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October 2009

02-03 NEWS


n Druckman takes on Trucost challenge

n Calls increase for ISA adoption in Europe
n Audit firm registration under review

Taiwans accounting profession is beset by regulatory

changes and fierce competition. But improved relations
with China could lead to more opportunities



The Iranian accounting profession has been developing

as rapidly as the profession in Western countries in recent
years. An industry figure speaks with Carolyn Canham
about the state of the industry and its global successes
and ambitions

Its all about the financial crisis for the UKs professional
accounting bodies again this year and no doubt that topic
will remain good for at least the next 12 months. The crisis
is affecting the institutes in different ways, but all are
positive the relevance of their qualifications remains true

Issue 6071



Jimmy Buffets Changes in Latitude, Changes

in Attitude is one of Robert Harriss favourite
songs and the title the new chairman of the
worlds largest accounting body chose for his
inauguration speech.
Harris focused on four main points as he
embarked on his one-year term as chair of
the American Institute of Certified Public
Accountants (AICPA): globalisation, sustainability, re-regulation of financial services, and
getting more CPAs actively involved in the
Sustainability and the globalisation of
the CPA profession, particularly in terms of
accounting standards, have been two areas
the US has lagged on, but this is changing.
At the highest level of politics, former US
President George W Bush is infamous for his
denial of issues such as climate change, while
awareness of these issues is growing under the
Obama administration.
Sustainability is also high on Harriss agenda and he told The Accountant the AICPA is
taking a leadership role by becoming involved
in the Prince of Wales Accounting for Sustainability project.
There are no official rules on how an
organisation would report sustainability. The
CPA profession can play a critical role by creating the measures and furnishing the proof
that businesses can be profitable and, at the
same time, environmentally responsible,
Harris said.
The US is the last of the worlds major
economies with no firm timeline for allowing
or mandating the use of IFRS for large listed
companies. This too, could soon change.
Its essential to have a date certain for
future adoption if the United States is going
to gather any real momentum towards adopting IFRS, Harris said.
The US Securities and Exchange Commissions draft road map for IFRS adoption
envisioned US adoption by 2014. But Harris
said AICPA membership surveys have shown
the majority think it would take three to five
years to adopt IFRS and 2015 is a more realistic date.
Harris said convergence in other areas, such
as auditing standards and regulation, is also

The world will be watching next month to

see how the International Accounting Standards Boards (IASB) new financial instruments
classification and measurement standard is
received in Europe.
The rules will replace part of IAS 39
Financial Instruments Recognition and Measurement, a standard so contentious it has been
discussed and criticised by European national
leaders and the G20.
Once the standard is released, it will be in
the hands of European politicians to decide
whether it will be applied in the EU.
Europe triggered a worldwide trend to
adopt IFRS when it mandated the use of the
standards for listed companies from 2005.
But European Financial Reporting Advisory Group chair Stig Enevoldsen said recently
that if Europe does not endorse the classification and measurement standard, the question
could be asked is Europe still using IFRS?
Several high profile figures in the UK profession have said the EC could easily move
either way. An indicator towards the EC not
endorsing the standard is the chilly reception
to the IASBs work from European finance
ministers, particularly those from France and
Germany. Indicators towards EC endorsement include pressure from the G20 for a
single set of global standards and news the
US Securities and Exchange Commission is
working on its proposed road map for IFRS
adoption with renewed purpose.
IASB chairman David Tweedie addressed
EU finance minsters recently, saying the board
has made changes since the exposure draft
that respond to concerns from the EC.
The changes include allowing reclassification of financial instruments when business
models change, which the EC says is essential.
Another EC concern that has been
addressed was extended use of fair value
measurement. Tweedie said the new standard
will probably result in financial institutions
that undertake traditional banking activities
applying less fair value accounting.
The IASB has a delicate balance to strike
in terms of pleasing Europe and maintaining
independence. November will be an interesting month. <
Carolyn Canham

New AICPA president welcomes

changing times in the US

A VRL publication

Robert Harris, AICPA

Audit oversight reliance between the EU
and the US hit a snag recently, with the EC
excluding the US from a proposal that audit
regulators in EU member states co-operate
with certain other national regulators in the
exchange of audit working papers.
One condition was reciprocity, which the
US cannot grant due to national law. Harris
said the Public Company Accounting Oversight Board is working with US politicians and
foreign counterparts to find a solution.
There is correcting language in pending
legislation in the House of Representatives
that would expand the production of audit
information and provide for exchanges with
foreign counterparts, Harris added.

AICPA veteran

Harris has a lengthy history of service with

the AICPA, including time on the board of
directors and the governing council. He was
chair of the National Accreditation Commission between 2003 and 2008, and has been
involved with committees covering issues as
diverse as womens initiatives, disability insurance, state legislation and finance.
Harris is also managing director of Harris,
Cotherman, Jones, Price & Associates, a local
CPA firm based in Vero Beach, Florida. <
Carolyn Canham

Profession braces for

EC endorsement news

E s tablished 1875: The professions oldes t news source

The Accountant October 2009




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Druckman takes Trucost challenge

One of the UKs foremost figures in accounting for sustainability has taken on a new
challenge leading an environmental data
Paul Druckman is a past president of the
Institute of Chartered Accountants in England and Wales, chairman of the Federation of European Accountants sustainability
policy group and chairman of the executive
board of the Prince of Wales Accounting for
Sustainability project.
Adding to his raft of positions, he recently
became chairman of environmental data company Trucost. Trucost maintains a data base
with information on 4,500 global companies,
including the worlds largest.
There are two sides to the business. One
is selling the data and services based on the
data to investors; the other is providing the
data to companies so they can see their own
environmental footprints and impacts.
Druckman said he believes Trucost occupies a niche spot in the market.
There are no other organisations doing
what we do, he told The Accountant.
There are other organisations that provide
data, but it is not the same concept because
we are maintaining, validating, standardising
and monetising the data that we have.
We have the data and the model to have a
complete environmental footprint, its more
than just about carbon. Some companies are
doing different pieces of that, but not the
overall complete set.

Environmental performance

To date, much of Trucosts emphasis has been

on the investor side of the business, for example informing investors who want to know if
a fund is low carbon.
[Trucost can find] the best performing
companies or the worst performing companies in terms of their environmental impact,
Druckman said. If you want to build a low
carbon fund, how do you know which companies are low carbon? It may not be that you
only invest in the lowest, but at least you will
see the ranking and make an informed decision.
The company is making inroads into the
public sector as well as the corporate sector.
We have contracts on the supply chain
side with local authorities and health care
organisations, Druckman explained.
Some of them have incentives to do that
through government schemes and incentives.
Others just want to be best practice.
Druckmans role at Trucost combines the

Paul Druckman
three areas of specialisation he has developed
during the past 10 years technology, sustainability and the accounting profession.
First, Trucost is essentially a technology
solution. Second, its provision of environmental data hits the sustainability mark. Finally,
Trucost converts non-financial environmental
information into financial information.
Trucost has the ability to make the
accounting profession understand what
all this is about because of the quantitative
nature of the data, Druckman explained.
Druckman said this financial data is a raw
material that businesses can use to build sustainability issues into financial models.
It has always been possible [to embed
sustainability into investment decision making], but it is still a big learning curve for an
accountant, Druckman added.
Accountants in normal practice must start
looking at these externalities rather than just
the financial return because they need to
understand that the world is changing and
there are other pressures on the behaviour of
a company that will affect its value, and not
just in an altruistic sense. Now here is something they can actually grab hold of and use
with a clearer understanding.
Druckman said one opportunity for Trucost is to move beyond being a separate data
source and become embedded in what other
organisations do.
Accounting software houses could have
Trucost environmental data associated with
their accounting systems, Druckman said.
Going back to the accounting side of it,
there is no reason why management accounts
should not now include an environmental
footprint. <
Carolyn Canham

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October 2009 The Accountant



Calls increase for ISA adoption in

Europe following EC consultation
The close of an EC consultation on the adoption of ISAs in Europe has heralded increased
statements in their favour.
The UK Auditing Practices Board (APB)
issued 33 clarified ISAs as audit standards for
the UK and Ireland on 13 October, becoming
one of the first major jurisdictions to do so.
APB chairman Richard Fleck said the new
ISAs are more rigorous and clearer than existing auditing standards in any country.
The APB hopes that these standards will
be mandated for use within the European
Union in the near future, Fleck added.
The Committee of European Securities Regulators (CESR) also supports the introduction
of ISAs in Europe.
CESR has said there is growing international acceptance of ISAs and many potential
benefits of harmonised auditing standards in
the EU.
CESR supports a European endorsement
process but says this should be used with precaution and changes made only in highly
rare circumstances, otherwise it could erode
the coherence of the standards and their international acceptability.
The Institute of Chartered Accountants
in England and Wales (ICAEW) is also in
favour of mandating ISAs in Europe. However, ICAEW executive director Robert
Hodgkinson said the institute disagrees with

an endorsement process that allows for addons or carve-outs.

Hodgkinson said if there is a seed of
doubt regarding what exact standards have
been used, it can have an adverse effect on the
ability to take an audit report at face value.
The EC consultation suggested three options
for the scope of an adoption: only the statutory audits of listed companies; the statutory
audits of all limited companies except small
companies; or, all statutory audits in the EU.
The ICAEW wants ISAs applied to all
Having two or more sets of standards
would make it expensive for the audit market
and also a bit confusing because inevitably
one will be thought of as better than the other
and certain audits will be seen as second rate,
Hodgkinson said.
Hodgkinson said infrastructure must be in
place to ensure audits are not unnecessarily
It is about making sure that the training,
software, commercial packages and working
paper packages are there for firms that cant
afford to develop their own, he explained.
Hodgkinson said while the standards themselves are important, having the practical tools
needed to deliver audits is just as vital. The
ISAs come with this complete package. <
Carolyn Canham


Audit firm registration under review

Indias audit regulator plans to limit the
number of audit firms a network can be
affiliated with in a post-Satyam shake-up
that could have wide implications for the Big
Four. This follows questions over the extent
of PricewaterhouseCoopers (PwC) affiliates
involvement in the Satyam accounting fraud.
Global networks such as PwC are affiliated
with multiple audit firms registered in the
country to overcome Indian laws that restrict
the number of partners a firm may have to
20. There are nine offices in India affiliated
with PwC. These operate in partnership but
are mostly structured as separate legal entities. Many carry variations of the name Price
The Institute of Chartered Accountants of
Indias (ICAI) proposal is to allow only two
registered audit firms from the same entity.

This would affect all the Big Four networks.

The proposal is designed to prevent global
networks from washing their hands of erroneous work carried out by affiliated firms.
Opponents of the ICAI proposal argue that
firms will set up new partnerships under different names and the rules could restrict the
ability of large audit firms to serve their clients, having a detrimental effect on capital
The Indian government recently said it
could take action within a couple of months
against the firms Price Waterhouse Bangalore, Price Waterhouse New Delhi and Price
Waterhouse Kolkata, four Price Waterhouse
Bangalore auditors and two former Satyam
Computer Services employees implicated in
the Satyam accounting scandal. <
Arvind Hickman and Nicholas Moody


Schapiro voices support for

global accounting standards
The chairman of the US Securities and
Exchange Commission (SEC) has said
she remains committed to the goal of
a global set of high-quality accounting
Speaking at an International
Organization of Securities Commissions
conference in Switzerland this month,
Mary Schapiro said the financial crisis
has highlighted the importance of
implementing and enforcing high quality
and consistent accounting standards
around the world.
I remain committed to the goal of a
global set of high-quality accounting
standards, she said. I also believe
that there are issues that will be critical
to address as we at the SEC consider
the input we have received on last
years proposed road map on the role of
international standards in the US.

IAASB launches consultation on

greenhouse gas standard
The International Auditing and
Assurance Standards Board (IAASB)
is seeking views on the development
of a new assurance standard on green
house gas (GHG) statements. The project
seeks to enhance the consistency and
quality of performance by practitioners
on assurance engagements to report on
this information, whether produced for
regulators, legislators or investors.
Assurance on a Greenhouse Gas Statement
asks a series of questions addressing
such matters as the form of assurance
report that users would find most useful,
the nature and extent of requirements,
how a standard should best integrate
with regulatory requirements, and
technical aspects of applying the
assurance process to GHG emissions.
An exposure draft is scheduled for release
next year.

IASB and FASB hold out hope

for fair value convergence
The International Accounting Standards
Board and the US Financial Accounting
Standards Board were unable to resolve
their differing opinions on the extent that
financial instruments are measured at fair
value at a meeting in the US this week.
According to US media reports, the boards
agreed to explore ways to facilitate easy
comparisons if the rules in IFRS and US
GAAP differ.
IASB chair David Tweedie also claimed that
if the rules are not identical by 2010 they
should be appreciably together. <

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The Accountant October 2009

After the revolution

The Iranian accounting profession has been developing as rapidly as the profession in Western
countries in recent years. Industry figure Gholamhossein Davani speaks with Carolyn Canham
about the state of the industry, its global successes and ambitions for the future

he relationship between Iran and the

West has produced news headlines for
decades. The most contentious recent
issues have been the republics nuclear
programme and election results disputed loudly both at home and abroad. But in the face of
high-level political wrangling, Irans accounting profession is moving ever more closely in
step with the rest of the world.
The Iranian Accounting Association (IAA)
is holding Irans second international accounting conference in December, following a successful inaugural event in 2008.
Conference board member Gholamhossein Davani says the issues on the conference
agenda are similar to those reverberating
around the rest of the world. Specific areas
to be covered include accounting education,
international accounting standards, corporate
governance, corporate social responsibility
and capital markets development.
Accounting education is one area where
Iran has particularly close international ties.
Davani lists at least three Iranian accounting
professors teaching in the US and the UK,
including University of Memphis professor
Zabihollah Rezaee, who is expected to appear
at the upcoming conference.
The IIA is one of three professional accounting bodies in Iran. The oldest is the Iranian
Institute of Certified Accountants (IICA),
which was established in 1972 by a group of
Iranians who were members of UK accounting
institutes. The IICA is member of the International Federation of Accountants (IFAC).
The second is the official Iranian Association of Certified Public Accountants (IACPA),
which was established by the government in
1999 and is an associate member of IFAC.
The third is the IAA, which Davani compares
with the American Accounting Association in
its role of promoting excellence in accounting
education, research and practice.
The IACPA currently has about 1,600
members. As of January 2008, it listed 173
registered member firms.
Davani estimates there are about 45 active
audit firms and the fee income of the largest
in 2008 was about $1.5 million. This minute
size reflects a profession that is heavily government-controlled and in need of development.

Of the worlds 10 largest accounting networks, just four have member or correspondent firms listed on their global websites. None
of the Big Four do.
Davani is managing partner of Dayarayan
Auditing & Financial Services, an RSM International correspondent firm, which Davani
says has been the top ranking firm in terms of
fee income twice in the past five years.
Davani explains that prior to the Islamic
Revolution in 1979, all the large international
organisations were represented in Iran. But
following the revolution, many private enterprises were confiscated or came under direct
government supervision. Subsequently, three
audit organisations were formed within the
public sector to audit and performing statutory services for these newly state-owned

I think under-developed
countries must support
accounting and auditing to fight
with corruption and develop
transparency to stabilise
accountability and responsibility
Gholamhossein Davani

A 1983 Act of Parliament merged the three

organisations and an earlier government audit
organisation to form the Audit Organization.
Today, the Audit Organization is a financially independent legal entity affiliated with
the Ministry of Economic Affairs and Finance.
Davani says its revenue forms about 50 percent of the Iranian audit markets total revenue, which in 2008 was about $100 million.
Davani says audit fees in Iran are very low
and the market needs support to help it develop.
Iranian auditors have demonstrated,
through the development of audit and consulting practices and tax services lines, that they
will continue to invest in new service capabilities when they see demand, Davani says.
However, he warns if audit policy does not

n IACPA membership 2009

Breakdown of the IACPAs 1,600 members
Sole practitioners 10%
Practice in audit
firms 44%

Audit Organization
employees 16%

Do not practice 30%

Source: The Accountant

change in line with wider privatisation processes the nation will find it hard to compete
Demand for certified public accountants
in Iran is progressive and the future outlook
for auditing and professional services depends
on opening the market to foreigners and international accounting firms, Davani says, adding there are many opportunities for the local
profession to partner with foreign investors to
help build the Iranian economy.
He estimates the Iranian audit market has
the potential to be worth more than $200 million.
The Audit Organization is also the official
standard setter, authorising the audit and
accounting standards that the profession must
follow. Davani says accounting standards are
about 95 percent in line with IFRS.
One critically important role for the audit
and accounting profession moving forward
is fostering accountability, transparency and
responsibility. Davani says accountability in
Iran is unfortunately weak as 90 percent of the
economy is in the hands of government.
I believe all governments try to run away
from accountability and transparency, especially when they are not accountable.
However, I think under-developed countries must support accounting and auditing to
fight with corruption and develop transparency to stabilise accountable and responsibility, he says. <

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October 2009 The Accountant



Opinion divided over SOX delay

for small companies in the US
A further delay in the implementation of Section 404(b) of the Sarbanes-Oxley Act (SOX)
for small public companies is a negative move
with few benefits, one US firm has warned.
At the same time, the US Institute of Management Accountants (IMA), which 18
months ago was calling for the requirements
to be waived or completely redesigned for
small public companies, is pleased with the
way they have been made more scalable.
The Securities and Exchange Commission
(SEC) this month delayed the SOX implementation deadline to fiscal years ending on
or after 15 June 2010 for the smallest US public listed companies those with public floats
of less than $75 million to allow extra time
to design, implement and document internal
control systems before auditors are required
to attest to their effectiveness.
An assurance partner of a large East Coast
firm believes the delay is unnecessary and
embarrassing to firms who had encouraged
clients to become SOX-ready by the end of
this year.
It did not make much sense to me because
most companies have been complying on an
internal basis as they have been doing management assessments for the past two years,
Marcum assurance partner-in-charge Gregory
Giugliano said. We also lose a little faith with
our clients as we have been encouraging them
to start this and then it gets delayed again.
The exemption period for small companies was previously due to end for fiscal years
ending on or after 15 December 2009, which
means most small listed companies had either
prepared for implementation or chosen to deregister their listing.
The SEC extended the date so it could complete a study on whether additional guidance
provided to company managers and auditors
in 2007 was effective in reducing the costs of

More relevant

Bruce Pounder chairs the IMAs small business financial and regulatory affairs committee. He said the IMA is happy with the additional guidance provided in 2007 because
it made the internal and external audits of
internal controls over financial reporting
more scalable and risk-based. The guidance
helps management and auditors to establish
what is important to stakeholders and adjust
procedures accordingly.
Giugliano estimates client audit fees increase

by between 20 percent and 40 percent due to

SOX implementation, and additional cost can
vary from $10,000 to $200,000.
Clients also have to absorb internal
expenses, which can include internal staff time
or the use of external consultants, he said.
The added costs are one reason Pounder
said small companies that have not yet complied with 404(b) must act now.
There is going to be a new cost hit, there
is no question about it and one of the things
that came out in an SEC study released earlier
this month about the cost and benefits of 404
compliance is the costs are clearly proportionately higher for smaller companies than for
larger companies, Pounder said.
It is absolutely a bigger issue for smaller
companies to think about how they are going
to pay for this, where the money is going to
come from and how they can make sure this
is not a financial disaster.
Companies preparing for compliance must
also evaluate whether they are happy with
their current external auditor as the same
auditor must be used for 404(b) requirements,
Pounder added
If you are thinking about changing auditors, now is the time to do that, before you
get into the more involved requirements for
404(b), Pounder said.
Grant Thornton US national managing
partner of public policy and corporate governance Trent Gazzaway also warned companies
against delaying implementation any longer.
An organisations efforts to prepare for
compliance often uncovers costly inefficiencies and potentially damaging risks. Companies that wait for another delay could also be
delaying opportunities to make enhancements
that could improve their bottom lines, he
Gazzaways comments follow a recent survey of senior financial executives by Grant
Thornton that found 74 percent of respondents thought small listed companies should
not be forced to comply with Section 404(b).
Marlene Hutcheson, a partner at Las Vegasbased firm De Joya Griffith & Company,
believes the extension is positive.
Some filers were (also) thinking of ceasing
being a reporting company because they were
not ready but with the extension some of these
companies will rethink and may revisit their
business plan to incorporate becoming SOX
compliant and continue to file, she said. <
Nicola Maher and Carolyn Canham


EFRAG to fast track financial

instruments advice
The European Financial Reporting
Advisory Group (EFRAG) will fast track
endorsement advice on a new global
accounting standard for classifying
and measuring financial instruments.
The decision is based on a European
Commission request to have a standard
in place for listed companies to apply for
2009 year end reports. The International
Accounting Standards Boards project to
replace IAS 39 Financial Instruments
Recognition and Measurement has three
phases and the board plans to issue this
first standard early next month. EFRAG
plans to finalise EC endorsement advice by
17 November.

