Challenges Faced by the Accounting Profession in Developing Nations
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Transcript of Challenges Faced by the Accounting Profession in Developing Nations
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Challenges Faced by the Accounting Profession in Developing Nations
Tony HegartyChief Financial Management OfficerHead of Financial Management Sector BoardThe World Bank
Mexico City, MexicoJune 2007
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The World Bank GroupWorking for a world free of poverty
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Poverty Reduction: Global Challenge
1 billion people live on less than $1 a day
2 billion do not have access to clean drinking water
200,000 children under 5 die each week of treatable and preventable diseases
Globally, 1 child in 4 does not finish primary school, and in Africa almost 50% do not
70% of the world’s poor are in Middle Income Countries
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Millennium Development Goals
Endorsed by 189 countries at the UN Millennium General Assembly in Sept 2000.
Aim to halve the proportion of people in extreme poverty by 2015.
Set targets for reductions in poverty, improvements in health and education, and protection of the environment.
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Developed countries must boost foreign aid to the developing world, remove barriers to the exports of developing countries, encourage private investment, and make the benefits of science and technology available to all the world's peoples.
Developing countries, meanwhile, must put in place the right economic policies, work to improve governance, invest in their people, and create an enabling environment that is conducive to growth and development.
“The Millennium Development Goals offer concrete targets for everyone to rally around in the global fight against poverty. But reaching the goals will require action from both developed and developing countries.”
Jeff Gutman VP, OPCS
The World Bank
Millennium Development Goals
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Gleneagles Summit, Scotland: July 2005
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Governance, Poverty Reduction, Financial Management
Formal Oversight Institutions
• Independent, effective judiciary
• Legislative oversight (PACs, PECs)
• Independent oversight institutions (SAI)
• Global initiatives: UN, OECD Convention, anti-money laundering
Political Accountability
• Political competition, broad-based political parties
• Transparency & regulation of party financing
• Disclosure of parliamentary votes Civil Society & Media
• Freedom of press, FOI• Civil society watchdogs• Report cards, client surveys
Decentralization and Local Participation
• Decentralization with accountability
• Community Driven Development (CDD)
• Oversight by parent-teacher associations & user groups
• Beneficiary participation in projects
Private Sector Interface
• Streamlined regulation• Public-private dialogue• Extractive Industry
Transparency • Corporate governance• Collective business
associations
Effective Public Sector Management
• Ethical leadership• Public finance management &
procurement• Civil service meritocracy
& adequate pay• Service delivery and regulatory
agencies in sectors
Outcomes: Services,
Regulations, CorruptionCitizens/Firms
Citizens/Firms
Citiz
ens/Firm
s Citizens/Firms
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GAC Consultations (Nov. 2006 – Jan. 2007)
AFRBurkina Faso, Botswana, Cameroon,
Kenya, Mauritania, Mozambique, Rwanda, Senegal, Tanzania, Uganda.
Planned: Congo-Brazzaville
LACArgentina, Bolivia,
Dominican Republic, El Salvador, Guatemala,
Mexico, IACC
EAPAustralia, Cambodia,
China, Japan, Indonesia, Lao PDR, Mongolia,
New Zealand, Philippines,
Vietnam, Thailand
MNAEgypt, Morocco, Yemen
ECAAlbania, Bulgaria, Georgia, Moldova,
Russia
EuropeBrussels, the Hague,
London, Madrid, OECD, Paris, Rome, Stockholm
North AmericaOttawa, Washington DC
(IMF, MDBs, US Government, CSOs,
private sector, unions)
SARBangladesh, India, Nepal
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Governance & Anticorruption (GAC)
Project Level
Combating corruption in
World Bank Group operations
Country Level
Deepening support to countries to
strengthen governance
Global Level
Working with development
partners, sharing experience & addressing
transnational issues
Key Elements of World Bank Strategy
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Governance, Poverty Reduction, Financial Management
Improved FM capacity is at the core of good governance and lies at the heart of achieving the MDGs/poverty reduction: ensuring that public and donor resources are used efficiently, effectively and transparently for intended purposes.
