CHALLENGES TO ACCOUNTING PROFESSION IN WTO REGIME
Abstract
The paper presents scenario as backdrop to the rise of WTO. It states various unique features of SAARC region and focuses on challenges restricted to accounting professions in the wake of rise of WTO. It presents briefly the regulatory framework governing the issuance of International Accounting Standards and International Standards on Auditing. It poses challenge to produce SAARC Accountants in the short run and Global Accountant in the long run for accepting the challenges posed by WTO regime in services sector.
It urges the Accounting Professional Institutes to implement IES-1 to 6 and IES-7 to produce professionally qualified accountants to face the challenges posed by WTO. It suggests the completion of journey through three stages namely, Memorandum of Discussion, Memorandum of Understanding and finally through Mutually Recognized Agreements.
While identifying appropriate logistics needed to meet WTO challenges, it presents a framework for strategic preparation through restructuring courses of studies and understanding competitive forces. In this respect details have been included for operationalizing the course of action and developing a commitment to implement the spirit of competitive forces.
CHALLENGES TO ACCOUNTING PROFESSION IN WTO REGIME
The Rise of WTO
In the last quarter of 20th century, the world saw some spectacular changes. Cross border investments started freely. Cross border transactions in the area of Stock Market, Trade and Movement of persons took place. The world saw the rise of competitive forces. China emerged as a rising giant. The Indians earned a high respect in the comity of nations due to their openness in the economy of the Country. India has appeared on the map of 85 countries through Business Process Outsourcing (BPO). European Union, through integration, emerged as strong force alongwith the introduction of new currency “Euro”. South Asian economies are a sleeping giant and have awakened up. Our area constituting SAARC Countries is a unique in many respects. We have the oldest civilization of the world. We are the largest single economic block with the highest number of consumers. We are number one in the world from the viewpoint of irrigation system. We rank number Two in the railway network, after USA.
For meeting the challenges of WTO, there is a need for South Asia to rise to the occasion and meet socio-economic challenges. However, this paper is restricted to challenges to accounting profession in the wake of rise of WTO.
The Accounting Profession
The global accounting profession is a beneficiary through issuance of various Accounting Standards from International Accounting Standard Board located in London, which issues International Accounting Standards (IAS) / International Financial Reporting Standards (IFRS). So far 40 IAS/IFRS have been issued. However the other aspects relating to education, ethics, business matter, public sector and auditing are handled by various Committees through the International Federation of Accountants (IFAC). In particular, International Standards on Auditing and related services are prepared by International Auditing & Assurance Standards Board (IAASB) and released through IFAC.
The accountancy profession produces two types of accountants namely: Chartered Accountants and Cost & Management Accountants. The challenges facing the accountancy profession in South Asia are to produce, in the short run, SAARC Accountants and later in the long run, a globally acceptable accountant on a wider scale.
Seven European countries are currently devoting their efforts in producing an European Accountant who may be acceptable throughout Europe. UNDP has prepared a curriculum to prepare a global accountant. Their curricula is also being debated and discussed to ensure that it meets International Education Standards (IES) 1 – 6. Table 1 lists these standards.
IES 7 released in May 2004 is entitled “Continuing Professional Development: A Program of Lifelong Learning and Continuing Development of Professional Competence”. In the backdrop of above, autonomous professional Institutes, the product of various legislations / statutes of respective countries are governed the accounting profession. They produce qualified accountants who service the business, industry, government, multi-nationals, etc. but also, with approval from their respective Institutes, practice for audit purposes. To meet the WTO challenge, this paper will focus its attention in developing SAARC Accountant in the short run and global accountant in the long run to play their role in the world.
The Journey
The journey would begin with the following three stages:
¯ MOD – Memorandum of Discussion
¯ MOU – Memorandum of Understanding
¯ MRA – Mutually Recognized Agreements
Under the auspices of South Asian Federation of Accountants (SAFA) consisting of India, Pakistan, Bangladesh, Sri Lanka and Nepal, the above process has started* and is briefly reviewed as under:
1) MOD
All the professional Institutes in SAARC region have completed this process.
2) MOU
Most of the professional Institutes in SAARC region have signed MOUs with each other for creating awareness relating to mutual recognition of qualification. However an effective follow up is the agenda of tomorrow.
3) MRA
Arising out of series of meetings, a suggested framework for Curriculum Governing Chartered Accountancy is now ready for discussion, comprehension and adoption in SAARC region. A similar effort relating to Cost and Management Accounting Curriculum is underway. It is hoped that as time goes on, this may possibly mature and eventually a bold step will be on its way to meet the spirit of WTO in services sector for free mobility and acceptability in South Asia in short run and globally in the long run.
Logistics
By now, Education Committee of the International Federation of Accountants has so far approved six International Education Standards for professional accountants to meet the challenges of WTO (See Table 1). The Accounting Professional Institutes on global basis are reviewing their curricula to adhere to all the above IESs. Entry requirements to produce the professional accountants are being reviewed globally. The contents of professional accounting programs are being updated. Full attention in being given to developing professional skills, professional values, ethics and attitudes. A fresh look is being given to refining the practical experience requirements. Finally a new system for assessment of professional capabilities and competence is being developed.
IFAC Education Committee is impressing upon the professional institutes (163) in 122 countries to meet the foregoing challenges. Logistics are being geared up and the direction for important areas is now crystal clear. The implementation of foregoing International Education Standards will certainly enable professional institutes on global and SAARC countries basis to meet the challenges of WTO. It may be interesting to note that a review carried out by Scotish Institute of Chartered Accountants relating to model curriculum for professional accountants by UNDP has also identified several gaps*.
WTO Challenges
WTO was established on January 01, 1995 in Geneva, Switzerland. Currently the membership is 149 Countries as on February 05, 2006. Main strategic challenges of WTO include the following:
1) Administering WTO trade agreements.