Islamic finance group

plans framework update
The Accounting and Auditing Organisation
for Islamic Financial Institutions
(AAOIFI) plans to update standards on
the conceptual framework for financial
reporting and accounting for investments
for the international Islamic finance
industry. Exposure drafts were expected to
be distributed before the end of October.
AAOIFI has developed the updated
standards to further support the
expansion of Islamic finance industry and
promote international best practices,
AAOIFI secretary general Mohamad Nedal
Alchaar said.

Mixed response to IFRS in US

Two in five US chief financial officers and
senior comptrollers do not believe US
companies should ever have to use IFRS,
according to new research from Grant
Thornton US. Another 39 percent said US
companies should start using IFRS in three
to five years. Only 7 percent want to start
using it immediately. The biannual study
surveyed 846 chief financial officers and
senior comptrollers from 21 September to
2 October.

FASB initiates non-for-profit group

The US Financial Accounting Standards
Board is to create a Not-for-Profit
Advisory Committee (NAC). The NAC will
seek comment from the not-for-profit
sector on existing guidance, current and
proposed technical agenda projects,
and longer-term issues affecting those
organisations. The 12 to 15 member
committee will be formed from the notfor-profit sector early next year, with its
first meeting taking place in the middle
of 2010. <

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The Accountant October 2009

Region round-up

asia -pacific
The Hong Kong Institute of Certified
Public Accountants (HKICPA) will continue
to liaise with Hong Kongs Financial Reporting Council (FRC) and Ernst & Young (E&Y)
during investigations into the Big Four firms
auditing of Akai Holdings.
Last month, Hong Kong police searched
E&Ys local offices and seized original working papers in connection with the suspected
forgery of Akais audit documents.
The Big Four firm was in court last month
facing allegations it was negligent in its audits
of Akai from 1997 to 1999.
E&Y settled with the liquidator of the
Chinese consumer electronics company for
an undisclosed amount and suspended one
of its partners after finding some of the documents in the audits of Akai could no longer
be relied on.
The HKICPA said once sufficient evidence
emerged from the FRC and police investigations to show that institute members may
have been involved in the falsification of

documents, it would initiate its disciplinary

The Korean Institute of Certified Public Accountants will train accounting staff
at central government agencies and public
organisations as part of an agreement with
the Ministry of Strategy and Finance.
The agreement was signed after Korea
adopted accrual accounting and double-entry
bookkeeping for governmental accounting
on 1 January 2009.
The institute said more than 1,000 people
have signed up for the training but due to
budget constraints, only 740 will be able to
They include accounting personnel from
48 major government agencies.
New Zealand has become one of the
first countries to apply the full set of clarified
International Standards on Auditing (ISAs),
according to the local professional account-

ancy body. For audits of financial statements

covering periods beginning on or after 1
October 2009, auditors complying with New
Zealand auditing standards will also be able
to assert compliance with ISAs.
New Zealand Institute of Chartered
Accountants general manager for standards
and advocacy Bruce Bennett said this change
will complete a process of strengthening
auditing and financial reporting in New Zealand that began in 2005.
Over the past four years, we have been
progressively adopting the international
standards and educating our members on
these new standards, he said. <

Nor th Americ a, L atin Americ a

American Institute of Certified Public
Accountants (AICPA) president and chief
executive Barry Melancon has told the US
Presidents Economic Recovery Advisory
Board that a comprehensive tax reform is
The dynamic American economy is
rebounding slowly and, we believe, is burdened by an unnecessarily cumbersome and
somewhat outdated income tax system,
Melancon said.
In particular, we see significant problems
for small businesses arising from the increasing complexity of the tax law.
The AICPA said the US Congress is likely
to take up tax reform as a major legislative
challenge beginning in January.
The US Federal Accounting Standards
Advisory Board (FASAB) has issued a new
standard for estimating the historical cost of
general property, plant and equipment.
Statement of Federal Financial Accounting Standards (SFFAS) 35 amends SFFAS
6 and 23 and clarifies that reasonable estimates of original transaction data historical
cost may be used to value general property,
plant and equipment.
The FASAB is responsible for setting
accounting standards for the US Federal
The national average salary for US
finance and accounting positions is expected to decline less than 1 percent next year,

according to a survey from recruiters

Chief financial officers and treasurers
are among the positions that will witness a
sharp wage decrease, with the national average salary expected to drop almost 8 percent
next year, compared with 2009.
The survey was compiled by combining national salary data from hundreds
of Ajilons staff recruiting for finance and
accounting positions at companies in 75
major markets across North America.
The US Public Company Accounting
Oversight Board (PCAOB) has changed
the effective date of new rules that require
reporting by registered public accounting
firms and provide for succeeding to the registration status of a predecessor firm.
The postponement will allow the PCAOB
to resolve technical issues related to deploying its new online system for processing and
publishing filings on the new forms.
It will not affect the timing of the first
annual reports required from registered
firms, which will still be due on 30 June
2010 for the 12 months ending 31 March
Almost three-quarters of US executives want the US Securities and Exchange
Commission (SEC) to approve its proposed
IFRS road map or a modified version of it,
according to a survey by Deloitte US.
The study found 51 percent of respond-

ents thought the SEC should approve the

proposed road map but consider pushing
back the mandatory deadline by a year, and
19 percent believe the SEC should approve
its proposed road map as is.
Opinions were split on the approach to
Thirty-nine percent of respondents wanted the International Accounting Standards
Board and Financial Accounting Standards
Board to achieve as much convergence as
possible between now and 2011, and then
focus on IFRS conversion.
The same number wanted the two groups
to extend the convergence plan over the
next 5 to 10 years.
More than 47 percent of Canadians who
hold the chartered financial analyst designation are not very confident that they have
a full understanding of what the impact
of IFRS will be on the companies they
invest or follow, according to a survey by
PricewaterhouseCoopers Canada. Twenty
percent were not at all confident.
Canada is due to complete its transition
to IFRS by January 2011. <

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October 2009 The Accountant

Region round-up

Supervision of the financial sector in
Europe is set to be revamped through the formation of a series of new regulatory organisations. The EC has adopted draft legislation that aims to reinforce financial stability
throughout the EU, identify systematic risks
at an early stage and foster cohesion and cooperation in emergency situations.
The legislation will create a new European
Systemic Risk Board (ESRB) to detect risks
to the financial system as a whole.
It would also set up a European System of
Financial Supervisors, composed of national
supervisors and new authorities to oversee
the banking, securities, insurance and occupational pensions sectors.
Three new European supervisory authorities will be created by transforming existing
committees. The Committee of European
Banking Supervisors will become the European Banking Authority, the Committee
of European Insurance and Occupational
Pensions Committee will become the European Insurance and Occupational Pensions
Authority and the Committee of European
Securities Regulators will become the European Securities and Markets Authority.
In addition to assuming the existing functions of the committees, the new authorities
will be responsible for developing proposals
for technical standards; resolving cases of
disagreement between national supervisors,
where legislation requires them to co-operate
or agree; and contributing to ensuring consistent application of technical community
The UK Audit Practice Board (APB) has
issued updated guidance on the auditing of
complex financial instruments. The updated
practice note (PN) 23 modernises an earlier
version created in 2002.

It is aimed at assisting auditors address

current considerations that are relevant in the
audit of financial statements of entities that
use complex financial instruments.
The guidance widens the scope of PN 23 to
cover other complex financial instruments,
as well as derivatives, as many of the audit
considerations are the same, the APB said.
A recent survey of UK accountants found
86 percent regularly work past normal working hours and 52 percent do so every day.
The study, by online accounting provider
e-conomic, also found 38 percent of respondents regularly work past 10pm, and 22 percent of those that have children said it is quite
normal for them to not get home in time to
see their children before bedtime.
The most popular response when asked
what single thing would most improve their
work life balance was less work for a higher
margin and 28 percent thought they were
over-worked and under-paid.
The e-conomic survey was conducted this
month among 2,000 accountants.
Des Hudson has been appointed chairman of the Taxation Disciplinary Board by
the Chartered Institute of Taxation (CIOT)
and the Association of Taxation Technicians.
Hudson is currently chief executive of the
Law Society of England and Wales and was
previously chief executive of the Institute of
Chartered Accountants of Scotland. His fouryear term begins on 1 November 2009.
There is no case for any significant
changes in the UKs governance rules in the
wake of the financial crisis, according to a
recent study by the Institute of Chartered
Accountants of England and Wales (ICAEW)

The report, Getting it Right, found that

over the past few years more effort has been
made to strengthen risk identification processes and ensure board committees spend
more time overseeing risk management.
Most of the non-financial company boards
are satisfied that their risk management is
working well thus there is no need for new
governance structures and processes.
The Institute of Chartered Accountants
in England and Wales has launched a register
that is intended to give courts greater confidence in the evidence presented by members
of the accounting profession. The forensic
accountant and expert witness accreditation
scheme was developed in response to pressure from the UK Government for improved
credibility of evidence presented to the legal
The UK Financial Reporting Council
(FRC) has updated guidance to assist directors of UK companies when making assessments of going concern. The guidance is
based on three principles: the process directors should follow when assessing going concern; the period covered by the assessment;
and the disclosures on going concern and
liquidity risk.
The guidance takes into account feedback
from market participants on a series of documents published by the FRC in the past 12
months. <

Afric a, middle eas t, south Asia

Claims the Indian government has
tightened its control over the Institute of
Chartered Accountants in India (ICAI) and
diluted the power of the institutes president
have been refuted by the institute.
Earlier this month, Indian media reports
suggested one rule change, approved by the
ICAIs financial committee, would require
all financial issues at the ICAI to be cleared
consensually by members of the committee.
The committee is made up of three government nominees, the president and the vicepresident.
Previously, the ICAI president had the
authority to approve spending. The ICAI
said there has been no change in the com-

position of the finance committee since last

year. The rumours of efforts to curb the
ICAI presidential powers follow criticism
from ICAI past president Sunil Talati about
reckless spending by current ICAI president
Uttam Agarwal. Last month, Talati called
for a rethink of the extensive powers granted
to ICAI presidents when they take office.
The Institute of Chartered Accountants
in England and Wales (ICAEW) and the
Institute of Chartered Accountants of Bangladesh (ICAB) have signed a memorandum
of understanding (MoU) to work together to
develop the accounting and auditing professions in Bangladesh. The two institutes will

continue their work to develop a new ICAB

qualification, look at examination requirements allowing members of one body to
access membership of the other, co-operate
on developing membership support and
liaise on technical matters. The agreement
between the two bodies was signed on 26
October by ICAEW president Martin Hagen
and ICAB president Nasir Ahmed. <

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The Accountant October 2009


Warming relations bring promise

Taiwans accounting profession is beset by challenging regulatory changes and fierce competition.
But David Hayes discovers improved relations with China could lead to a more fertile business
environment and new opportunities

aiwans accounting profession has

entered a challenging period following the recent announcement of a
timetable for the adoption of IFRS
and an approaching deadline for accounting
firms to decide their public liability status.
New standards and changes in tax laws
are expected to generate additional work
for accountants, yet there is increasing competition among the large number of small
practices due to a trend for manufacturing
clients to move operations out of Taiwan.
The Big Four and mid-sized accounting
firms are poised to benefit from improved
relations between Taiwan and Mainland
China following the election of the Taiwan
Nationalist Party (Kuomintang) president
Ma Ying-Jeou last year on a pro-growth
Ma, a Hong Kong-born former mayor of
Taipei, won votes with plans for economic
expansion after years of relatively slow economic growth under former president Chen
Shui Bian, who failed to develop co-operation with Beijing.
Warming relations between Taiwan and
China have lifted Taiwans economic outlook since the beginning of this year and
given the local stock market an important
Taiwans estimated 2,100 accountants
could see a 25 percent increase in demand
for their services within the next three years,
according to the local newspaper Economic
Daily News. The report forecasts a further
5 percent increase during this period if
another 250 companies list on the Taiwan
Stock Exchange in response to government
tax incentives and other initiatives to persuade Taiwanese companies in China to list
in Taiwan.

Big Four dominance

The Big Four audit about 84 percent of Taiwans public listed companies, according to
the National Federation of CPA Associations of the Republic of China (NFCPAA).
Medium-sized accounting firms audit the
remainder as local regulations specify audit
firms must employ a minimum of three CPAs
to audit a public company.

Big Four firms employ about 18 percent

of CPAs in Taiwan. Second-tier accounting
firms employ about 15 percent of CPAs and
sole proprietors account for the remaining
67 percent.
Taiwans planned adoption of IFRS will
present accounting firms, especially sole
practitioners, with new challenges.
In May, Taiwans Financial Supervisory
Commission (FSC) announced a two-phase
timetable for listed and non-listed companies
to adopt IFRS.

At present it is not possible

for Taiwanese and mainland
accounting firms to join or
merge, but some accounting
firms in Taiwan and China have
co-operation arrangements
for client referral, information
sharing and other matters
Roger Shih NFCPAA

Local companies listed on the Taiwan Stock

Exchange or the Gre Tai Securities Market and
financial institutions under FSCs supervision
must adopt IFRS by 2013.
Non-listed companies, credit co-operatives,
credit card companies and insurance companies must adopt IFRS by 2015.
The Taiwanese government previously hesitated on IFRS adoption due to uncertainty
over whether the US would adopt the international standards.
The Big Four encouraged the government to
proceed due to increased foreign shareholding
in Taiwanese companies, which has resulted
in demands for higher standards of financial
reporting. However, small businesses opposed
IFRS adoption, saying they do not have the
resources to meet the requirements.
IFRS has recently become a hot topic
between the government, academics and practicing accountants, says Roger Shih, an international affairs and audit committee member
at Taipei Provincial CPA Association, one of

the three bodies that form the NFCPAA.

Amendments to Taiwans Certified Public
Accountants Law that were passed on 1 January 2008 are expected to boost the quality
of accounting services and bring Taiwanese
accounting rules in line with international
One amendment aims to ensure auditors
play their part in preventing corporate fraud
similar to that which occurred in the collapse
of hardware manufacturer Procomp Informatics in 2005 and the Rebar Group in 20062007.
But the most important change clarifies
accounting firm liability. This could cause a
wave of mergers among small and medium
accounting firms as they seek to achieve the
economies of scale needed to operate viable
practices. These mergers would be a new phenomenon in Taiwan where most businessmen
want to retain their autonomy.
Final details of the amendments are still
being sorted out between the FSC and
NFCPAA, but the revised law is expected to
have a greater impact on mid-tier and small
firms than the Big Four.
Under the new CPA Law, accounting firms
are allowed until the end of 2009 to decide
which status they will take, Shih remarks.
Accounting firms are waiting, no one has
made any announcements yet. They are thinking of their taxation exposure as they could be
liable to pay business tax. At present accountants just pay personal income tax.
The NFCPAA is currently campaigning
for the government to waive business income

Neighbourly relations

Meanwhile, Taiwans policy of developing

closer relations with China is encouraging the
growth of closer ties between the Taiwanese
and Chinese accounting professions.
This process is expected to continue as
economic co-operation between Taiwan and
the mainland expands. An economic co-operation agreement between the two countries is
due to be signed this year.
The government is also reviewing Taiwans
taxation system, including corporate tax rates
and incentives. Corporate tax will be reduced

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October 2009 The Accountant

from 25 percent to 20 percent from 1 January

2010 as part of government efforts to attract
investment to Taiwan and encourage Taiwanese companies to list their China operations
in Taiwan.

Cross-border ties

The Big Four and some mid-tier accounting firms in Taiwan and China already offer
cross-border services to clients with business
activities in both territories. Development
of ties by Taiwan and Chinas accounting
professions is one of the topics discussed by
NFCPAA and its CPA association members
during regular meetings with the Chinese
Institute of Chartered Public Accountants
(CICPA) and the provincial CPA organisations across China.
At present it is not possible for Taiwanese and mainland accounting firms to join or
merge, but some accounting firms in Taiwan
and China have co-operation arrangements
for client referral, information sharing and
other matters, Shih explains. Some Taiwanese accounting firms doing this are linked
to a mid-tier international practice.
The Taiwanese government has no restriction on Taiwanese accounting firms relations
with mainland Chinese accounting firms but


the Taiwanese government does not accept

Chinese accounting firms audit reports
except from the Big Four, Shih says.
Of Taiwans estimated 2,100 CPAs, about
1,800 work in the capital, Taipei. Most of the
remaining 300 are in Kaohsiung.
Almost 95 percent of CPAs are thought
to be in public practice. The Ministry of
Finance, Ministry of Justice and other government departments employ a combined
total of about 100 accountants. Relatively
few qualified CPAs work for industrial or
commercial organisations.
As a large number of manufacturing companies have moved operations from Taiwan
to China during the past decade, the accounting professions workload has declined.
There is an oversupply of accountants in
Taiwan, Shih notes.
Sole practitioner accounting firms now do
various jobs they consult for private companies, do tax work, also personal finance, teach
in schools and other things.
They do not specialise in one area. They
do many things.
Another reason competition among
accounting practices has intensified is
accountants in Taiwan share the accounting
market with bookkeeping specialists who do

bookkeeping, tax work and accounting.

They cannot do audit but they can do
consulting for tax and accounting. Their
market share is growing as they are cheaper
than accountants, Shih explains.
Many bookkeepers are early retirees from
government departments who have good
connections with government agencies and
find it easy to attract private clients.
Their clients think they can solve problems for them because of their connections
in government. Since 2003 they must be
licensed. They were not licensed before,
Shih says.

