional body of accountants or of auditors, or who is recognized as such by a regulatory body". This definition underlines the fact that accountants must not only be highly qualified but also be under the surveillance of a professional or regulatory body.
Filling a Vacuum
While international standards exist for the provision of the service of accounting, there are no global standards as yet for the service providers. The purpose of the guideline is therefore to establish a benchmark for national qualifications and to assist holders of those qualifications to function in a global economy. The harmonization of professional requirements
would close gaps in national systems of qualification, cut the cost of mutual recognition agreements and increase transborder trade in accountancy services.
ISAR felt that a detailed model curriculum was a necessary part of the guidance because developing countries and countries with economies-in- transition need more than general guidance in designing, or evaluating, the accounting curricula of their educational institutions. Such a curriculum could serve as a benchmark to indicate to countries what steps should be taken to ensure that their educational programmes are comparable to programmes elsewhere.
Many countries cannot afford to establish mechanisms such as special education committees to link the needs of the global market with education of accountants domestically. Nevertheless, developing countries face barriers if they do not comply with world standards. The President of the International Federation of Accountants, Frank Harding, thus stated that the model curriculum would be "a useful contribution" to strengthening the accountancy profession in developing countries.
National bodies in Malaysia and Switzerland have already used the model curriculum and found it useful. At the ISAR meeting, Japan judged it to be a very important input for trade and development; while the Indian representative stated that as mutual recognition agreements would come only on the basis of comparison, the guideline would facilitate this task. The question of monitoring compliance with the benchmark was deferred to a meeting to be hosted by the Association of Chartered Certified Accountants in London on 15 and 16 July.
A Sense of Urgency
The issuance of such guidance to the profession is very timely. The World Trade Organization (WTO) has just adopted disciplines for accounting services including provisions on licensing requirements, qualification requirements and procedures (14 December 1998), and thus the guideline can fill a vacuum in implementing the WTO disciplines.
Defining the qualification requirements in detail via a guideline is also in the best spirit of Article VII of the General Agreement on Trade in Services (GATS) which states that "Members shall work in cooperation with relevant and non-governmental organizations towards the establishment and adoption of common international standards and criteria for recognition and common international standards for the practice of relevant services trades and profession."
Secondly, the Asian crisis has revealed many deficiencies in national accounting systems and in implementing international accounting and auditing standards. It appears that some accountants were not up to functioning in a
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global economy with complex financial transactions. Elsewhere, in the formerly centrally-planned economies in transition accountancy qualification systems are in a state of flux; these countries are thus looking for appropriate models, as well as admission to global accountancy bodies.
ISAR discussed a 40-page study which it had requested during its previous session on "The Role of Accounting Disclosure in the East Asian Crisis". The study, prepared by an independent consultant, reviewed the accounting practices of 85 of the largest banks and corporations in six Asian countries.
The study found that while weak financial infrastructure, financial liberalization and speculation were to blame for the crisis, if reliable accounting information had been available, excessive financial exposures would have been detected earlier, permitting corrective action to be taken, and thus possibly diminishing the magnitude of the crisis.
Experts at the ISAR meeting felt that while the accounting principles of "true and fair view" and "going concern" had probably not been adhered to, the auditors were not entirely to blame. Better corporate governance had a role to play in assuring compliance with such fundamental accounting principles.
ISAR Assesses Its Work
The Group undertook a self-assessment of its work as requested by the UNCTAD Trade and Development Board. The majority of participants gave a very positive assessment of the impact of ISAR's work. However, while one delegation acknowledged that while there was universal agreement that the work was important, he wondered what was the best method to continue this work. A number of delegates suggested how the efficiency of ISAR could be improved.
Many experts gave concrete examples of how the work of ISAR had affected accounting practices in their countries. The overwhelming sentiment of the experts, as expressed by the Brazilian delegate, was that this is a forum worth preserving: "Developing countries and economies in transition have needs in the field of accounting standards and of financial reporting. However, they should be given the opportunity to say what their needs are, and work side by side with developed countries to see that those needs are met, rather than merely being told how they can be met, from the unilateral point of view of whomever decides to tell them. Those needs must be debated in appropriate forums."
The World Bank, the European Union and the European Commission echoed these sentiments. The World Bank stated,"the world needs a joint public and private sector forum to develop mutual understanding of interdependencies to meet the challenges of the emerging international financial architecture.
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Only ISAR offers a balanced and inclusive forum where developing countries have a voice."
For more information, contact Lorraine Ruffing, Chief, Enterprise Development Branch, UNCTAD Division on Investment, Technology and Enterprise Development, on telephone: +41 22 907 58 02; fax: +41 22 917 01 97; e-mail: lorraine.ruffing@unctad.org, or Carine Richard-Van Maele, Chief, Press Unit, UNCTAD, on telephone: +41 22 907 5816/28, fax: +41 22 907 0043; or e-mail: press@unctad.org
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