2) Forum for trade negotiations.
3) Handling trade disputes.
4) Monitoring national trade policies.
5) Technical assistance and training for developing countries.
6) Cooperation with other international organizations.
Our Strategic Preparation
Our strategic preparation to face the challenges of WTO may include the following:
1) Restructuring
To ensure that proper persons join Accounting Profession, IEG 11 suggests broad guidelines for entry point and structure of pre-qualification education and experience of professional accountants. This IEG is also under review and to be issued as IES-11. This process will take around two years. IEG 11 identifies the scope of the guideline by explaining work domain, roles, pre-qualification and post-qualification, knowledge and skills, pre-qualification tests of professional competence and post-qualification tests of professional competence. Pre-qualification IT knowledge and skill requirements have also been spelled out by highlighting general information technology education requirements, the user role, the manager role, the designer role and the evaluator role. It also includes guidelines for post qualification IT knowledge and skill requirement through continuing professional education**, guidelines for specialization and details of four roles to be performed by professional accountants as user, manager, designer and evaluator. Six appendices (Table 2) relating to core I.T. knowledge and skill areas for professional accountants roles have been attached to above IEG.
The accounting professional Institutes are urged to restructure their syllabi and ensure IES 7 for continuing professional development so that professional accountants are not a victim of Law of Obsolescence of Knowledge.
This guideline lists three elements of accounting education and experience e.g. knowledge, skills and professional values. The strategic goal is to produce competent professional accountants. Knowledge bejeweling must cover General Knowledge, Organizational and Business, Information Technology and Accounting and Accounting relate. Skills to be developed include intellectual, interpersonal and communication. Professional values must concentrate on professional ethics and values.
Earlier, entry requirements require pre-testing to enable students with appropriate aptitude to enter into the accounting profession.
Core knowledge in organizational and business areas such as economics, quantitative methods and statistics of business, organization behavior, operations management, marketing and international business must be covered in the prescribed courses of studies. Core knowledge related to accounting and related areas must include in the prescribed courses of studies subjects such as financial accounting and reporting, management accounting, taxation, business and commercial law, auditing, finance and financial management and professional ethics.
Field experience is a pre-requisite for developing proper accounting professionals.
IEG 11 deals with Information Technology (IT). IT is pervasive in the world of business and a firm grip on IT on the following aspects is considered essential for professional accountants:
a) General IT education requirements.
b) The accountant as user of IT.
c) The accountant as manager of Information Systems.
d) The accountant as designer of Business Systems.
e) The accountant as evaluator of Information Systems.
Six appendices have been included with the above IEG dealing with general information technology education requirements, with the following components:
a) IT concepts for business systems.
b) Internal control in computer-based systems.
c) The professional accountant as a user of IT, as a manager of IS, as a manager of IS and as a designer.
2) Understanding Competitive Forces
Five point model suggested by Prof. Dr. Michael E. Porter is recommended to be carefully examined for developing strategies to face the future challenges of WTO regime. His model is summarized below:
a) The threat of new competitors entering the industry
b) The intensity of rivalry among existing competitors
c) The threat of substitute products or services
d) The bargaining power of buyers
e) The bargaining power of sellers
Conclusion
It is high time that professional accounting institutions equip themselves to prepare SAARC Accountants in short run and global accountants in long run to be universally acceptable to meet the challenges of WTO. Homework is needed to be undertaken with a serious attitude to achieve the foregoing objectives. The earlier this is done, the better,
Selected Bibliography
A) Books
1) Wright, Peter, Kroll, Mark J., Parnell, John (1998), Strategic Management: Concepts and Cases, New Jersey: Prentice Hall.
2) Porter, Michael E., (1989) The Competitive Advantage of Nations, New York: The Free Press.
3) Saeed, Khawaja Amjad, (2006), Principles of Auditing, Lahore, Institute of Business Management.
4) Saeed, Khawaja Amjad, (2006), Advanced Auditing, Lahore, Institute of Business Management.
5) International Standards on Auditing & International Auditing Practice Statementa, Institute of Chartered Accountants of Pakistan, Karachi, November 2002.
6) International Standards on Auditing & International Auditing Practice Statements, Institute of Chartered Accountants of Pakistan, Karachi, 2002.
B) Publication of International Accredited Bodies
7) IFAC 1999 Technical Pronouncements, New York: International Federation of Accountants, Sections: Education (pp 591-694) and Information Technology (pp 927-968).
8) IFAC Handbook 2000: Technical Announcements, New York: International Federation of Accountants, IEG, 2000.
9) International Education Standards for Professional Accountants, International Federation of Accountants, Education Committee, New York, October, 2003.
10) IFAC Education Committee IAS – 7, New York, International Federation of Accountants, Education Committee, May 2004.
C) Articles
11) Eshai Mujahid, ICAP and the Provisions of the WTO GATS, “The Pakistan Accountant”, March – April 2000, pp 5-20.
12) Haider, Sayed Aftab, World Trade Organization: The Rhetpric and Reality, “The Pakistan Accountant, March-April 2000, pp 21-23.
13) Noordin, Shiraz, World Trade Organization: Trade Flow as Freely as Possible, “The Pakistan Accountant”, March-April 2000, pp 325-29.
* The author served as SAFA Vice President (1996), President (1997) and Advisor (1998) and also participated in several SAFA Assembly meetings during 1999 to 2005 in which the above processes were fully discussed.
* The author attended the IFAC Education Committee meeting as Technical Advisor in Düsseldorf, Germany in 2005 in which a presentation was given on these gaps and detailed discussions were held.
** This is now known as IES-7 (May 2004) and deals with Continuing Professional Development: A Program of Lifelong Learning and Continuing Development of Professional Competence.
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