Qualification requirements

Most prospective accountants study accounting at local universities. About 40 universities

offer accounting courses. Graduates then join
an accounting firm for a minimum of two
years in an accounting related position to get
a CPA licence. The final CPA exam pass rate
is about 16 percent each year.
With a pass rate that low, the profession
may be over staffed and under-worked, but
at least there are no floods of new entrants.
The profession will be looking forward
with hope that the improved business environment will give them room to grow. <


The changing shape of the profession

The Taiwanese accounting profession is
represented by three associations operating under an umbrella federation. There are
local government plans to consolidate this
into one body, but this is receiving opposition from China.
The umbrella organisation is the National Federation of CPA Associations of the
Republic of China (NFCPAA), which was
founded in Nanjing, China, in 1946.
The three groups the NFCPAA is comprised of are the Taiwan Provincial CPA
Association, Taipei City CPA Association
and Kaohsiung City CPA Association.
CPA members pay an annual fee to
the associations, which in turn fund the
NFCPAA. There is no government funding. The three associations also appoint delegates to the NFCPAAs committees.
The Taiwan Provincial CPA Association
was set up in 1950 and covers the whole of
Taiwan including the capital, Taipei, in the
north and the second-largest city, Kaohsiung, in the south.
Following two decades of economic
development that caused rapid growth in
Taipei and Kaohsiung, Taipei CPA Association was set up in 1970 followed by Kaoh-

siung CPA Association in 1979. Practising

CPAs must register with two of the three
associations, which allows them to practice
either in Taipei and other areas excluding
Kaohsiung, or Kaohsiung and other areas
excluding Taipei.
CPAs must register with all three associations to practice throughout the whole of
The role of NFCPAA includes overseeing the education of accountants and acting
as a communications channel between the
accounting profession and the government.
The associations provide staff for service centres in the offices of the Ministry of
Finance, the Ministry of Economic Affairs,
the Taipei and Kaohsiung national tax
administration offices, and the main national tax administration offices throughout
Practising accountants are regulated by
the Commercial Department of the Ministry
of Economic Affairs. In addition, the governments Financial Commission controls
CPAs that audit listed companies. Consequently, some accountants are regulated by
two organisations.
The Taiwanese government has plans to

reorganise the accounting professions current structure, replacing the NFCPAA and
three CPA associations with a single unified
body representing Taiwans accounting profession. However, this remains stalled due to
opposition from Beijing.
It is impossible to merge as we have to
have relations with Chinas accounting profession and China wants to deal with three
local accountant associations in Taiwan and
not one island-wide body, explained Roger
Shih, an international affairs and audit committee member at Taipei Provincial CPA
Staying in favour with the Chinese profession is important as the Taiwanese organisations undertake joint activities with the Chinese Institute of CPAs (CICPA) and want
this to continue, Shih said.
The NFCPAA meets with the CICPA
annually and also meets regularly with
CICPA provincial associations.
Most of the issues we discuss are how
we should co-operate in business to serve
Taiwanese companies in China; also, the tax
situation, labour laws, customs regulations
and other matters, and their impact on business, Shih said. <

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The Accountant October 2009

More of the same

Its all about the financial crisis for the UKs professional accounting bodies again this year, and no doubt
that topic will remain good for at least the next 12 months. Carolyn Canham discovers the crisis is affecting
the institutes in different ways, but all are confident the relevance of their qualifications remains true

he recession has dominated the activities of the UKs five major professional
services bodies for the second year in
a row.
But while the tough economic times have
dealt some challenges to the profession, they
have also provided the institutes with increased
opportunities to develop public policy agendas
and make their voices heard on issues relating
to business and the economy at large.
All five institutes have international presences and the Association of Chartered Certified Accountants (ACCA), the Chartered
Institute of Management Accountants (CIMA)
and increasingly the Institute of Chartered
Accountants in England and Wales (ICAEW)
are more global than national bodies.
Consequently, their international activities
have featured prominently in The Accountants UK country surveys for many years. This
year, however, The Accountant will feature a
global survey in December (issue 7073) so this
months report will focus on activities and
issues affecting the UK.

Higher public awareness

The institutes report that one benefit of the economic crisis has been increased public awareness of the importance of professionalism and
the value of professional qualifications.
The Chartered Institute of Public Finance
and Accountancy (CIPFA) was the only institute whose UK membership figures dropped
compared with last years survey down a
fraction of a percent to 13,281.
CIMA reported UK membership growth of
4 percent to 57,162 and the ACCA and the
Institute of Chartered Accountants in Scotland (ICAS) grew their UK membership by
3 percent to 61,303 and 15,304 respectively.
The ICAEWs UK membership grew by half a
percentage point to 112,738.
ICAEW chief executive Michael Izza notes
that in addition to the institutes membership
ending 2009 at an all-time high, resignations
and members not paying fees were at an all
time low.
In an environment where I am sure a lot of
people were looking very hard at whether or
not they wanted to pay their fees, they voted
with their wallets to continue, Izza says.

When people are concerned about their

jobs they obviously want their professional
qualification looking nice and shiny, but the
other thing I take away from this, and from
all the discussions that I have with members,
is they are pleased with what we are trying to
do strategically in terms of making this transformation from being a national to an international body and raising our profile.

Mixed results

There were more mixed results from the institutes in terms of student growth in the UK.
The ICAEW experienced very strong growth,
up 12 percent to 14,560.
Izza says there is more demand than ever
from students and the critical constraint is
places available.
In 2008, we had about 9,000 graduates
who approached us who we were unable to
help find spaces and it wont be any different
this year, he explains.
Another positive for the ICAEW this year
was Ernst & Young UK began training with
it again. For several years the Big Four firm
has been putting its trainees through the ICAS
[Ernst & Young] are at the moment using
both the ICAEW and ICAS and we will have
to see how that goes moving forward. But we
were very pleased that they took the decision
and it is clearly a positive move for us in a
challenging year, Izza says.
Ernst & Young now has more than 50 UK
employees training with the ICAEW. The
network also trains with the ICAEW in some
overseas locations. The other UK Big Four
firms all train with the ICAEW.
ACCA UK student numbers grew 3 percent
to 71,689 since last years survey, while the
other three organisations experienced drops.
CIMAs UK student numbers were down less
than 1 percent to 53,836, CIPFA was down 3
percent to 2,836 and ICAS was down 7 percent to 3,702.
The Accountants UK surveys have shown
a slight decline in CIPFA student numbers
each year since 2006 but chief executive Steve
Freer says this does not represent a decline in
demand for the qualification.
He explains that while fluctuations do

n UK
UK membership, 2005-2009



Source: The Accountant

reflect the number of people who are signing

on as the students; they also reflect the number
of people dropping off the other end.
Sometimes our numbers go down simply
because we have had a set of excellent examination results, he says.
Freer says new student registrations are up
this year compared with last year.
In the current climate we regard that as a
pretty positive result, he adds.
Freer says CIPFAs member numbers are also
complicated as while they reflect the number
of new people qualifying, retirements must
also be taken into account and these reflect
historical admittance.
Forty years ago was a big period of growth
for CIPFA so although we have been doing
very well with members qualifying, that is
competing with a strong outflow, Freer
ICAS chief executive Anton Colella calls the
drop in ICAS student numbers a sign of the
times, while CIMA chief executive Charles
Tilley says there has been fewer new students
due to the financial crisis.
When you look at the levels of unemployment in the UK and the speed with which that
is going up, although Im not being complacent about [CIMAs new student numbers], I
think they are okay, he says.

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October 2009 The Accountant

CIMA, in partnership with professional

education provider BPP, has initiated a new
programme to assist recent graduates who
have been unable to find full-time work.
Called Yes You Can, the programme allows
students in the UK who graduated from university at the end of the most recent academic
year and are working less than 20 hours a
week to undertake CIMA training and exams
at half the normal price.
The programme represents a departure from
normal proceedings in the UK where candidates for the CIMA programme traditionally
had to be working in a finance function.
Yes You Can is one of many programmes
and initiatives the UK institutes have introduced to assist students and members through
the recession. For example, both the ACCA
and the ICAEW set up micro-websites. ACCA
UK director Wyn Mears says the ACCAs
offering looks to guide members through the
challenges of being made redundant and the
pressures on their businesses as a result of losing clients and contracts.
CIPFA is a unique organisation in the UK,
being the only professional accountancy body
that specialises solely in the public sector. Freer
says the institute found itself in a particularly
interesting position this year as public finances
have been in very sharp focus.
Most CIPFA members work in public sector
organisations and are anticipating significant
funding reductions following next years UK
general election, irrespective of the outcome.
To help members deal with this, CIPFA
has been developing a guide that looks at a
number of different economic scenarios, considering how long the recession may last, how
deep it may be and what impact these factors
could have on public finances.


Managing through the crisis

The institute has also been trying to identify

the levers organisations can pull in order to
effectively manage through what Freer says
is going to be the most difficult period for
public sector organisations in our lifetime, certainly in our working lifetime.
The financial crisis has provided the institutes with greater opportunity to enter public
Izza says that as the crisis unfolded in the
past 12 months, the ICAEW has been asked at
various stages to get involved. This has included evaluating the crisis as it unfolded, suggesting corrective actions and justifying what the
profession did or didnt do at various stages.
An example of something the profession
did well was demonstrate an improvement
in audit quality and financial reporting following the scandals at Enron and Worldcom,
while one area it could improve is its ability to
see into the future, particularly for financial
institutions where situations can change very
quickly, Izza says.
In the UK, the audit profession has offered
to talk to the financial regulators to see how
additional things might be added to the audit
that could perhaps be more helpful, Izza says,
adding that these discussions are ongoing.
Nothing is happening very quickly, he
continues. One of the things we are concerned about as a professional body sitting
here in the City of London, is that nine months
ago there were lots of discussions taking place
about the changes that needed to be made,
the lessons we must learn from the financial
crisis, but all of a sudden we seem to be going
back to business as usual before any of these
changes have come into effect.
That is very worrying because people who


CPD in the spotlight

The financial crisis has had a variety of
impacts on UK professional services institutes continuing professional development
(CPD) offerings.
Chartered Institute of Management
Accountants (CIMA) chief executive
Charles Tilley said CIMA has experienced
less take-up of its post-qualification CPD
[While this] is disappointing, it is one of
the things that always happens. Training is
cut back before many other things, it is one
of the easier cuts, Tilley said.
The CPD members are required to
complete to retain CIMA membership is
assessed on an annual basis so Tilley cannot say whether members are fulfilling their

requirements as yet, but he said he suspects

more self study is being done.
Alternately, the Institute of Chartered
Accountants in Scotland has reported it is
experiencing more demand for CPD courses relevant to the immediate issues members are facing.
Examples of relevant CPD include
refreshing the CA training of members
working in the financial services sector,
who have faced the prospect of changing
or potentially losing their jobs.
Institute of Chartered Accountants in
England and Wales chief executive Michael
Izza said the ICAEW has not noticed any
drop in members undertaking CPD, or
change in demand for CPD. <


n UK
UK student membership, 2005-2009



Source: The Accountant

are older than I am and who have seen this

kind of thing before will say that the seeds of
the next crisis are sown in the solutions to the
The ICAEW developed two new faculties
in the past two years, the Financial Services
Faculty and the Financial Reporting Faculty.
Izza says these groups really came into their
own in terms of contributing to debate.
I would not have liked to have been in
the position we found ourselves in 2009 if we
hadnt had those groupings constituted with the
member support around them because we were
being asked to comment in very short order on
some quite technical things, Izza says.
Other activities the ICAEW undertook to
support members and students hit by the crisis included working with HR departments to
support those being made redundant, and in
the case of students, finding them new roles as
quickly as possible.
Another member request the ICAEW
addressed was raising awareness that banks
were changing the rules of lending to businesses. The institute prepared a report on
financing, concentrating specifically on SMEs,
which it presented to the UK government and
the Bank of England.
ICAS too has helped members deal with the
changed lending environment. The institute
supported members in practice who had to help
their clients learn a new language of lending,
and supported members in business to get a better understanding of the new lending reality.
The public policy agenda for the ACCA
during the past 12 months included pushing
for improvements to regulation surrounding
governance. A specific issue the institute commented on was the Walker Review of Corporate Governance of the UK Banking Industry,
which the ACCA did not think addressed the
root causes of bank failure. Mears says further4

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The Accountant October 2009


4 changes to governance need to be investigated. The ACCA believes it will take regulatory
support and change to improve governance
Governance issues were also high on
CIMAs agenda and Tilley says there are three
governance issues that need to be addressed
going forward.
First, there should be consistency in governance codes around the world; second, if there
is principles-based governance, what sanctions
are there if people dont follow those principles; and third, regulators must effectively
promote what good governance looks like.
Two other important issues the ACCA commented on were sustainability and the value of
global co-operation and cohesion.
The ACCA has made submissions and campaigned on the need for a global solution and
shared vision across the globe in the lead up to
the Copenhagen Climate Change Summit.
The institute is also pushing for global solutions to accounting issues and Mears says the
ACCA particularly welcomes the new IFRS
for SMEs and the revamped ISAs that emerged
from the International Audit and Assurance
Standards Boards Clarity Project.
While use of IFRS is mandatory for listed
companies in the EU, non-public interest entities must comply with the Fourth and Seventh
Company Law Directives, which are currently
under review.
If the EC determines that IFRS for SMEs
does not comply with these directives, companies could be prevented from using them.


Accounting institutes in the UK












Source: The Accountant

Despite this, the UK Accounting Standards

Board has already proposed to introduce
IFRS for SMEs in the UK as part of a threetier reporting system.
The EC is consulting on use of IFRS for
SMEs in Europe as part of its review of the
Company Law directives and Mears is confident the standards will not be outlawed.
We think that the EU and its member states
will be moving in that direction, he says.

Education cycles

The UK institutes are all at different stages

of the endless cycle of updating their curriculums. CIMA launched an updated syllabus


Addressing access to the profession

The Institute of Chartered Accountants in
England and Wales (ICAEW) is convening
a meeting next month to investigate ways
to help young people from disadvantaged
backgrounds apply for internships in large
accounting firms.
The endeavour is linked to the Alan Milburn report into fair access to the professions, which was published in August this
year and makes recommendations on how
to open professional careers to as wide a
pool of talent as possible.
The report found that the professions
are becoming more socially exclusive over
One finding relevant to the accounting
profession was that 70 percent of finance
directors were independently schooled.
This was second only to judges (75 percent) in terms of profession groups. The
UK average is just 7 percent.
ICAEW chief executive Michael Izza


said the internship programme would be

for young people who are bright academically, so there would be no question about
standards dropping.
Getting internships can often be about
who you know you
can be very bright,
but you just dont know how you get into
one of the Big Four, he explained.
Association of Chartered Certified
Accountants UK director Wyn Mears said
he hopes the government that takes power
after next years UK general election will
take on board the Milburn report and
hopefully recognise that there is a need to
support professional and vocational qualifications on a par with academic qualifications.
It is pretty important in terms of social
mobility and providing young people with
opportunities to develop their careers and
to contribute to business across the UK,
Mears said. <

this year and will be examining it for the first

time in May. This process occurs every four to
five years and on this occasion between 4,500
and 5,000 people responded to the preliminary consultation.
CIMA also launched a new qualification
level. There are now three levels of competencies that students can achieve before gaining
the full CIMA qualification.
CIMA has also continued to build its
Islamic finance offering, which it launched
last year. Just this month an Arabic version of
the qualification was launched in partnership
with Middle East-based accounting body the
Talal Abu-Ghazaleh Organization and Tilley
says there are now about 500 students studying the qualification.
Other CIMA education developments
included increased availability of material over
the web. Students can now take CIMAs test
of professional competence in management
accounting case study four times a year rather
than twice, and on two of those occasions they
can sit it on a computer.
ICAS is also moving its education more
online. Colella explains the Scottish institute
has taken a real step into e-enabled learning as
part of CA training.
This meant students are out of the work
place less, they have more independent learning, he says.
Also, for the first time this year, ICAS students brought their own laptops to their final
test of professional expertise assessment.
Colella says the institute plans to continue
extending e-enabled learning.
The most important development in CIPFAs education programme during the past
year was the introduction of a new specialist
qualification developed jointly with the Association of Corporate Treasurers and called
the International Treasury and Management

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October 2009 The Accountant



n UK
Survey of accounting institutes: 2009
Chartered Institute of Management Accountants (CIMA)

Association of Chartered Certified Accountants (ACCA)


26 Chapter Street, London, SW1P 4NP

29 Lincoln's Inn Fields, London, WC2A 3EE


+44 (0)20 7663 5441

+44 (0)20 7059 5000


+44 (0)20 7663 5442

+44 (0)20 7059 5050




Aubrey Joachim (June 2009 June 2010)

Brendan Murtagh

Executive director

Charles Tilley (1)

Helen Brand

Annual turnover

42.6 million (2)

104.8 million (2)






Total qualified members





Qualified members who are women





Qualified members based abroad





Qualified members 29 and under

58 (3)



Qualified members aged 30-39

42,804 (4)




Qualified members aged 40-49

17,087 (5)




Qualified members aged 50-65

9,529 (6)




Qualified members over 65



Number of students





Number of students who are women





Number of students based abroad








Qualified members in business



74,541 (17)


Qualified members in public sector





7,264 (7)


10,995 (18)


Qualified members in public practice

Qualified members who are retired/honorary members

Qualified members in other categories
Annual membership fee

Fellow 221; Associate



Annual membership fee for those with practising


Annual membership fee for non active members/retired,



Annual membership fee for student members



Regional/international affiliations

CMA Canada (8); ICAA (9); CPA Australia; AICPA (10);

HKICPA (11); IIM Calcutta (12); ICMAB (13); CICPA (14);
IAMI (15); ICWAI (16)

See box (page 14)

Overseas bodies with which reciprocal agreements are

in place

CMA Canada (8); ICAA (9); CPA Australia; AICPA (10);

HKICPA (11); IIM Calcutta (12); ICMAB (13); CICPA (14);
IAMI (15); ICWAI (16)

See box (page 14)


Notes: u/a = unavailable; (1) Chief executive; (2) December 2008 financial year-end; (3) Figure for members aged 25-34; (4) Figure for members aged 35-44; (5) Figure for members aged 45-54; (6)
Figure for members aged 55-64; (7) Retired; (8) Certified Management Accountants Canada; (9) Institute of Chartered Accountants in Australia; (10) American Institute of Certified Public Accountants;
(11) Hong Kong Institute of Certified Public Accountants; (12) Indian Institute of Management Calcutta; (13) Institute of Cost and Management Accountants of Bangladesh; (14) Chinese Institute
of Certified Public Accountants; (15) Institute Akuntan Manajemen Indonesia; (16) Institute of Cost and Works Accountants of India; (17) Includes 16,467 members in financial services; (18) Other
includes 10,556 unemployed and 439 no data.
Source: The Accountant

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n ACCA mutual links

Accountants Association in Poland
Association of Accountants and Auditors of
Expert and Licensed Accountants of Romania
Botswana Institute of Accountants*
Certified General Accountants Association
of Canada
Chamber of Auditors in the Slovak Republic
Chamber of Auditors of the Czech Republic
Chamber of Financial Auditors of Romania
Dubai Financial Services Authority
Eastern Central and Southern African Federation
of Accountants
Egyptian Society of Accountants and Auditors
Ethiopian Professional Association of Accountants
and Auditors
Federacin Argentina de Consejos Profesionales
de Ciencias Econmicas
Fdration des Experts Comptables Europens
Hong Kong Institute of Certified Public
Ikatan Akuntan Indonesia
Institute of Certified Public Accountants in Ireland
Institute of Certified Public Accountants of Cyprus*
Institute of Certified Public Accountants of Greece*
Institute of Certified Public Accountants
of Singapore*
Institute of Chartered Accountants of Barbados*
Institute of Chartered Accountants of Belize*
Institute of Chartered Accountants of Guyana*
Institute of Chartered Accountants of Jamaica*
Institute of Chartered Accountants of Sierra Leone*
Institute of Chartered Accountants of the
Institute of Chartered Accountants of Trinidad and
Instituto Mexicano de Contadores Pblicos
Iranian Association of Certified Public Accountants
Lebanese Association of Certified Public
Lesotho Institute of Accountants*
Macau Society of Certified Practising Accountants
Malaysian Institute of Certified Public Accountants
Malta Institute of Accountants*
Ministry of Economy and Finance, Cambodia
Kampuchea Institute of Certified Public
Accountants and Auditors
Ministry of Finance of the Socialist Republic of
Tanzania National Board of Accountants and
Ordre des Experts Comptables de Tunisie
Public Accountants Examination Council of Malawi*
Serbian Association of Accountants and Auditors
Singapore Institute of Certified Public Accountants
South Eastern European Partnership on
Accountancy Development
Swaziland Institute of Accountants*
Ukrainian Federation of Professional Accountants
and Auditors
Union of Accountants of the Czech Republic
Union of Chambers of CPAs of Turkey
Vietnam Accounting Association
Vietnam Association of Certified Public Accountants
Zambia Institute of Chartered Accountants*
Notes: * = joint examination scheme partner bodies.
Source: The Accountant