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Diagnosis of Country PFM Systems?
A CFAA a diagnostic tool to enhance the knowledge of PFM in client countries.
It supports fiduciary responsibilities by identifying the strengths/weaknesses of PFM so that potential risks to funds can be assessed/managed.
It supports development objectives that lead to the design and implementation of capacity building programs (Action Plan) to improve a country’s PFM
diagnostic tool
fiduciary responsibilities
Action Plan
development objectives
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PFM Diagnostics Completed: over 100
AFR
SAR
EAP
ECA
MNA
LCR
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PFM Diagnostics: Emerging Cross-cutting Issues
Incomplete Budget Information Inadequate Accounting Systems Obsolete Legal Framework Ineffective Internal and External Audit Poor dissemination of PFM information Shortage of qualified PFM Professionals Barriers to IFMIS
Mostly due to weak capacityMostly due to weak capacity
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Foreignexchange
crisis Stock Market crash
Corporate bankruptcy Bank
failure
PropertyMarket
collapse Economiccrisis
International Financial Crises
Increasepoverty
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International Response: Standards & Codes
The World Bank
Policy Transparency Data Transparency Fiscal Transparency Monetary and Financial Policy Transparency
Financial Sector Regulation & Supervision Banking Supervision Securities Regulation Insurance Supervision Payments Systems Anti-money laundering
Market Integrity Corporate Governance Insolvency and Creditor Rights Accounting Auditing
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What is an Accounting and Auditing ROSC?
Evaluates strengths/weaknesses of institutional frameworks
Assesses comparability of national with IFRS/IAS and ISA
Examines compliance with standards in practice
Supports the preparation of development action plan for enhancing accounting and auditing standards and practices
strengths/weaknesses
comparability
compliance
development action plan
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ROSC A&A Reviews Completed: 62
AFR
SAR
EAP
ECA
MNA
LCR
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ROSC A&A Reviews in Latin America & Caribbean: 10
Chile
Colombia
Dominican Republic
EcuadorEl Salvador
Paraguay
PeruUruguay
Jamaica
Mexico
Argentina Brazil
Honduras
Guatemala
+ 4 being finalized…
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ROSC A&A: Emerging Cross-cutting Issues
Outdated legal frameworks Weak accountancy professions Widespread non-compliance with standards Weak monitoring/enforcement mechanisms Lack of access to international standards Inadequate training and curricula Non-availability of implementation guidance and
practice manuals
Mostly due to weak capacityMostly due to weak capacity
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Fromdiagnostics to
capacity developmen
t
How do we get there?
From Diagnostics to Implementation
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Capacity Development: Follow-up
Government
Country Stakeholders
Donors
World Bank
Involves Collaboration/Partnership
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Integrated Capacity Development Plan(Example: Country Action Plan)
Education & Training Accountancy
ProfessionAccounting Standards & Actual Practices
Auditing Standards
& Actual Practices
Statutory Framework
Oversight, Monitoring & Enforcement of Standards
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Guiding Principles for Capacity Development
Country leadership and ownership
Tailor-made capacity development design
Comprehensive programme design and implementation
Coherent and coordinated donor support
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Building FM Capacity: Harmonization and Global PartnershipsDonors are harmonizing fiduciary requirements and are
aligning those with strengthened country PFM systems MDB OECD-DAC JV-PFM
Donors are supporting FM capacity building initiatives in various countriesDonors are supporting international FM organizations:
IFAC INTOSAI IASB
IFAC Developing Nations Committee
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Building FM Capacity: How Can the Accountancy Profession Contribute?
Complying with IFAC membership obligations (SMOs)
Supporting IFAC’s Developing Nations Committee
Providing advise/technical support to governments/donors
Training/Certification of more accountants (levels)
Addressing specific needs of the public sector
Ensuring compliance with accounting/auditing standards
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Summary and Conclusion
Poverty reduction is primary global development challenge
MDGs created a powerful compact for fighting poverty. Reaching them will require accelerated and concerted actions from developed and developing countries
Improving governance and financial management
FM capacity development
Partnership required in support of country led strategy