4 We are currently recruiting the first group

of students to go through that and we are getting very a good take-up, Freer says.
The ICAEW recently launched a forensic
qualification that can be studied post-ACA.
It is also developing a feeder qualification for
insolvency. Neither of the qualifications were
developed as a response to the financial crisis,
but the introductions have been timely.
Anyone from an insolvency background or
corporate recovery is very busy at the moment
and they will be very busy for another three
or four years because many of the businesses
that are struggling today are being kept alive
by the banks, Izza says.
[The banks] will decide when they want to
pull the plug and history tells us the peak time
for insolvencies may well come three or four
years post the end of the crisis.
The ACCA has not made any education
changes during the past year but plans to consult on some developments over the next 12
months. It cannot reveal any further details
at this stage.
Other critically important developments
within the next 12 months are political movements within the UK and Europe.
A UK general election must be held by next
May and Izza, for one, is predicting a change
in government. A high level of public dissatisfaction means that is a safe bet.
Mears says major political changes always
impact on ACCA members, but he does not
imagine major differences depending on who
takes government.
There arent that many differences these
days between the fundamental approaches of
the parties to business, he explains.
The Conservatives, who are currently the
favourites to form the next government, have
announced plans to make changes to the
UK banking regulator, the Financial Services
Authority, and also revaluate the role of the
FRC. Mears says he hopes public consultations will precede any changes.
It is not a decision that can be taken lightly
and it is certainly not something that should
be rushed into, he explains.
Political changes are also afoot in Europe,
as the member states attempt to push through
the Lisbon Reform Treaty and jostle for commissioner positions. The post with potentially
the most impact for the accountancy profession is the Internal Markets and Services
Mears suggests the ACCAs role is becoming ever more important in European policy
and politics because of its widening influence
in some of the emerging states.
We now have offices in countries such
as Poland, the Ukraine, the Czech Republic,
Romania and so on, he explains.
We are making a contribution for the best

The Accountant October 2009

interests of our members, employers and students from so many different countries from
within the EU, so I think we have to be listened
to... It is not just a UK organisation speaking,
we are reflecting opinion for business and for
accountancy across the whole EU.
The ACCAs growing presence in Central
and Eastern Europe is set to aid what Mears
predicts to be steady but encouraging growth
in coming years for the institute.
Freer predicts a tough year for CIPFA members but he feels confident about their ability
to step up to the plate.
Balancing the budget is going to be a big
challenge and an absolute top priority so
accountants are going to be in the spotlight,
he says.
A second challenge will be implementing
some of the cuts in public services, and Freer
says it will also be critically important to build
the financial capacity of public sector organisations so delivering better value for money,
economy and efficiency are at the forefront of
thinking in every decision.
On a lighter note, CIPFA will also celebrate
its 125th anniversary in 2010.
ICAS will be pushing forward with more
e-targeted communications and personalised
communications with members.
We will see more e-enabled learning come
through, far more of our CPD will be delivered
on line. We will see podcasts coming through
next year and webinars appearing right across
the spectrum of ICAS work, Colella says.
Tilley predicts 2010 to herald more of the
It is continuing to strengthen our individual markets, which is primarily about explaining the value of the management accountant
both to the individual and the employer.

More of the same

It is not just CIMA that will be experiencing

more of the same in 2010. Although predictions on the length and depth of the financial
crisis vary, the fallout will be felt for years to
come and the institutes will be called upon to
support their members, students, and the profession at large.
It will also be more of the same in terms
of the institutes making their voices heard on
public policy both in the UK and abroad, and
on advocating the value of their qualifications.
On other issues there is far less certainty.
Politics will play a big part, with election outcomes in the UK and commissioner posts in
Europe potentially having extensive and long
lasting effects.
Many variables are out of the hands of the
profession. The institutes must just continue
to do what they always do try and adapt as
quickly and effectively as possible. <

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October 2009 The Accountant



n UK
Survey of accounting institutes: 2009
The Institute of Chartered Accountants
of Scotland (ICAS)

The Institute of Chartered Accountants

in England & Wales (ICAEW)

Chartered Institute of Public Finance

and Accountancy (CIPFA)


CA House, 21 Haymarket Yards,

Edinburgh EH12 5BH

Chartered Accountants' Hall, PO Box

433, Moorgate Place, London EC2P 2BJ

3 Robert Street, London, WC2N 6RL


+44 (0)13 1347 0100

+44 (0)20 7920 8100

+44 (0)20 7543 5600


+44 (0)13 1347 0105

+44 (0)20 7920 0547

+44 (0)20 7543 5700




Douglas Nisbet (Apr 2009 to Apr 2010)

Martin Hagen (Jun 2009 to Jun 2010)

Roger Latham (to Jun 2010)

Executive director

Anton Colella (1)

Michael Izza

Steve Freer

Annual turnover

15 million (2)

74 million (2)

40.5 million









Total qualified members







Qualified members who are women







Qualified members based abroad






Qualified members 29 and under



23,989 (4)



Qualified members aged 30-39



35,467 (5)




Qualified members aged 40-49



30,432 (6)




Qualified members aged 50-65



23,944 (7)




Qualified members over 65







Number of students







Number of students who are women










Qualified members in public practice






Qualified members in business



58,260 (8)



Qualified members in public sector





Qualified members who are retired/

honorary members





4,608 (3)


10,593 (9)



Number of students based abroad

Qualified members in other categories

Annual membership fee

EU residents 382; Outside EU 222



Annual membership fee for those with practising





Annual membership fee for non active members/

retired, honorary

96 (4)


One-off payment for life 275 for

retired members; 44

Annual membership fee for student members

One off payment 794



Regional/international affiliations

CCAB (10) Fdration des Experts

Comptables Europens; International
Federation of Accountants; GAA (16);

CCAB (10); CIPFA (11); HKICPA (12);

CICPA (13); ICAI (14); ICAP (15); GAA

Fdration des Experts Comptables

Europens; International Federation of

Overseas bodies with which reciprocal agreements

are in place

SAICA (18)

ICAI (14); CICA (17); SAICA (18); NZICA

(19); ICAA (20); ICAZ (21); ICAS (22)

CMA Canada; CPA Australia


Notes: u/a = unavailable; (1) Chief executive; (2) December 2008 financial year-end; (3) Other includes 3,308 retired, 537 career break and 763 unknown; (4) Figure for members aged 25-34; (5) Figure
for members aged 35-44; (6) Figure for members aged 45-54; (7) Figure for members aged 55-64; (8) Industry and commerce; (9) Other includes unemployed, taking a career break, undertaking study,
on maternity leave; (10) Consultative Committee of Accountancy Bodies; (11) Chartered Institute of Public Finance and Accountancy; (12) Hong Kong Institute of Certified Public Accountants; (13)
Chinese Institute of Certified Public Accountants; (14) Institute of Chartered Accountants in Ireland; (15) Institute of Chartered Accountants of Pakistan; (16) Global Accounting Alliance; (17) Canadian
Institute of Chartered Accountants; (18) South African Institute of Chartered Accountants; (19) New Zealand Institute of Chartered Accountants; (20) Institute of Chartered Accountants in Australia;
(21) Institute of Chartered Accountants in Zimbabwe; (22) Institute of Chartered Accountants in Scotland.
Source: The Accountant

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The Accountant October 2009



11:48 am

Page 1

Audit Organization, Iran
Dayarayan Auditing & Financial Services 4
Institute of Chartered
Accountants of Bangladesh
Institute of Chartered
Accountants of India
3, 7
Iranian Accounting Association
Iranian Association of
Certified Public Accountants
Iranian Institute of Certified Accountants 4
Chinese Institute of CPAs
Financial Reporting Council, Hong Kong 6
Financial Supervisory
Commission, Taiwan
Hong Kong Institute of
Certified Public Accountants
Kaohsiung City CPA Association
Korean Institute of
Certified Public Accountants
National Federation of CPA
Associations of the Republic of China
New Zealand Institute of CAs
Taipei Provincial CPA Association
Taiwan Provincial CPA Association
Association of Chartered
Certified Accountants
Auditing Practices Board UK
3, 7
Chartered Institute of
Management Accountants
Chartered Institute of
Public Finance and Accountancy
Committee of European
Securities Regulators
European Commission
1, 3
European Financial
Reporting Advisory Group
1, 5
European Systemic Risk Board
European System of Financial Supervisors 7
Federation of European Accountants
Institute of Chartered Accountants
in England and Wales
2, 3, 7, 10-15
Institute of Chartered
Accountants in Scotland
American Institute of
Certified Public Accountants
1, 6
Financial Accounting Standards Board 3, 5
Grant Thornton US
Institute of Management Accountants
Public Company Accounting
Oversight Board
1, 6
US Securities and
Exchange Commission
1, 3, 5, 6
Accounting and Auditing
Organisation for Islamic Financial
International Accounting Standards Board 1,
3, 5
International Audit and Assurance Standards
International Federation of Accountants 4

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April 2010 Issue 464/465

Political bombshell

US lobby forces KPMG out of Iran

RSM expands in North Africa and Brazil
Poland survey: Firms come through the worst
Deloitte UK leader John Connolly to step down
Spain survey: Extreme pressure as firms battle recession


International Accounting Bulletin

Politics strikes profession

A lobby group has pressured KPMG into ending its affiliation with Iranian firm Bayat Rayan.
Arvind Hickman interviews industry leaders to discuss the circumstances surrounding KPMGs
departure and the repercussions it will have for the developing profession in the country

PMG has fled Iran amid fierce US

lobby group pressure. It is the last
Big Four firm to leave the embattled country, raising questions
about the future of the Irans accounting
profession as well as the moral integrity
of using economic sanctions to remove an
unpopular regime.
Experts, including the leader of the International Federation of Accountants (IFAC)
warn the Big Fours departure could stall
the development of Irans profession. A
broader exodus of foreign companies will
seriously destabilise the countrys economy,
which is already suffering chronic inflation
due to a shortage of imported goods.
Bayat Rayan, a part of the KPMG family a month ago, believes foreign companies will still use its services, as there is little
choice in the market, and the Big Four will
return to the resource rich nation once the
political situation is resolved.
KPMGs departure was engineered by
the United Against Nuclear Iran (UANI), a
coalition of lobby groups that wants to prevent Iran from becoming a regional power
with nuclear weapons, although scratch the
surface and it is clear the lobby group has
other interests, including regime change.
The lobby group dismissed concerns
about Irans accounting profession while
lauding KPMGs decision as helpful to our

cause on a greater level than any company

operating in Iran.
For its part, KPMG has remained largely
silent on this issue, confirming it ended its
working relationship with Bayat Rayan due
to concerns raised by the UANI. KPMGs
silence is common among accounting firms
who often shy away from politically sensitive issues.

Once you start working

in this part of the world,
disappointment doesnt mean
much. You have to survive and
you do survive
Ali Jan, Bayat Rayan

Irans top 10

Bayat Rayan is a top-six domestic firm

with 55 staff that provides audit, accountancy, tax and advisory services, primarily to
Irans private sector.
The Iranian profession is dominated
by 10 audit firms: Audit Organization,
Dayarayan, Agahan Moshar, Bayat Rayan,
Behrad Moshar, Behmand, Fater, Iran
Mashhood, Rymand & Co and Tadvin,
according to Dayarayan managing partner

Gholamhossein Davani.
According to International Accounting
Bulletin research, there are at least seven
global mid-tier networks that still have
Iranian affiliates (see chart below). These
groups play and will continue to play an
important role in assisting their Iranian
affiliates to develop international standards
and best practices.
Davani explains the state-owned Audit
Organization is the largest firm and audits
80 percent of the audit market, including
Irans government companies and public
institutes. The rest of the pack focuses on
the private sector. Davani estimates the
total revenue generated by the audit market is about $90 million of which Audit
Organization earns $60 million.
It is unclear what cut Bayat Rayan takes
out of the Iranian audit market but it is
significantly less than what KPMG earns
from US federal contracts each year the
Big Four firm is reported to have earned
$1.2 billion in the past decade.
For this reason alone, Bayat Rayan
partner Ali Jan believes KPMG had little
choice but to end its working relationship.
Common sense tells me that if my interests is somewhere else and they are going to
make me subject to sanctions, then I really
need to make a decision on where I am

The International Accounting Bulletin approached the mid-tier to find out which groups had Iranian member firms.

Firm name

Membership status

Nexia International

Behrad Moshar Certified Public Accountants

Full member

Moore Stephens International

Moore Stephens Iran Limited, Moore Stephens Hajiran Audit and Management Services Firm

Full member

HLB International

HLB Modaberan Auditing Services

Full member

Grant Thornton International

Rymand & Co

Correspondent member

RSM International

Dayarayan Auditing & Financial Services Firm

Correspondent member

Crowe Horwath International

Hoshiyar Behmand & Co


AGN International

Azmoudekaran Certified Public Accountants


BDO International, IGAF Worldwide, Baker Tilly International, PKF International, Kreston International, Mazars, Praxity, Leading Edge Alliance, BKR International, DFK
Source: International Accounting Bulletin

4 y April 2010


International Accounting Bulletin

going to lose most if I am not following the

rules, Jan says.
Jan does not believe the break-up will
have a major impact upon Bayat Rayans
bottom line because a large bulk of its business is local and theres little alternative for
foreign companies in Iran.
Weve got international clients which
operate here and under law have to have
their accounts audited in accordance with
the local laws, he explains.
Either they use us or they use another
firm like us, so really at the end of it [they
shouldnt go elsewhere] because there is
no alternative. All the major international
firms have gone so there is no choice.
One way or another we may get affected slightly but we still have expatriate clients ringing us still making enquiries. I do
not expect a major upheaval. It all has to
be sorted out at a much higher level than
KPMG, what is happening in the world, in
the UN.
At the diplomatic level this has to be
resolved and once thats resolved the business will follow.

Threat to the economy

Davani is concerned that foreign firms and

companies leaving Iran will not only directly affect the local audit market but also collapse the economy.

You are cut off from resources

and you are cut off from
colleague contacts. There is no
more inbound investment [by
the Big Four firms] So you
look at that and it is potentially
devastating to the profession
Robert Bunting,
International Federation of Accountants

It is self evident that if they comply with

the sanctions, foreign companies shall be
out of Iran and the revenue of audit firms
who are engaged with foreign clients will be
reduce so much, Davani says.

Even revenue of otheraudit firms [will

be affected] because the economy will collapse.
Both Jan and Davani point out the Iranian profession went through a similar
exodus following the Islamic Revolution in
1979 and recovered.
We have been through this before, it is
not the first time and Im sure multinationals will come here, Jan says.
Once you start working in this part of
the world, disappointment doesnt mean
much. You have to survive and you do survive.

Development headache

Even if firms do survive the desertion of

foreign companies, the departure of the Big
Four could delay professional development
in Iran, according to one of the worlds
leading accountants.
Iranian professional accountants are
trained by professional accounting bodies and at firms like Bayat Rayan. Being
affiliated with a Big Four network allows
domestic firms to tap into vast technical4


KPMG departure sends a key message to all United Against Nuclear Iran
The United Against Nuclear Iran (UANI)
has described KPMGs departure from Iran
as being more helpful to its cause than any
other company it has targeted.
KPMG was targeted by the UANI for several reasons. It was the last Big Four firm
with a presence in Iran and the UANI is
attempting to drive out multinational companies to destabilise the nations economy
and pressure the Mahmoud Ahmejinidad
regime to buckle to US demands.
UANI spokesperson Kimberlyn
Lipscomb describes this strategy as Irans
cost benefit analysis.
Is it more worth it to them to continue to pursue illegal nuclear weapons or
to engage with the international business
community? Lipscomb asks.
The UANI claims that KPMG has profited from US government contracts worth
$1.2 billion and, therefore, the firm should
not also profit from doing business in
The UANI hopes KPMGs departure
from Iran will lead to an exodus of multinationals that operate in the country. In
the past six months, the UANI campaigns
have pressured six major international
corporations to leave, including the heavy
duty machine manufacturer Caterpillar
and commercial products manufacturer
Ingersoll Rand.

As an auditor [KPMG] is enabling companies to do business in Iran. Some of those

companies include Daimler, Honda, HSBC,
Petrobras and Synopec, UANI spokesperson Kimberley Lascombe says.
By convincing KPMG to get out of Iran
we can also limit the other companies that
are doing business there. I think its certainly a disincentive, which is why KPMGs
decision to end their business in Iran is
helpful to our cause on a greater level than
any company operating in Iran.

High-level founders

The UANI lobby coalition was formed in

2008 by former US ambassadors Dennis
Ross, Richard Holbrooke, Mark Wallace
and James Woolsey as a private effort to
address US foreign policy challenges in Iran.
Two of the founding members, Dennis Ross
and Richard Holbrooke, now have roles in
the Obama Administration and have ended
their direct involvement with the group.
Lipscomb says foreign policy challenges
include Irans nuclear ambitions, the countrys human rights record and the countrys
links to Western defined terrorist groups.
Lipscomb concedes the group has no tangible evidence Iran is seeking to build nuclear
weapons but the nations refusal to disclose
all of its nuclear plans is a sign of its ambitions.

While hope for diplomacy may not be

feudal at this point there is certainly stress
and I dont know that there is an avenue
for co-operation with them as we had hope
even a year ago, she says.
UANI coalition members promote a variety of causes, including groups opposed to
nuclear weapons and those in favour of
The UANI works by publicly naming
and shaming large corporations operating
in Iran and threatening legal activism to
ostracise companies. This involves writing
to targets and using an army of activists to
harass them directly.
The UANI first wrote to KPMG on
March 12, asking the firm to sever ties with
its Iranian affiliate Bayat Rayan.
Lipscomb says KPMG was also subject
to private messages from thousands of
UANI supporters.
On 1 April, KPMG announced it had
ended its relationship with Bayat Rayan.
The firm stated: As a result of serious and escalating concerns expressed by
UANI and others, KPMG International has
terminated Bayat Rayans membership in
the KPMG network, effective 30 March
2010... As a result, the KPMG network no
longer has any member firm in Iran.
KPMG is the last Big Four firm to have a
presence in Iran. <

April 2010 y 5



KPMG right, UANI wrong

KPMGs departure from Iran is a blow for
Irans accounting profession but it wont be
fatal. However, a US lobby groups campaign to target a firm that provides corporate transparency in a country where transparency is lacking is hypocritical, counterproductive and leaves a bitter taste in the
minds and hearts of Iranian accountants.
Criticism should not be directed at KPMG
for leaving. KPMG should receive praise for
staying in Iran well after its Big Four rivals
fled, ignoring the political tensions between
Iran and the US.
KPMGs departure is a straightforward
business decision, and the right one. Any
business that earns as much as $1.2 billion
in a decade from one client, the US government, would be foolish to risk this by making some pointless political stand that will
ultimately achieve nothing.
Two of the founders of United Against
Nuclear Iran (UANI), Dennis Ross and
Richard Holbrooke, are now senior Obama
advisers one can only imagine the prickly
position KPMG found itself when the UANI
came knocking.
The UANI parades KPMGs departure
from Iran as a sign that big business wont
deal with a brutal regime seeking nuclear
weapons. But on further probing, the lobby
group could not provide a shred of evidence
KPMG ever dealt with or endorsed the Iranian government or that Iran is even producing nuclear weapons. Media speculation
is not evidence of sinister nuclear ambitions
while providing services to clients in a country is not the same as endorsing a regime.
The UANI claims KPMGs departure will
have no ill-effect on the Iranian profession,
but how many experts did it consult?
This publication spoke with two from the
Iranian profession and one from the peak
accounting body, IFAC. The sentiment is
that the departure of a major provider of
training and technical resources will have an
effect, although just how much is unclear.
Western divestment in Sudan, a country
where genocide is occurring, may be justified. Divestment in Iran is not, and economic sanctions are leading to extreme inflation
rates of 25 percent in 2009. This affects the
people much more than the regime.
KPMGs departure wont help the UANI
prevent Iran from producing nuclear weapons. But if the lobby group manages to drive
out all foreign companies, expect further
economic casualties in Iran to follow. <
Arvind Hickman

6 y April 2010

International Accounting Bulletin

4 resources, training programmes and global

best practices. This is particularly important for keeping up to speed with international changes to accounting and auditing
IFAC president Robert Bunting says
the Big Four leaving any country could
be potentially devastating, highlighting
the important role these networks play in
providing on-the-job training. Big Four networks also provide support and resources
to professional accounting bodies, such as
the Iranian Association of Certified Public
You are cut off from resources and
youre cut off from colleague contacts,
Bunting says.
There is no more inbound investment
[by the Big Four firms]. In a lot of countries
the large firms and large networks are net
investors because they dont profit at all
from being in the country, they are simply
financially supporting their office there.
So you look at that and it is potentially
devastating to the profession. Certainly it is
going to delay the development of the profession for a long time.
Jan accepts that belonging to a network
has its own benefits, because you get the
technical know how, you have access to
research, access to training and things like
that which are within that international
But having said that, we are now back
on the same footing as all other firms operating in Iran, he adds.
Both Jan and Davani contend that
resources are still largely available on the
internet and through staff membership of
professional bodies abroad.
At Bayat Rayan, several professionals
have access to resources from the Institute
of Chartered Accountants in England and
Wales, among other bodies. He hopes these
connections will help mitigate the loss of
materials and support from KPMG.
Another effect KPMGs departure could
have on Bayat Rayan is the removal of
KPMGs strict quality control infrastructure, which polices auditor practice across
the network.
Firms that belong to networks such as
KPMG are regularly inspected to ensure
they comply with high global standards.
The loss of this oversight could eventually
filter down to audit quality if careful monitoring is not picked up elsewhere.

Sending a message

The UANI argues that KPMGs departure

from the country will not devastate the
domestic accounting profession.
I cant imagine KPMG is the only

accounting firm left in Iran, UANI spokesperson Kimberley Lascombe says.

It certainly sends a message to the Iranian regime that the Big Four international
accounting firms are not willing to provide
services to a brutal regime.
Lascombe also does not believe economic sanctions will affect the people of Iran
more so than its government a common
criticism of economic intervention mechanisms.
I dont think it is hard to argue that
what the Iranian regime is doing to its own
people is significantly more brutal than
KPMGs decision not to operate in Iran,
she says.
Lascombe cites South Africa as an example of where the divestment movement
during apartheid proved to be effective.
An example closer to Iran is the brutal
UN Security Council-imposed economic
sanctions forced on Iraq between 1990 and
The United Nations Childrens Fund estimates these sanctions were responsible for
the deaths of at least half a million children
while doing little to affect the powerbase of
Saddam Hussein.
Davani questions the UANIs motives and
believes all professions such as accounting, lawyers and medicine must be [left]
out of political matters.

Profession battles on

Irans profession has undergone setbacks

before when global organisations have left
for political reasons and industry leaders
are confident they will return when the time
is right.
Further, its important to note that several
mid-tier networks are active in Iran, playing an important role in helping the local
profession develop global standards. Iranian professionals are also well educated,
resourceful and often qualify with globally
recognised professional bodies.
Other organisations, such as IFAC, provide assistance, whether this is on a formal
or informal basis.
However, there is certainly the risk that
a potentially toxic political situation could
spiral further out of control and economic
sanctions become much harder hitting. In
addition, the UANIs campaign against foreign organisations could yet threaten the
Iranian operations of other international
accounting groups.
Iranian accounting firms wont hold their
breath in the hope stability will return any
time soon. But also dont expect this profession to stagnate or go backwards, it has
battled hardship before and will survive this
latest setback. <

January 2015 Issue 6134

clean sla
after the

Round Table: Latin American profession dances to its own tune

Politicians should support accrual accounting: Muller-Marques Berger
A4S summit: sustainability enjoys a crowning moment
Obama, Modi and the IFRS road map in India

Full of insight,
Fayezul Choudhury
CEO, International Federation of Accountants

Intriguing stories and

outstanding advice from
Alex Malley, the suspended
schoolboy who became
a disruptive CEO.

Alex Malley
CEO, CPA Australia

Now available at all good booksellers


The Accountant

Iran also in from the cold?

Is Iran the new Cuba? Judging by the news
reports from Genevas nuclear talks, a compromise between Washington and Teheran
could be reached at some point in 2015.
The global accountancy profession must
be watching very closely for the outcome
of the P5+1 groups negotiations. All these
countries, by the way, should know an awful lot about nuclear weapons. The whole
P5 (the US, Russia, China, the UK and
France) have nuclear warheads the exception being the +1, Germany.
Worth remembering the US was the first
to use them in WWII against the Japanese,
when, according to some historians, Japan
was already defeated.
And France declassified documents in
2013 about the consequences of its nuclear testing in Polynesia during the 60s, 70s
and the 90s.
Never mind. The talks about Irans nuclear ambitions come on the back of December historic announcement by President Obama that the US will seek to restore
diplomatic relationships with Cuba after
more than 50 years of animosity between
the neighbours.
Im sure the global profession is also

keeping an eye on the ongoing US-Cuba

talks. Nonetheless, there are significant
differences between Iran and Cuba, as
well as similarities. Iran and Cuba have in
common a well-educated population with
an avid appetite for pursuing university
degrees, particularly in accountancy and
Cuba has 33,450 accountants for an 11
million population. In Iran there are 8,000
accountants for 78 million people and more
than 200,000 students a year begin accountancy studies at Iranian universities.
Yet the Iranian profession has managed
to develop further and reach impressive
levels of maturity and international standards compared to its Cuban colleagues.
Few would remember the last time a US
business (including accountancy practices) was run in Cuba, after the exodus from
the island in the late fifties and the subsequent international sanctions and embargo. That hasnt been the case in Iran.
As recently as 2013 international accounting firms had members in the country and
prior to 2010 that included the Big Four.
A driving force behind the exodus of
international firms (not just in the ac-

countancy sector) has been the US lobby

group United Against Nuclear Iran (UANI).
Its hard soft power, as UANI CEO Mark
Wallace describes it, has extended the
scope of the embargo turning it into an
overarching boycott.
But as we explain in our country survey,
while UANIs campaign has removed international players from Iran, the national
profession is taking over strongly and
resiliently filling the void left by international peers. As far as the accountancy
profession is concerned, to what extent
has UANIs campaign backfired?
In addition, accountancy being a catalyst for financial transparency and accountability, a chance might have been
missed to build a more democratic Iran
with international firms and other stakeholders sharing their know-how on the
After our July 2014s report on Cuba, The
Accountant tackles the Iranian conundrum
this month. Find out what the future of one
of the oldest civilisations in the world looks
Carlos Martin Tornero





UK and Australia complete cross-border merger

US audit reports in potential conflict with IAASB


New Spanish professional body to help SMEs

Obama and the IFRS road map in India


Thomas Mller-Berger


A4S summit in London


Shiraz, Ali e bne Hamzeh mosque

Round Table: Latin America


Iran: International sanctions eroding business
activity, the exodus of international firms, and
lobby groups calling for tougher sanctions.
Despite the adverse conditions, the Iranian
profession is proving to be resilient

Latin American profession: Shall we dance?


January 2015 y 3

The Accountant


The Association of Chartered

Certified Accountants (ACCA)
and the University of London
partnered to offer a Masters
course to ACCA students and
members. ACCA said the partnership marks the first time an
accountancy body and a university have joined forces to allow
candidates to gain both a Masters degree and a professional
ac cou nt a nc y qua l i f ic at ion
The CFA Institute appointed the
Institute of Chartered Accountants in England and Wales
(ICAEW) fellow Paul Smith to
the role of chief executive officer. Smith previously held the
position of managing director
at the 147-country investment
institute and brings to the role
30 years of management experience, of which 18 were in Asia.
His appointment is part of an
increased strategic focus within the CFA Institute towards
China and India, where it hopes
to build a stronger presence.
Former chief accountant for
the US Securities and Exchange
Commission (SEC) division for

investment management Jaime

Eichen returned to EY as a
T h roug hout her t i me at
the Commission, Eichen was
responsible for the interpretation of new accounting and
auditing legislation. Prior to
joining the SEC in 2008, Eichen
held the post of senior manager
at EY. She rejoined the firm as
a partner.
T he Institute of Singapore
Chartered Accountants (ISCA),
Chartered Accountants Ireland
and the Singapore Accountancy Commission signed an
ag reement to consider the
reciprocity of their membership in the future. More than
50,000 accountants could benefit from a future recognition
agreement; 28,000 of them are
ISCA members while the Irish
institute has more than 21,000
professionals. In recent years
the Singaporean profession has
signed different agreements
with global institutes to raise
its international profile and to
meet the 2020 deadline for its
project of becoming Asia-Pacifics accounting hub.

Uantchern Loh, SAC, CEO

Moore Stephens will sponsor the recently established

Counter Fraud Centre of the
Chartered Institute of Public
Finance and Accountancy. The
institute launched the centre in
July 2014 to aid anti-fraud and
anti-corruption efforts across
public services. The Centre
will provide the tools, training
and ideas to shape the future of
counter fraud, Moore Stephens
director of counter fraud services John Baker said.
KPMG global chairman John
Veihmeyer has been appointed
to the board of trustees of the
Financial Accounting Foundation (FAF), replacing Grant
Thornton International chief
executive Edward Nusbaum.
The FAF, the US equivalent of
the IFRS Foundation, oversees

t wo standard-set ting bodies: the Financial Accounting

Standards Board (FASB) and
the Governmental Accounting Standards Board (GASB).
Veihmeyers appointment is
for a four-year term, ending
31 December 2019.
In February 2014 he was
appointed KPMG global chairm a n , a s M ich ael A nd re w
retired after being diagnosed
with a serious medical condition.
Khalid Rahman, chief operating officer at the Institute
of Chartered Accountants of
Pakistan (ICAP), was appointed
managing director of Sui Southern Gas Company (SSGC), a
top gas distribution company.
SSGC is listed on the Karachi
Stock Exchange and has authorised shares worth PKR10bn
SSGCs outstanding shares
a re wor t h PK R6.7 bn , t he
majority of them, 70%, are held
by the government.
As well as an ICAP member
Rahman is an ICAEW member,
as is the countrys Minister of
Finance Mohammad Ishaq Dar.

Cross-border merger of UK and Australian accountancy bodies completed

The UK Institute of Financial Accountants
(IFA) and the Institute of Public Accountants (IPA) in Australia have partnered to
create a global organisation aimed at representing the interests of SMEs and SMPs.
Following a majority vote of IFA members (96%) on 16 December 2014, the
consolidation process was scheduled to be
legally completed by the transfer of IFAs
assets to the newly created organisation by
31 December.
IFA and IPA have undergone an amalgamation, as they call the move, to form
the IPA Group which has more than
35,000 members and students in 80 countries according to the institutes.
As of January 2014 IFA counted 7,000

4 y January 2015

members, 60% of them based in the UK,

and 2,200 students. According to The
Accountants 2014 World Survey, IPA has
12,631 members and 9,811 students.
The amalgamation of IFA and IPA
represents the second cross-border consolidation project by professional accountancy bodies. Earlier in 2014 the Institute of Chartered Accountants Australia
(ICAA) and the New Zealand Institute of
Chartered Accountants (NZICA) merged
to create a Tran-Tasman institute named
Chartered Accountants Australia and New
ICAA had 53,711 members and 13,715
students, while NZICA counted 26,146
members and 12,373 students, according

to The Accountants 2014 World Survey.

IFA and IPA, both members of the
International Federation of Accountants
(IFAC), said they will, however, preserve
the autonomy of each institute.
In a recent interview before the December vote, IFA chief executive David Woodgate told The Accountant that IFA and IPA
members will be part of the IPA Groups
membership, although the brand names of
the two institutes will be retained.
At the moment theres no plan to
change the names, thats important for the
members. Other institutes can be invited
to join further down the line, he added.
Carlos Martin Tornero <


The Accountant

US anonymous audit reports in potential conflict with IAASB standards

The revised auditor reporting standards
issued by the International Auditing and
Assurance Standards Board (IAASB),
which include disclosing the name of the
engagement audit partner, might create a
conflict between US rules and the international standards.
The IAASB final standards are intended
to enhance the relevance of audit reports
and transparency in the financial reporting
chain, a long-standing demand of investors.
Among the measures to improve the
auditors report, IAASB rules include a section to express key audit matters (or additional information subject to the auditors
professional judgement); and notably, the
disclosure of the engagement audit partner
who conducted the work.
Such requirements are mandatory for
listed companies and voluntary for nonlisted businesses.
According to the general provisions of
ISAs (or International Standards on Auditing) an auditor may be required to comply
with additional regulatory requirements,
as well as the international standards.
The standards guidance states: The
ISAs do not override law or regulation that
governs an audit of financial statements. In
the event that such law or regulation differs
from the ISAs, an audit conducted only in
accordance with law or regulation will not
automatically comply with ISAs.
The guidance also states that an audit

Spanish equivalent of
chartered accountants
introduced to help
SMEs finances
Spains General Council of
Economists (Consejo General
de Economistas or CGE) and
the Institute of Auditors (Instituto de Censores Jurados de
Cuentas de Espaa or ICJCE)
partnered to introduce a professional profile called experto
contable, which would resemble the chartered accountant of
other jurisdictions.
Spains two professional bodies said the move is aimed at
building the reputation of Span-

can be conducted in accordance with both,

performing additional audit procedures to
comply with the relevant standard and the
national law.
ACCA head of auditing practice David
York told The Accountant the guidance
doesnt clearly address the conflict between
laws and ISAs.
An easy but incredibly odd auditors report could say complied with ISAs
except for this non-disclosure, York said.
The guidance also states that in rare circumstances, the auditor would be allowed
not to sign off the audit report if that creates a personal security threat. But this
does not include the threat of legal liability
or professional sanctions.
However, the guidance indicates that the
law or national standards of a given country may establish further requirements that
are relevant to determine whether or not
the disclosure of the engagement partner
is compulsory.
The guidance was intended to make
sure that auditors did not use some spurious reason about personal security, York
However the last bit of the guidance
could be a hint, according to York, that if
the law prevents the disclosure there might
be a way around.
But it is too woolly, I think law preventing disclosure would be rare, he added.
In August 2014 the US Council of Institutional Investors (CII) urged the Public

ish professional accountants

and enhancing their responsibility and regulatory oversight.
ICJCE, the professional body
for auditors, and the CGE ,
which is formed by a wider
range of finance professionals
including economists and auditors, will jointly run the new
To that end a committee will
be tasked with assessing the
professional experience and
capabilities of those members
who would like to become a
registered experto contable
and meet the criteria to do so.
A spokesperson for the CGE

Company Accounting Oversight Board

(PCAOB) to include this issue on its standard-setting agenda.
The CII was reissuing a previous call,
when the PCAOB discarded the idea of
requiring auditors to sign their reports on
a mandatory basis.
PCAOB chairman James Doty told The
Accountant in a July 2014 interview that
he personally saw the need for the auditors to have at least an option to sign their
All the major markets, except the US
have it. Auditors are living with it in most
countries around the world except here,
Doty said.
Were not expecting them to sign; we
are giving auditors alternatives about
whether further to disclose the name.
The US Center for Audit Quality executive director Cindy Fornelli told The
Accountant that national policymakers are
pursuing more transparency in this area.
The PCAOB has said it will release a
supplemental request for comment on a
proposal that would require disclosure
of the engagement partner and others
involved in the audit, either in the audit
report or in a separate form to be filed with
the PCAOB, she said.
The PCAOBs standard-setting agenda
has been recently updated to discuss this
issue during the first half of 2015.

told The Accountant that the

professional bodies decided to
join forces as both were working on similar initiatives to
strengthen the regulation and
opportunities of professional
The experto contable would
be a finance professional who
would work for those companies that do not need to pass a
statutory audit.
The vast majority of companies in Spain are SMEs. The
idea behind the introduction of
a Spanish chartered accountants equivalent (or the French
equivalent of expert-comptable)

Carlos Martin Tornero <

is to place trust in the financial

statements of those companies,
which may lack reliable independent third-party assurance.
For example, the initiative
could improve the access to
finance by SMEs as Spanish
banks have been traditionally reluctant to lend to smaller
companies, particularly in the
aftermath of the credit crunch.
According to the European
Commissions Eurostat, 38% of
Spanish companies had no more
than nine employees in 2010,
compare with 18% in Germany
and with the 28% of the Eurozoness average.

January 2015 y 5



The Accountant

Obamas visit signals IFRS momentum in India

India is working hard to be better integrated into the global economy as Carlos Martin Tornero and
Vincent Huck report

he US president Barack Obama began

2015 with a visit to India which has
been described as a landmark of a new
era in the relations of the two countries. In his three-day visit, Obama and India
Prime Minister Narendra Modi left few subjects untouched as they discussed climate
change, human rights, defence and, most
importantly, trade.
Indeed in the US delegation to India,
Obama brought with him the US Secretary
of Commerce Penny Pritzker; the administrator of the US Agency for International
Development Raj Shah; the president and
CEO of the US Overseas Private Investment
Corporation (OPIC) Elizabeth Littlefield;
and the Director of the US Trade and Development Agency Lee Zak.
In the last few years, weve increased
trade between our countries by some 60%.
Today, its nearly $100bn a year which is
a record high, Obama said during his visit.
However the US president said this wasnt
enough and he announced a series of new
measures that would increase trade between
the two countries.
Today, Im proud to announce additional
steps, a series of US initiatives that will generate more than $4bn in trade and investment with India and support thousands of
jobs in both of our countries, he said.
He added that over the next two years,
the US Export-Import Bank will commit
up to $1bn in financing to support Madein-America exports to India. OPIC will
support lending to small and medium businesses across India, which the US president
anticipated would ultimately result in more
than $1bn in loans in underserved rural and
urban markets. He also announced that the
US Trade and Development Agency will aim
to leverage nearly $2bn in investments in
renewable energy in India.
Incidentally, a week before Obamas visit
and his announcements of new measures to
make the US and India greater partners in
the globalised market, India took steps of its
own to upgrade its profile internationally.
Indeed, the Indian Ministry of Corporate Affairs (MCA) has announced plans to
implement IFRS for all listed companies by

6 y January 2015

2016, with the exception of banks, insurers

and shadow banking companies.
The announcement follows the call made
in July 2014 by Minister Arun Jaitley, who
proposed the mandatory adoption of Indian
accounting standards (Ind AS), which are
IFRS-converged, by financial year 20162017 and on a voluntary basis from April
2015. According to the MCA, the Indian
IFRS-converged accounting standards will
also apply to non-listed companies whose
net worth is INR5bn ($78.7m) or above.
According to the Institute of Chartered
Accountants of India (ICAI), more than
550 listed companies will be affected by the
change. But the number of companies, either
listed or non-listed, applying Ind AS will
increase as the following year the net worth
threshold will go down to INR2.5bn.
Banks and insurers wont be affected at
this stage, as their accounting is not governed by the Companies Act. The accounting rules for insurers are set out in the Insurance Regulatory Development Act, whereas
banks follow the Banking Regulation Act.
In further stages they might be covered as
well. These acts have differences, but there is
work going on to make them compatible and
prepare for the transition, IFRS expert Eish
Taneja told The Accountant.
The governments announcement brings
closer to completion the process of IFRS
convergence started in 2010, which has been
subsequently postponed.We have now a
government which is in majority, so it has
the power to enforce the decision. The previous government could not do so, although it
was trying, Taneja noted.

Adoption issues
ICAI president Kumar Raghu told The
Accountant that his institute recommended
the implementation of IFRS to the government. He warned, however, that the new
standards will require new types of financial information, and presumably first-time
adoption issues will be rife. Any new system of accounting will bring implementation
challenges, for both preparers of financial
statements and auditors. We are a very big
country, with a large number of accountants.

We have to train all of them, Raghu said.

ICAI has already prepared 500 seminars around the country. And Taneja, who
also trains Big Four firms staff on IFRS,
acknowledged theres a skill gap that needs
to be addressed. One of the new areas that
the IFRS-converged standards will bring to
India is the concept of fair value, as Taneja
and Raghu pointed out.
In India we dont have a strong body or
association that can monitor the concept of
fair valuation. There are registered valuers,
who are supposed to do fair valuations, but
there is no strong body to monitor them,
Taneja said.

The MCAs announcement did not mention
the controversial National Financial Reporting Authority (NAFRA), a new regulator
under the Companies Act which hasnt been
implemented yet. Taneja said that NAFRAs
composition and team members could be
announced in the next months.
I think is a good bold step, in line with
the PCAOB [Public Company Accounting
Oversight Board] in the US. Its going to handle accounting standards and professionals,
who were not under big scrutiny. They have
been handled by the institutes, which is quite
lenient, Taneja said.
The ICAI president disagreed and hoped
the government will not pass enabling legislation to implement the NAFRA. Our
institute is doing its job. The NAFRA is a
duplication of authority; there is no need for
one more regulator, Raghu said.
Despite the challenges and difficulties arising, Indias latest announcement show the
countrys commitment to be better integrated in the global economy. And in light of the
US president recent visit and announcement,
it is expected that foreign direct investment,
and not only that coming from the US, will
see an important increase.
With an accounting profession and a
corporate world able to speak the international language of IFRS, it will only make
India more attractive for investors. Needless
to say, its a language the US is still turning
its back on. <

The Accountant



Sustainability enjoys a crowning moment

heres bad news for climate change

sceptics who still sit in national parliaments, company boardrooms and
CFOs suites. Bad news for those who
still put short-term profit above long-term
sustainability regardless of the price. Sustainability is high on the agenda. Quoting
a 2014 report of the International Panel on
Climate Change, Prince Charles declared
that the consequences of climate change
could be beyond our capacity to rectify, if
unchecked. We are already seeing in the
form of ever-more extreme weather events
that damage our infrastructure, sea level rise
threatening coastal cities and the disruption
of weather patterns vital for agriculture to
feed a growing population, Prince Charles
said. His words seemed more topical than in
the previous ninth summits of the Princes
Accounting for Sustainability Project (A4S),
as world leaders were meeting in Peru for
the UN climate summit. There was mounting pressure for them to reach a global agreement to reduce carbon emissions and compensate for the 2009 fiasco of the Copenhagen summit.
The A4S summit in London on 11 December, however, focused on the close relationship between finance and sustainability,
which is the rationale behind the joint work
of the A4S and the accounting community.
I could see that accountants would need to
develop the practical tools required to design
and build sustainable organisations, and
ultimately the sustainable economy we so
desperately need, Prince Charles said. And
that was the gist of the A4S summit despite
the progress made in sustainability, theres a
long way ahead. To highlight the change in
attitudes within the finance community, A4S
executive chairman Jessica Fries brought
to light a survey the Institute of Chartered
Accountants in England and Wales conducted among its members in 2003.
Back then, 63% of them didnt see environmental or social issues as being part of
an accountants responsibility, with some of
them making remarks such as these issues
are not the business of an accountant or
isnt this survey a waste of time?.

The most interesting quote came from one

member who answered: What a mess this
country is in because of our focus on touchyfeely issues? As Fries pointed out, the new
generations of accountants are more aware
of the challenges ahead. She said: More
recently, research conducted by different
global accounting bodies showed that more
than 80% of their students believe sustainability is a relevant issue for their qualification
in finance. A recent joint survey by the Chartered Institute of Management Accountants
and the American Institute of Certified
Public Accountants, showed similar rate
of awareness, 88%, among their African
members compared to an average of 65%
among their peers in Western economies.
From a SMEs perspective, Institute of
Directors chairman Ian Dormer, who runs
an engineering SME, said smaller companies are crucial for the sustainability agenda.
The overwhelming number of UK businesses are small firms, Dormer said. But they
are all plugged into the global supply chain.
Without convincing them that sustainability
is in their interest, the aims we share will be
much harder to achieve.
National Grid finance director Andrew
Bonfield broadened the scope of sustainability to include corporate tax avoidance issues.
It has to do with our companies playing
their part in society and paying fair taxes,
he said. From a CFO perspective, he warned,
this is not just corporate social responsibility
but a long-term bottom line issue: Yes we
all have short-term pressures. But if sustainability is not part of our strategy, how long
do you expect to be around for? Bonfield
asked rhetorically. He added that investors are the first to benefit from long-term
business strategies, but do they care about
sustainability and are they the only ones to
blame? The onus is also on CFOs to make
sure that we are getting the message across,
that we are highlighting the importance of
sustainability within our business plans,
UK grocer Sainsburys CFO John Rogers
said at one of the summits panel discussions.
Another member of the panel, David
Blood, co-founder of Generation Investment

Management, a long-term focused investment partnership, noted that not all investors belong to the same type. Its important
to differentiate that there are long-term
investors, who may or may not be focused
on sustainability specifically, but indeed in
the long-term assessment of investments.
And then there are traders.
From the floor, Global Reporting Initiative chairman Christianna Wood asked the
panel that if one of the issues is the shortterm focus of traders, what can the finance
community can do about it. Blood answered
that there are increasingly more long-term
investors in the financial system. However,
he said, they often confuse themselves and
think as traders. They become very focused
on quarterly performance; we need to move
away from all that. Long-term investors are
structural for a more sustainable economy.
Again from the floor, a delegate highlighted the issue of incentives in the financial services industry. If you look at brokers business models, youll find that being
short-term focused improves their profitability. He stressed that such a system of
incentives is undermining sustainability and
said accounting could help to challenge this.
We can start using the data from the
corporate disclosures to show clients where
the money is being invested; what kind of
sustainability profile is in the portfolio. But
at the moment this is not particularly pervasive, he said.
Sustainability did seem to be the days
top priority, as on the same day of the A4S
summit in London, the US Secretary of
State John Kerry paid an unexpected visit to
negotiators in Lima. If youre a big developed nation and you are not helping to lead
[in sustainability] then you are part of the
problem, Kerry said. In his closing keynote
speech Prince Charles joked: I did my best
to account for a little bit of sustainability by
walking here. Step by step the message of
sustainability permeates the financial world.
And while negotiators saved the day in
Lima, next December all eyes will turn to the
2015 Paris UN climate change conference.
Carlos Martin Tornero <

January 2015 y 7


The Accountant



In the wake of the financial crisis regulators have called for accounting reforms in the private sector.
But the profession is more and more vocal building the case for governments to adopt accrual-based
IPSAS to increase transparency. Vincent Huck looks at the state of play after the WCOA

here were the auditors? is the

question commonly asked when
reflecting on the 2008 financial
crisis. From there starts a line of
questioning that has been repeated over and
over again since the fall of Lehman Brothers:
are auditors reports fit for purpose? How
to enhance audit quality? Should businesses
report differently on their activity? Is the
Big Four quasi-monopoly of the market an
impediment to audit quality?
In the past six years, out of those questions a number of initiatives were born,
some laws were passed and new accounting
and auditing standards were issued. However most of these look at the private sector
as the genesis for all troubles.
Far from suggesting that the private sector
doesnt have its share of responsibility for
the recent economic turmoil, the accountancy profession has in recent months
warned governments that they should focus
on their own backyard as much as the private sectors.
Against the background of this rhetoric,
the International Public Sector Accounting Standards (IPSAS) seem to have come
out of the shadows a set of accrual-based
standards used for the preparation of general purpose financial statements by governments and other public sector entities
around the world and issued by the IPSAS
Board (IPSASB) since the late 1990s.
T he A c c o u n t a n t h ig h l ig hte d t h i s
increased focus on government accounting
by the profession in its 2014 World Survey entitled The Quest for Transparency,
but the accountancy professions call for
accountability in public finance has never
been so loud as at the latest World Congress
of Accountants held in Rome in November.
IFAC immediate past-president Warren
Allen set the tone in his opening speech
right at the start of the Congress. He
said historians had pointed at economic

8 y January 2015

troubles, public sector overspending, and

government corruption as the reasons
behind the decline of the Roman Empire.
In 2014, more than 1,500 years after the
fall of Rome, these issues still plague us,
he continued. More than six years later,
nations remain in recession and governments still struggle with massive debt, high
unemployment rates, and anaemic economic growth [] Without doubt, there is a
need for greater transparency and accountability.
Only a few minutes after his speech, Allen
presented the IFAC Gold Service Award to
IFAC former chief executive for 10 years
and CIPFA current chairman Ian Ball, and
in his acceptance speech Ball reiterated
the need for transparency in governments
Quoting Jacob Solls book The Reckoning: Financial Accountability and the
Rise and Fall of Nations, Ball said: From
Renaissance Italy, the Spanish Empire,
Louis XIVs France, the Dutch Republic,
the British Empire, and the early United
States, effective accounting and political
accountability have made the difference
between a societys rise and fall.
In conversation with The Accountant a
few weeks later he said he likes Solls book
because it shows how economies and societies evolved depending on the political
accountability between leaders and the
public. That is something we kind of lost,
and I really think we see better governments
where we see better accounting or financial
management involved, he said.
Ball is very much attached to this topic as
he helped his home countrys government,
New Zealand, over 20 years ago, to adopt
accrual-based reporting standards. To that
effect Ball was one of the speakers at the
WCOA second plenary session entitled
Enhancing government transparency and
accountability: a way to economic growth.

Also a speaker at the session was IPSASB

member and EY partner Thomas MllerMarques Berger who said the lessons of the
financial crisis had been learned. Catching
up with The Accountant after his speech he
explains: There were three lessons to the
crisis: the first was the lack of transparency
in financial accounting, the second was the
lack of quality of data in statistical framework, and the third was the incongruences
between the two.
Talking with delegates at the Congress,
he continues, one of the takeaways is that
it is globally accepted that we need a higher
level of transparency within government
accounting. He also points to the fact that
accounting boards are more and more
working in close cooperation with statistical organisation like the IMF or Eurostat.
M l ler - M a rque s B erger tel ls T he
Accountant that accrual-based accounting standards in the public sector are a prerequisite for transparency in governments
spending. Talking about transparency,
there certainly are two parts to it: you need
to get the right numbers, and then you need
to translate that into understandable messages for the decision-makers, he explains.
But accrual accounting is a necessary precondition to get the numbers right. How
can you talk about financial debt if you
dont have an accrual picture of the financial debt?
He admits that IPSAS implementation
around the world might be slow, but despite
the critics saying that IPSAS are not gaining
momentum he says the IPSASB was not dissatisfied with the level of adoption.
We are not dissatisfied with improvement and the level of implementation at the
IPSAS board, he says. I think you have
to look at the specific environments we are
focusing on countries like Nigeria which
have some serious challenges for the implementation of an accounting framework.


The Accountant

Things can always go faster, but on the

other side it has to be sustainable, he continues. But compared to where we were six
years ago when we had the financial crisis, I
think we made huge improvements.

Implementation challenges
However the level of implementation
around the world is difficult to ascertain.
Only two countries directly refer to IPSAS,
Switzerland and Austria, while many country use the international standards as a
base to develop their own set of national
accrual-based standards. Nevertheless
Mller-Marques Berger says that 80 countries already apply or are considering applying IPSAS.
Nevertheless he admits that IPSAS implementation doesnt come without its fair
share of challenges. First theres the question of cost, but Mller-Marques Berger
contends that the cost of doing nothing is
greater then the cost of implementation.
In Europe for example, some member
states needed to be bailed out or subsidised
[because of the financial crisis], he says,
adding that this is the cost of doing nothing. And you have to compare that to the
cost of getting improvements in the public
finance management system.
Equally the debate tends to focus on the
costs rather than the benefits, he continues.
He argues that a government might have to
cover implementation costs for a period of
three-to-five years, but the benefits in having transparency and better figures, better
decision-making, will last for decades.
I rather tend to speak about investments
in improving our public finance management system, rather than talking about
costs, he says.
Lack of skills and knowledge is another
challenge regarding IPSAS implementation, but this is a gap thats becoming easier to breach according to Mller-Marques
Berger. One of the advantages of having
accounting and reporting systems which are
very close to the private sector is that we can
leverage the knowledge we have of financial
reporting in the private sector, he argues,
saying that it wasnt the case 10 years ago
when an accountant wouldnt really cross
the line between private and public sector.
Now, if you have knowledge in IFRS,
I think you update yourself on what are
the additional or different requirements in
IPSAS in a reasonably short time, he says.


There is something that accountants could have done better in the

past: they should have more intensively talked to politicians about the
benefits of accrual accounting. But the ones who really should benefit
and support the process are politicians
Thomas Mller-Berger
While IFRS aimed at creating a common
language and a certain level of comparability in the private sector around the globe,
the necessity for such comparability in the
public sector might seem overstretched. But
Muller-Marques Berger contends: The
capital markets are not only looking at private sector investments; they are also looking at public sector investments.
Therefore he believes that it is in the
interest of investors to have comparable
information, but its also in the interest of
the countries themselves as they compete
for investments from foreign and global
But while the profession pushes for
accrual accounting in the public sector, as
highlighted by Mller-Marques Bergers
discourse, accounting firms are not always
supportive of accrual accounting for their
own purposes. This was particularly clear
in the US, as revealed last October in The
Accountant, when US CPAs actively lobbied
Congress through their professional body,
the American Institute of Certified Public
Accountants, in order to be able to continue to pay their taxes under a cash-based
accounting system.
Asked about his thoughts on the topic and
if it was the reason why the US accounting
profession hadnt been campaigning more
vocally for the use of accrual accounting by
the federal government, Mller-Marques
Berger answers: To be honest Im not
familiar with this issue, I havent heard
about it, I cant comment.

Balance sheet and audit

In contrast to the US, some countries have
been more receptive to the issues, like Canada which at the moment is the only country
in the Group of 7 (G7) to produce a balance
sheet. Mller-Marques Berger argues that
all governments should be looking into publishing balance sheets and have their financial figures independently audited.
Theres no difference between private
and public sectors when it comes to the need
for independent audit, he says when asked
who should be providing the independent
audit. The issue of whether this [the audit

of governments finances] is done by a firm

from the private sector or whether its a
knowledgeable supreme audit institution is
not really important.
Asked if there was no ethical issue in having the private sector giving assurance on
public sector financial data, he says that
what matters are the auditing standards
applied and to have trained, knowledgeable auditors, which according to him is the
case in private practices as much as supreme
audit institutions.
In many cases, or in most cases, when
private sector audit firms do the audit, they
do it on behalf of the supreme audit institution and often for capacity reasons, he
says, adding that in the end its always the
supreme audit institution giving the last
stamp. Therefore I dont have a problem
with private sector firms being involved; on
the contrary, I think we can contribute a lot
in how to perform audits, due to capacity
restrictions in the public sector.
IPSAS still has a long way to go before
reaching the same celebrity status as its
younger brother IFRS. Indeed the international standards for the private sector
started in the early 2000s. And even if a
few major economies are still reluctant to
embrace IFRS, it has quickly gained traction with today half of the world already
adopting, converging or considering IFRS.
Even so, IPSAS is slowly making its way
in governments minds, as Mller-Marques
Berger reminds: Looking at where we
stood four or five years ago, where we still
had to spread the word about what IPSAS is
and to raise awareness today if you talk to
somebody about IPSAS, theyre aware of it.
Youre not asked to explain what it is.
In two years, IPSASB will be celebrating
its 20th anniversary, and as countries consider whether or not to adopt the boards
standards they should be reminded that the
concept of accountability in the public sector is much older.
And as of an example they might want
to revisit Thomas Paines words: A body
of men holding themselves accountable to
nobody ought not to be trusted by anybody.

January 2015 y 9


The Accountant


Profession dances to its own tune

At the World Congress of Accountants in Rome The Accountant took the pulse of a continent full of
opportunities for the global accounting industry, as Latin American practitioners met with
Carlos Martin Tornero and Vincent Huck
The Accountant: What are the main challenges
and opportunities when practising accountancy in your countries?
Oscar Noe Lpez Cordn: Globalisation is
opening up the markets and when Guatemala receives direct foreign investment
(FDI) flows, we, the profession, should be
ready to live up to expectations. FDI is both
a challenge and an opportunity. We should
be able to translate those investments into
the language of financial information for the
benefit of stakeholders and potential investors. Obviously, we need to deliver quality
and master not only international accounting standards but also assurance standards
to give extra trustworthiness to the financial
information we produce. And bear in mind
that the competition is fierce within the
profession. In Guatemala the biggest firms
control the market. That makes it harder for
the smaller players to invest in capacity and
training. Being a global accountant doesnt
come cheap, as standards, rules and the
know-how frequently change. But we must
be ready to take up that challenge.
TA: Indeed, investing in capacity is not cheap.
But do you have any support from the national
body, from the government or international
Lpez Cordn: At the national institute we
make significant efforts to be relevant to
the profession. On a personal level, we also
make time in order to attend industry events
like the WCOA. And its not just the cost
of the flight and accommodation, its also
the time we stop working at our firms to be
here in Rome. We acknowledge, though, the
importance and added-value for the national
profession of catching up with international
colleagues, networking, and keeping abreast
of technical changes and trends.
TA: You mentioned the biggest firms dominate
the market, whats their share approximately
in Guatemala?

10 y January 2015

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Oscar N
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Guatem ordn:
de Conta
Auditor ores Publicos y
committe president executi
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Isidro So
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ez: ISS
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(Costa Ric
Juan Iva
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Umber to
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chief exe

Lpez Cordn: The Big Four have about 80%

of market share and the mid-tier about 15%.
Theres a tiny slice of the cake left for the
smaller national firms, and they are the ones
who need to consider very seriously investments in international education in order to
be competitive. But thats expensive. And
only the best, those who produce quality
work, thrive in these tough conditions. And
remember that word of mouth is the only
marketing tool were allowed by regulations
and ethics. We can only grow through positive endorsements from our clients.
TA: International qualifications being key to
remaining competitive, is there any involvement by the global accounting bodies to build
capacity in your countries?
Lpez Cordn: We try to make contact and
look for relationships, because, as they say,
those who seeks shall find. But its hard to
get international support. Its more an effort
from within the country. For instance, Guatemala hasnt benefited from the capacity
building initiatives of the World Bank or
the International Monetary Fund (IMF).
There is an IMF Report on the Observance

of Standards and Codes (ROSC) from 2005

whose findings havent been implemented. In
theory, Guatemala should be using standards
based on financial performance information,
but in reality theres still a predominance
of taxation-based information. Thats an
obstacle which impedes our profession from
accessing funds to access global capacity
building. Recent attempts have been made
to review the ROSC but one of the main
challenges lies at university level. Future
generations of accountants need to enter the
profession as prepared and fully equipped as
possible with a strong focus on ethics.
Isidro Soto Snchez: Indeed our main issues
start right at the beginning, in university
classrooms. The curricula dont reflect the
changes in the profession. So, when students finish their degrees they are already in
need of an update. Add to that their lack of
minimum professional experience. And to
make things worse, the national accounting
bodies in Costa Rica provide little support,
if any support at all. All this contributes to
the ongoing war on fees in the marketplace,
what we call the jungle, because the lack
of a proper qualification and training of
national professionals causes a drop in the
quality of the services rendered and the fees
charged. Theres dysfunctional competition
as a result. No wonder, as Oscar points out,
international firms have the biggest share of
the market. But theres an additional issue. If
an independent firm has a big client in Costa
Rica, market players such as banks or the
regulator, would tell the client that an international firm is required for its operations.
This assumption is not right and clips the
wings of smaller practitioners and independent firms without an international affiliation.
TA: Why do you think professional bodies are
not providing enough support?
Soto Snchez: We have two bodies, one for
accountants and another one for auditors.
My criticism is that they see continuing
professional development (CPD) entirely


The Accountant

as a business. The CPD that national bodies offer should be at more affordable prices
for their members. They charge a fortune,
despite the members being those who financially maintain the institutes. In addition,
our national bodies should monitor and
take action against professional malpractice.
They should keep a vigilant eye on firms that
provide services for which they are not qualified or lack sufficient expertise. As I said, this
partly explains why banks or regulators tend
to underestimate independent firms, which
ultimately shapes the markets dynamics.
TA: What does the market look like in Costa
Soto Snchez: Id say the Big Four have 75%
of market share, and 15% the mid-tier. There
is still a considerable segment, about 10%,
formed by small and medium-sized independent firms and individual practitioners.
TA: Whats the situation in Panama?
Juan Ivn Rogers-Harper: Professional training and education is the key that opens the
door of the market. If accountants dont
believe in professional training and dont
look for it, either within the country or
abroad, they will lag behind. We have about
15,000 accountants for a country of four
million people. But out of those 15,000
accountants, just 15% are members of one
of our three national accounting bodies. The
situation, Id say, is similar to Guatemala
and Costa Rica. There isnt support from the

Umberto Tedeschi, Brazil

government or from international organisations. We should aim at forcing accountants to keep up to date with international
rules, standards and best practices. This is
expensive. But accountants play a crucial
role in society and there are worrying signs
that society is losing confidence in the profession. For example, as one of the panellists at the WCOA said, accountants should
fight fraud, corruption and money laundering. Yet the widespread perception is that
institutions that are supposed to enforce the
law arent able to counteract this scourge.
And in those institutions accountants work
without being able, or not knowing how to,
fight corruption more effectively. And this
is a global perception. Panama is one of the
fastest-growing economies in Latin America,
with a wealth of foreign investment flows.
This investment, however, poses risks too.
Sometimes capital of suspicious origin slips
through the system and dont forget that all
those investments have passed through an
accountants hands at some point.
TA: And what does the accounting firms
market look like in Panama?
Rogers-Harper: The market share of the Big
Four, mid-tier and independent firms could
be around 70%, 20% and 10% respectively.
In Panama non-Big Four firms are getting
stronger. Some professionals leave the biggest firms to pursue a career with other market players or to found new firms.
TA: Umberto, lets hear about Brazil now.
Umberto Tedeschi: We have 500,000
accountants, of which 150,000 are based
in Sao Paulo, and the population of Brazil
is 200 million. The profession has massive
opportunities. Accounting studies are the
most sought-after degrees in universities.
As in every field of life, though, when a sudden growth is reported, quality and quantity
dont go necessarily hand in hand. One of
the main concerns of the Conselho Federal
de Contabilidade (CFC) is to ensure that
the quality of the accounting curricula is
maintained in each of Brazils 27 states. In
fact, a proficiency test was reintroduced in
order to gain access to the profession and be
granted the licence to practise as an accountant. Another concern for the CFC is to keep
the qualification relevant through CPD, for
both auditors and accountants. And one of


Rogers-Harper, Panama
the main challenges, not just for Brazil but
for the whole of Latin America, is the ethics of the profession. This closely relates to
the issue of fee pressure. We were discussing
this between us a while ago. Some professionals bid down fees disregarding quality
standards. Theres a constant struggle to dignify the profession going on, which connects
with the ethics and CPD. In my opinion, this
is crucial for the future of the Latin American profession.
TA: What does the market of accounting firms
look like in Brazil?
Tedeschi: My area of expertise is accounting and not just auditing. Also take into
account that the majority of companies,
which represent about 80% of Brazils GDP,
are not subject to statutory audits. Among
the remaining companies, worth 20% of
GDP, more than half are international corporates whose choice would normally be a
Big Four firm. But I should say that in Brazil
we have the Big Six. Grant Thornton, BDO
plus other local firms are making inroads
into the auditing market, particularly among
listed companies.
TA: Umberto pointed to the critical issue of
fee pressure as a structural problem of the
profession. Do you perceive that benefits are
put above quality in audit work?

January 2015 y 11


The Accountant




Unemployment rate


GDP growth
GDP per capita (PPP)
Foreign direct investment (net inflows)

3.6% of GDP






Unemployment rate


GDP growth
GDP per capita (PPP)
Foreign direct investment (net inflows)

6.5% of GDP





Unemployment rate


GDP growth


GDP per capita (PPP)

Foreign direct investment (net inflows)

2.5% of GDP



Current account balance

-3.2% of GDP

Current account balance

-5.4% of GDP

Current account balance

-3.7% of GDP

Budget balance

-1.7% of GDP

Budget balance

-5.7% of GDP

Budget balance

-2.3% of GDP

Corruption perception index

Ranked 69
out of 187

Corruption perception index

Ranked 47
out of 175

Corruption perception index

Ranked 115
out of 175

Human development index

Ranked 79
out of 187

Human development index

Ranked 68
out of 187

Human development index

Ranked 125
out of 187

Sources: IMF; UNDP; WB and Transparency International

Rogers-Harper: In theory auditors should

be able to estimate the amount of billing
hours a commission would require following the applicable rules and standards. But
those estimates are sometimes not entirely
accurate because while conducting an audit
unexpected issues and questions could arise
too. And such issues may require further
investigation beyond the budgeted billing
hours. Its a business at the end of the day,
and the auditor would go ahead to deliver
in time. At that point it all boils down to
ethics; its the professionals call whether
the profit outweighs the risk of signing
off a potentially faulty report which may
eventually compromise the professionals
reputation. In my career as a forensic auditor Ive seen cases of fraud, corruption and
money laundering where the accountant or
the auditor could have done more. Thats
why, for me the future of accountancy lies in
adopting a forensic approach to the business
from the very early stages. An accountant
with a forensic mindset would help prevent
many risks.
TA: Can you elaborate on this idea of a forensic
approach to accounting?
Rogers-Harper: In conversation with colleagues at the WCOA I told them: if you
have a new audit client just ask the management and ownership one question. Ask them
about the particulars of the initial investment
to set up the business. If they dont remember,
you are most probably auditing the financial statements of a shell company. Thats
rife in Latin America. And here comes the
real challenge for the profession a forensic approach to prevent fraud. The motto

12 y January 2015

Sources: IMF; UNDP; WB and Transparency International

of the WCOA is learning from the past to

build a better future for the profession. Lets
look back at recent history. The profession is
under fire. Crime, fraud and corruption have
given the profession a bloody nose. Governments and financial institutions have fallen
apart and dont tell me that only politicians
are to blame. We accountants must stand up
for a stricter approach to business. We need
another mindset and international support.
Accountants are the vigilantes of the worlds
TA: Touching ethical issues, whats your view
on accounting firms rendering consulting and
other non-audit services to audit clients?
Rogers-Harper: Its a tricky one for accountants. The client may have started with the
firm and eventually have grown to the extent
of requiring audited financial statements.
Normally, the conflict could be solved by
changing the partner. But obviously, such a
solution wouldnt work for a forensic audit.
Forensic audits make companies venture into
the lions den. And by the way, big accounting firms in Latin America arent precisely
eager to develop this service line. Ive talked
to partners and they arent keen on being
seen as the police within their industry segments. For example, lets take the banking
industry where the Big Four firms usually
take 90-95% of market share. In the event
of a forensic audit which detects fraud, the
bank would see its dirty laundry aired. That
may have a negative impact also for the auditor that was in charge of the statutory audit.
No one wants to be auditing a bank involved
in corruption or fraud or money laundering.
And at the same time, those audit firms may

Sources: IMF; UNDP; WB and Transparency International

not like to be regarded as the police. As I

said, an industry-wide forensic approach,
not only for auditors but for accountants as
a whole, is the future of the profession.
Soto Snchez: In Costa Rica, the bigger firms
dont want to turn down any work opportunity. Therefore the firms different departments of tax, audit, consulting, etc. would
provide the services to the same client perhaps at the expense of professional independence. And as I said before, smaller firms
wouldnt be able to compete, due to the lack
of adequate and affordable CPD courses.
But theres another problem the reluctance
to enrol for courses because of the irrational
fear of what people will say. Unfortunately,
this prejudice exists within the profession;
the misleading pride of assuming that if you
need a course its because youre not a good
enough professional. And to make things
worse, some of those who could afford a
course would hesitate to sign up for it if its
during out of office hours or on a weekend.
TA: How is the wider accounting and corporate governance culture in Latin America? For
example, would companies value a voluntary
audit, undertake internal audits or get management accountants on board?
Soto Snchez: I think audit, and accounting
too, is regarded as an obligation, a burden,
or a cost. Many companies still just want the
cheapest accountant, regardless of the quality delivered. They just simply want to comply with whatever the minimum regulatory
requirements in their countries are.
Rogers-Harpers: The evidence of what Isidro


The Accountant



Unemployment rate




GDP growth
GDP per capita (PPP)
Foreign direct investment (net inflows)

2.3% of GDP



Current account balance

-8.7% of GDP

Budget balance

-2.7% of GDP

Corruption perception index

Ranked 94
out of 175

Human development index

Ranked 65
out of 187

Sources: IMF; UNDP; WB and Transparency International

is saying is that companies are increasingly

outsourcing their accounting needs. Companies underestimate to some extent the role
of the accountants in business. Outsourcing means one less headache for them. But
accountants can be key leaders within companies. Instead, we have enclosed ourselves
within the walls of numbers, rules and standards. The accountant needs to get involved in
IT, marketing, strategy and several fronts of
the business for his role to be fully harnessed.
Thats what global management accounting
credentials are showing.
Lpez Cordn: Besides better training and
ethics, our profession would benefit from
stricter processes and monitoring tools
to review the quality of accounting firms
and practices. In Guatemala we are implementing quality assurance systems. This is
intended to review accounting firms every
three years, regardless of their size and not
only for audit work. If the review observed
irregularities, there could be sanctions. And
governments have also stiffened measures
to fight money laundering. For example, in
Guatemala accountants are obliged to report
to the police any client we suspect could be
involved in such wrongdoing. Otherwise
we could face prison terms ourselves. The
market and the economy will continue putting pressure on us. So we are better off selfregulating and self-controlling our profession, being ahead of the game.
TA: Umberto, have the criticisms about Brazils
FIFA World Cup last year damaged the profession in any way?
Tedeschi: Well, the country had other

rather more urgent needs than building

football stadia to be used for four games in
a tournament. The World Cup could have
been organised spending much less money
thats the core criticism. Instead, those
very resources could have been allocated
to other industries, or invested in improving the health or education systems. Fifty
years ago Brazil was considered the country of the future, and so it is, still today.
Now touching on your previous question
about the accounting culture, I think enhancing compliance capabilities is the best measure to prevent fraud, and therefore avoid
going through a forensic audit. Whenever
theres a threat, theres also an opportunity.
In Brazil, accountants are considered, so to
speak, the family doctors of companies. And
many companies are literally born, grow up
and die with the same accountants. There
is an opportunity for the profession to harness this loyalty by developing compliance

For me the future of

accountancy lies in adopting
a forensic approach to the
business from the very early
stages. An accountant with
a forensic mind-set would
help prevent many risks,
work as a means to prepare for the audit or
prevent fraud and forensic audits.
TA: Have you ever felt patronised by foreign
professions reputed to be more advanced?
Rogers-Harpers: In all honesty, quite the
contrary in my case. Perhaps its because
Ive specialised in a particular niche in the
market. But its true; almost invariably what
comes from abroad is seen as the last Coke
in the desert. Nonetheless, there are ambitious independent professionals emerging
from Latin America. The four of us are independent practitioners who have attended
this congress with little or no support from
any organisation, I suspect. We are here at
our own expenses, giving our time. We represent ourselves in this forum, but indirectly
our respective countries too. There used
to be more delegates from Latin American
countries. Yet the professional of the future
is a global accountant. We need support


from top to bottom if we want to achieve an

international profile.
TA: Global accounting bodies would be interested in having more presence in Latin America. But for some reason its hard for them to
enter those countries. Why?
Lpez Cordn: In 2007 we started a project,
together with Isidro, to build relationships
with the French profession, aiming at creating perhaps a federation for Central America
some years down the line. No doubt, culture and language are sometimes obstacles
for both parties, but nothing that cant be
overcome with willpower. In fact both professional bodies, the Guatemalan and the
French, managed to sign an agreement in
October 2013 to cooperate in the implementation of quality assurance systems in national firms I previously mentioned. Despite the
difficulties, this agreement proves that there
is always a way. I would recommend to other
global professional bodies to be less conservative if they are interested in Latin America.
Accountancy is one of the most internationalised professions; its a matter of really
wanting to get closer between countries. Im
sure we have more things in common than
differences between us.
TA: Andrew Harding from the Chartered Institute of Management Accountants told us once
that CIMA was very keen on Brazil, yet we
guess its not easy to enter such a big country?
Tedeschi: As I said, Brazil has been the country of the future for a very long time. Companies may have an insufficient knowledge
of the country. And, as I said, a ratio of
500,000 registered accountants for a population of 200 million people.
Rogers-Harpers: How many accountants are
not registered? There should be millions....
Tedeschi: I dont know, but in any case,
accountants in Brazil need to be registered
in order to practice the profession, otherwise
you are out. Thats one of the focuses of the
CFC to ensure accountants have the mandatory licence to practise. Now, my criticism
of Latin America countries is that we arent
united enough. There were some initiatives,
such as Mercosur and others to create a trading bloc, but it hasnt gone further. Abroad
we are seen more as a project for the future,

January 2015 y 13


The Accountant



Top earners

Top employers
Revenue (BRLm)

Audit & Accounting (%)




















Grant Thornton



Grant Thornton















Baker Tilly International



Baker Tilly International



RSM International



Moore Stephens International




Moore Stephens International



Nexia International



Source: International Accounting Bulletin; Data as of firms respective 2013 year-ends

than a current option. We should do our

homework first. In Brazil theres huge potential. The tax authority is trying to put some
order into key aspects such as money laundering and tax avoidance. A law has recently
been passed whereby all cash transactions in
excess of BRL50,000 ($19,000) have to be
reported to the authorities. And an e-invoice
system has been enforced, so that all invoices
paid and issued by any company can be verified by the tax authorities.
Soto Snchez: A note regarding international organisations. In Latin America, for
example, we have the Inter-American Association of Accounting (AIC). But to what
extent is this or other organisations making
a difference? Whats the benefit for national
accounting bodies who are members and
support the AIC? And when it comes to
IFAC, I do miss representatives of independent and smaller firms at higher levels in executive committees.
TA: In Latin America you have also GLENIFF
(Group of Latin-American Accounting Standard Setters) and CILEA (the Committee for
Integration of Latino, Europe and America),
so what about them?
Rogers-Harpers: They work as clubs. National institutes are normally part of one of those
clubs. It follows those dynamics the members of one club hang out in one corner and
the members of the other club in the opposite
one. Im missing the synergies between them.
And regarding IFAC, I have just shared with
them that Id like the International Institute
of Forensic Auditors to be considered for
membership. They said they have to think

14 y January 2015

about it as IFAC membership is for accounting institutes. However, take into account
that theres a new profession, forensic audit,
which is being led by accountants. In general
our profession, and in particular international organisations, need to be more open.
We need to play them some tango or samba
and see if they become more sociable.
TA: Talking of which, in Europe the profession has to face the music and implement the
reform of the audit market, including mandatory rotation.

audit quality in Europe has been closely followed.

Soto Snchez: In Costa Rica we have mandatory firm rotation every three years for the
audits of financial institutions. Companies
then have to choose from a list of qualified
audit firms that meet the requirement to
conduct such audits. More than audit rotation, I think the priority in Costa Rica would
be sitting exams every three or five years to
keep the qualifications of our accountants

Rogers-Harper: In Panama there is already

mandatory rotation for certain industries.
For instance, within the financial industry
its every four years. The idea is to bring a
fresh pair of eyes onboard. But I dont think
that rotation solves any problem. The current audit firm has a wider knowledge of the
company than any other firm. Im dealing
with a fraud case where audit firms rotated
every four years. Three firms in total dealt
with the audits. So I would ask the lawmaker in Brussels, whats the point? This policy
is doomed to fail. All audit firms follow the
same rules. And you know how hard it is to
get clients? You have to play golf, hang out
at the social club, and that kind of stuff. As I
said, what matters is a forensic approach to
the profession at all levels. We would only
change the world if auditors and accountants really challenge their clients. Otherwise,
mandatory rotation could just mean bringing in one yes man after another.

Tedeschi: I think one of the key questions

is the moral hazard. Technically, the audit
will be performed according to the amount
of hours budgeted for the commission. But
if the auditor sees something that requires
further investigation, that should be tackled
or flagged up. However as it goes off budget,
the auditor could consider that its not the
scope of the audit work and may carry on
with the audit. The case of Petrobras and
PwC reflects this issue; the auditor didnt
want to certify the companys Q3 financial
statements due to an alleged scandal involving a kickback scheme. In Brazil since 2014
all companies, no matter their size, have
to hand a statement to their accountants
expressing that they are not aware of any
fraud or irregularity within the company.

Lpez Cordn: In Guatemala it isnt compulsory by law. Theres just rotation of the audit
partner although the wider debate about

Tedeschi: Yes for all companies, even the

smallest ones.

Rogers-Harper: Is it for all companies? Thats

really an improvement that should be highlighted.

Translated by Carlos Martin Tornero


Clean slate
after the embargo
A man pays tribute to Persian poet Hafez at his tomb in Shiraz. Photo by Vincent Huck

International sanctions eroding business activity, the exodus of international firms, and lobby groups
calling for sanctions to be stepped up a notch. Despite the adverse conditions, the Iranian profession
is proving to be resilient while everyone keeps an eye on the nuclear negotiating table. Carlos Martin
Tornero investigates

tanding on the sidelines at Romes

World Congress of Accountants
(WCOA), this publication had the
opportunity to meet representatives
of the Iranian delegation for lengthy discussions.
Amid the WCOAs busy schedule, a group
of national practitioners shared with The
Accountant exclusive insights into what
it means being an accountant in a country
strangled by economic sanctions and whose
accountancy industry was forced to sever ties
with international counterparts not so long
One of the Iranian practitioners who met
with us is Houshang Khastoui, a veteran
auditor and co-founder of the Iranian Association of Certified Public Accountants or
Khastoui jokes about how similar the
acronym of its US equivalent is, the American Institute of Certified Public Accountants
(AICPA), when said in the same breath.
IACPA council vice-chair and chairman of
an investment advisory firm, Saeed Jamshidi
Fard, spares a thought for the Iranian professionals who miss, he says, the exchange
with international colleagues, including the
Americans. Globalism means removing
barriers and obstacles. Knowledge and scientific exchange shouldnt be restricted by the
political environment, Jamshidi Fard says.
Khastoui elaborates: International standards means globalisation. Sanctions are
against IFRS. What does globalisation mean
in such circumstances?
Amir Pooryanasab, a member of the Iranian Institute of Certified Accountants (IICA)
and editor of the IICA official magazine
(Hesabdar or Accountant in Farsi), says the
Iranian profession has influenced the govern-


At a glance

ment to adopt IFRS as a model for national

Abbas Vafadar, an IACPA council member and managing director of Iranian firm
Azmoon Pardaz, notes that the Iranian securities exchange organisation has agreed that
listed companies should be allowed to use
Jamshidi Fard adds: Its voluntary during the next two years. After that period it
becomes mandatory for them. But IFRS are
translated [into Farsi] and well-known in
A circular from the Tehran Stock
Exchange (TSE) seen by The Accountant
states that from the Iranian year 1395, or
2016 in the Gregorian calendar, listed companies must prepare IFRS-compliant financial statements. However a spokesperson for
the TSE tells this magazine that the official
date is 2017, quoting the Iranian Capital
Market Authority.

0.8% of GDP
1.9% of GDP
-4% of GDP
Ranked 136th out of 175
Ranked 75th out of 187
Source: The Accountant, IMF estimates, UNDP, WB and
Transparency International

International relationships
Inevitably, one vital issue to understand
Irans modern accounting industry emerges
during the conversation. In April 2010 the
last Big Four firm with a presence in the
country, KPMG, severed ties with its affiliated national firm Bayat Rayan.
The exodus steadily continued, reaching
a tipping point in 2013 when Nexia, Grant
Thornton International, RSM International
and Crowe Horwath International followed
Behind the exodus has been a lobby
campaign by the US pressure group United
Against Nuclear Iran (UANI). By naming
and shaming companies with any commercial relationship with Iran, UANI targets the
countrys economic lifeblood as a means to

January 2015 y 15


The Accountant


Total membership: 2,106




94.5 % vs 5.5%


Active membership: 1,460



94.4% vs 5.6%

Audit firms: 266








Source: IACPA; Notes: 27 firms havent been assesed yet; The other
professional body, the IICA, has 6,502 members (598 female) . At the
time of publication the IICA didnt participate in this survey

counteract its alleged nuclear threat.

Our interviewees remember this episode
well, so we cant afford to miss the opportunity of asking them about the status of their
relationships with international firms.
Vafadar says there are some links, yet not
formal or direct. Asked if he can name any
names he prefers to be discreet, but says: A
lot of Iranian firms have informal relationships with big firms. Its a form of cooperation between professionals. For example, if
one of their clients needs to find a firm in
Iran to do some work, Vafadar says.
Jamshidi Fard adds that the need for referrals comes not just from the clients of big
international accounting firms but also from
smaller ones, as the majority of companies in
Iran are SMEs.
He adds that the door is open for all types
of international firms and explains that those
referrals sometimes go through the local
institutes, which both have a certain amount
of experience in international affairs.
Our discussion in Rome continues, joined
by IICA president Ghasem Fakharian and
general secretary Mohsen Ghasemi, this time
focusing on the profession and the interest
of young people in pursuing a career in
According to the Iranian delegates at the
WCOA, its one of the most popular and
sought-after degrees at universities with
250,000 students currently, higher than law
and medicine due to its low unemployment
The audit track proves to be in high
demand too, despite being granted a licence
requiring preparation for a tough exam.
Approximately 6,000 candidates, who must
be IACPA members with at least six years
experience, take the test every year. Just 100
of them pass, according to Vafadar.
A minimum of three licensed IACPA
members can set up an audit firm. Currently

16 y January 2015

As a result, the parliament passed anoththere are 266 firms which are reviewed on a
er law establishing the IACPA, which was
yearly basis by the IACPA. After this quality
granted power to supervise audit firms of
control, firms are ranked in four categories:
CPAs and to develop the Iranian profession.
A, B, C and D, with A reflecting the highBut the abundance of state-owned busiest quality. The review process could involve
nesses in Irans economy still remains a challosing the registration if the outcome is
lenge for the profession too, Vafadar says,
because the demand for its services would be
As of January 2015, there were 69 firms
greater with a more dynamic private sector.
ranked A; 121 B-ranked firms; 41 C-ranked
Another question we put forward, on the
firms and eight D-ranked firms. The remainback of the ongoing EU audit reform impleing 27 are new firms which havent been
mentation, is if there is mandatory audit
reviewed by the IACPA yet.
rotation and if audit firms can render other
Despite not being able to provide a rankservices.
ing by revenue or income, delegates state
As Vafadar explains listed companies
that theres no gap in the market between
the first four players and the following midmust rotate auditors every four years and
tier peers as in other countries.
no other services to the audited company
Vafadar points out that size is not that
can be provided. Auditors themselves are
important and all reviewed firms should be
not allowed to take other jobs, apart from
able to uphold good standards. However, the
teaching at university.
differences in quality are reflected by those
A to D rankings, and there is increasing speInternational perspective
cialisation of firms by sectors or industries.
The conversation with the Iranian delegaAt this point in the conversation, delegates
tion at the WCOA left a lasting impression
point out that one of the issues Iran faces is
on The Accountants editorial team. Eager
still a weak private sector as the majority of
to obtain further insight and analysis, this
businesses are state-owned.
publication contacted stakeholders from the
This is an issue for the accounting profesglobal accounting industry.
sion as well, Vafadar says, looking back to
We focus on two main issues: what impact
the 1979 revolution to offer perspective on
the sanctions may have had in the Iranian
the matter. In the aftermath of the Iranian
professions fabric. And whether or not,
Revolution, businesses were nationalised,
despite the embargo, theres interest in the
international accounting firms left the counIranian profession and market.
try and the local ones had to close because
The Association of Chartered Certified
of a drop in demand for their services. Three
Public Accountants (ACCA) head of Northgovernmental organisations were established
ern Gulf Anis Motorwala, who has responto audit the recently-created state-owned
sibility for Iran, recently travelled to the
business sector.
Four years later, in 1983, a law was
ACCA doesnt have an office for its scarce
passed to allow the merger of the three. By
Iranian membership about 15 profes1987, the resulting body, called the
sionals. However it counts 350
Audit Organisation of Iran, was
students, who can take ACCA
also responsible for setting
computer exams in an Iranaccounting and auditing
based examination centre.
Motorwala predicts a
Its clear that having all
higher demand for skilled
those responsibilities in the
financial professionals if
hands of one entity and not
the sanctions and the enviinvolving stakeholders in the
ronment eases up in the near
Abbas Vafadar
process of standard-setting is not
future, as Iran will start interideal, Vafadar notes.
acting in international markets.
As such in the nineties, shortly after the
These skills can improve. For examwar with Iraq, the government started libple, banking operations are basic in certain
eralising the economy. And in Irans first
aspects. Banks are lending, based on the balfive-year development plan, Vafadar says,
ance sheet and the income statements, but
the need for private sector audit firms was
they dont look at cash flow, Motorwala


The Accountant

Nonetheless the goal to be IFRS-compliant

by 2017 is a powerful indicator for Motorwala which shows the aspirations of the Iranian accounting profession and the appetite
for achieving professional qualifications.
Theres a strong culture of education in
Iran and accounting has a large intake at
the university undergraduate level. More
than 200,000 students enter the accounting stream every year. Some of the private
universities are very open and talk about
aligning their curricula according to ACCAs
programme, he says.
According to Motorwala, many stakeholders within the banking sector are already
pushing to improve the financial capabilities
of the staff and are investing in capacity
A private bank, Saman Bank, has created
an internal academy and a university. And
another financial institution, Bank Pasagard,
is a significant ACCA employer and has its
own computer exam centre
Motorwala points out another relevant
factor for the professions development, if
conditions for doing business improve the
Iranian diaspora.
If markets open up, a lot of Englishspeaking Iranians living abroad may consider relocating to Iran. I not only heard this, I
confirmed it on the ground. Thats a strong
sign, from our perspective, to look at, he
From his recent visit to Iran, Motorwala
appreciates some interesting developments.
For example, big players from China and the
former-Soviet area, such as the Savola Group
and other big family businesses, already have
a presence in the country.
Asked whether he believes international
accounting firms would be interested in rediscovering Irans opportunities, Motorwala
perceives that everybody is watching very
Even without lifting the sanctions, if you
go and visit and compare what you hear
about Iran and what you actually see, they
are two different economies. Inflation is a
big issue but its a quite operational economy
despite the challenges, Motorwala says.
And regarding what impact the sanctions
and long-lasting pressure from lobby groups
such as UANI have made to the Iranian
accounting industry, Motorwala shares his
personal views: It may have made local
firms stronger, because they have learnt to
find ways out. They might have become sav-




Weapon stockpile

View of the International Campaign to Abolish Nuclear Weapons:



It spends more on its nuclear arsenal than all other countries combined.

United States


It is investing heavily in the modernisation of its warheads and delivery




Most of its nuclear warheads are deployed on submarines equipped with

M45 and M51 missiles



It does not appear to be increasing the size of its arsenal.

United Kingdom


It is considering whether to overhaul its nuclear forces or disarm.



It has increased the size of its nuclear arsenal considerably in recent years.



It developed nuclear weapons in breach of non-proliferation commitments.



It has a policy of ambiguity in relation to its nuclear arsenal, neither

confirming nor denying its existence.

North Korea


It is not clear whether it has the capability to deliver them.

Source: Federation of American Scientists, 2014 and the International Campaign to Abolish Nuclear Weapons

vier or take a bigger share of the business.

We question HLB Modaberan Auditing
Services partner Nasrollah Saleh, one of the
few Iranian firms that keeps an international affiliation. To what extent has the exit of
international accounting firms damaged the
Professional ethics have improved. We
are more or less adopting international
standards, Saleh says. The IICA issues
standards, the IACPA reviews audit firms
yearly. To be honest, as far as the professional practice is concerned were improving.
We point out that perhaps one of his colleagues, with no international affiliation,
may not share his analysis.
When international firms are practising
somewhere, they have their own manuals,
procedures and practices, he says. This
could help with the training and with international regulation. But Im practising in
Iran, where accounting firms are investigated and supervised, using defined standards which have been issued by the national
Saleh notes that the work of the two institutes, combined with the securities exchange
organisation has been crucial in improving
the Iranian profession, particularly in the
past 15 years.
For him, therefore, while sanctions
have affected the business activity of the
country, a factor that may put off international accounting firms from entering or reentering Iran, the professional practice hasnt
been hurt that much.
He explains that even when there were
internationally affiliated firms in Iran, they
were registered and worked under the local
name. Before they left, local firms were
auditing and issuing audit reports under

their names, Saleh says. When they left,

more or less nothing changed. The same
firms continued their auditing.
Asked if despite the embargo there are offthe-radar talks or communication between
Iranian professionals and international
firms, hes not sure about it, but adds that
some cooperation might have been needed.
In that respect Alliott Group chief executive James Hickey says that just in the last
few months his association has registered
two needs for referrals from clients which
have got business in Iran. One of them was
from a US Alliott member firm whose client
was looking to sell commercial properties in
Hickey acknowledges the huge potential,
not only of the country but the whole region:
We have to be there. The Iraqs, the Irans
and other places perhaps are not in peoples
bucket lists. But any international group has
to be there, he says.
Mentioning the pressure suffered by the
international accounting firms before leaving the country, some of them with government contracts in the US, Hickey notes a big
difference between being a network and an
He says at Alliott all members remain
totally independent from one another. I
can understand that in the case of the Big
Four and larger networks, that pressure can
influence decisions. But as an association we
dont chase as a group government work.
We are looking to service the entrepreneurial
mid-tier SME businesses, Hickey says.
As he explains those referrals dont
involve fee sharing. Its typically the referring firm looking for a peer in the country
which would take care of its client. Once
introduced, the client would take over the

January 2015 y 17


In post-revolutionary Islamic Iran the
Supreme Leader Ayatollah Ali Khamenei is the ultimate ruler of the country, elected for life by a religious elite.
There are presidential and par lia ment ar y elections ever y four years,
but the Supreme Leader has the f inal
decision on all crucial public af fairs.
Candidates running for presidential and
legislative elections are subject to a vetting
process carried out by the Guardian Council.
According to a BBC Monitorings report
about the past elections, this process
aims at checking the piety and loyalty
to the Islamic Republic of candidates. Of
the total 686 candidates who registered,
only eight of them were approved by the
Guardians Council, 30 of them women.
As the BBC also reported there is ambiguity in
Irans constitution about the participation of
women in presidential elections. The council
interprets that law only allow women to run as
members of parliament, not for president. <
running of that transaction and would usually invoice the referred firm.
Hickey says his association hasnt got,
at the moment, any firm knocking on the
door to join, but Alliott is very keen on
Iran. Were clear about the relationship
that we have with our members in their
respective countries. As long as theres transparency in what people are trying to do and
these are legitimate businesses looking to do
legitimate work, were there to support them
on an independent basis.
The Accountant contacted a large number
of international firms and in the majority
of cases, the interest in entering the country
if sanctions are lifted, is indicative of Irans
accounting industry potential.
One of those is Crowe Horwath International which before its departure from
Iran in 2013 was represented by Hoshiyar
Behmand & Co, a firm that had been part of
a Big Four in the past.
Crowe Horwath International regional
director for EMEA Bernard Delomnie says
the network was active in Iran working both
for domestic and international companies,
but always within the limits of the interna-

18 y January 2015

The Accountant


Id like to think that those

accounting firms left on their
own volition. You cant do
any serious business in Iran
without the involvement, either
direct or tacit, of the Islamic
Revolutionary Guard Corps,
Mark Wallace, UANI

tional embargo.
Crowe Horwath International was one of
the international firms that were put under
pressure by the US lobby group UANI. Delomnie says that when they received the letters from UANI asking them to leave Iran,
the network reviewed the situation with its
external legal advisers, who confirmed that
the international firm was not infringing the
However, after discussing with our Iranian colleagues, we agreed that it was better
to part company for the time being and we
made our decision accordingly in the common interest of everybody, Delomnie says.
He adds: We hope that the political situation will evolve positively and that we will
be able to readmit our previous member firm
to our network.
However, if the international accounting
firms werent doing anything illegal why
didnt they stand up and fight back, uniting
against the challenge posed by lobby groups
such as UANI?
If the demands of those lobby groups were
beyond what could be considered reasonable, why wasnt there a united voice from
the profession defending the legitimate right
to have a member firm in Iran?
Didnt UANIs challenge represent one of
those occasions when the global profession
should put aside industry squabbles and
respond in unison?
UANI chief executive Mark Wallace tells
The Accountant: Certainly, we were an
encouraging force, but Id like to think that
those accountancy firms took what I see as a
wise decision on their own volition.
Wallace, a former UN ambassador,
describes UANIs lobby work as a hard soft
power capable of affecting foreign policy
where governments cant or wont act. Different sources and media reports link UANI
with Jewish and pro-Israel groups.

The lobby group was created in 2008

when Wallace was friends with the late US
diplomat Richard Holbrook, former CIA
director Jim Woolsey and diplomat Dennis
Ross among others.
The founders shared the strategy that by
targeting the vulnerabilities of Irans economy, foreign policy could be influenced, he
says, without considering American boots on
the ground.
Wallace says UANI has focused on every
important business sector in Iran, from the
oil industry, to the automobile sector, to the
shipping industry.
Weve tried to run the gamut, and in
many ways peel the onion of economic support, layer by layer, he says. And look, I
think accounting firms were an important
component of that. Obviously any largescale project, infrastructure for example, is
under the control of the Islamic Revolutionary Guard Corps (IRGC), Wallace says.
He continues: Those big projects are
very difficult to finance and operate without financial statements, audit and serious
accountancy. So hopefully these firms saw
their responsibility in aiding and abetting the
sustenance of that economy, and that they
didnt want to be participating in this.
Asked if he doesnt see a strong accountancy profession as a driver for change, transparency in governments finances, as well as
a force capable of strengthening democracy,
Wallace says that wouldnt be the case in
You cant do any serious business without the involvement, either direct or tacit, of
the IRGC. Their revolutionary cronies have
been insinuated into the economic levels of
power in order to dominate society, prevent
any change and engage in horrible human
rights violations against its own people.
Asked if UANIs pressure on international
accounting firms could backfire in the sense
of radicalising people in Iran, instead of


The Accountant

The relationship between Iranian

audit firms and the international ones
have started, but there have been no
official agreements. Western countries
should be realistic and respect Irans
right in the international stage,
Abbas Vafadar, Iranian CPA firm
Azmoon Pardaz
supporting entrepreneurial businessmen who
would enhance the private sector, Wallace says:
The best example is that Iran was operating for
many years without a sanctions environment.
Those accounting firms were there for a long
time, profiting under the auspices of the Ayatollah and [during that time] didnt help the Iranian
people to stand up to the dictatorial theocracy
they live under.
In Irans 2013 presidential election, a moderate
and well-educated candidate Hassan Rouhani,
who gathered the pro-reform votes, was elected and succeeded radical hardliner Mahmoud
Ahmadinejad. Nonetheless, Wallace remains
sceptical about the potential for change that
President Rouhani can bring out.
He was able to be elected in a non-democratic
election, lets be serious. He was one of six handpicked people [originally eight, two withdrew]
who were allowed to run by the Ayatollah and
the Guardian Council. But he managed to present
himself as a reformer who would ease sanctions,
Wallace says.
Rouhani is a very charismatic friendly looking man, but he harbours the same ideologies as
Ahmadinejad and, most importantly, the Ayatollah, who is obviously the Supreme Leader of
Wallace says a vigilant eye is kept on all campaigns launched by UANI, including the one targeting accounting firms: If the firms are engaging in support activities to Iranian practitioners
and we found out about it, I think the risk to
those firms is so monumental.
He adds that many accounting firms do enormous amounts of work in the US, and otherwise
they would be in a very vulnerable position: We
would bring pressure to ensure that they didnt
have those opportunities in the US and the US
government. From a business decision [perspective], if [firms] had a choice of doing business in
the US or doing business in Iran, they would be a
little bit foolish not to take the US.
One factor that needs to be considered regarding UANIs naming and shaming campaign is
to what extent could what the international

accounting firms were doing be considered illegal. Would paying membership fees to an international network constitute any trading activity
at all?
On the other hand, international accounting
networks are typically formed by independent
member firms. One of those member firms, based
in a country where trading with Iran is not forbidden, could technically establish contact with
Iranian peers.
Therefore, whats really been achieved by
UANIs campaign against accounting firms? If,
as many practitioners have argued, the Iranian
profession has become more resilient as a result,
then UANIs campaign could have backfired.
If professional collaboration between colleagues and former colleagues is hypothetically
possible, either through referrals or simple networking, then is not UANIs campaign doomed
to fail?
Moreover, it wouldnt be exaggerating to say
that international accounting firms might be
queuing up to enter (or re-enter) Iran, judging by
the words of IACPAs Vafadar: Considering the
positive signs from the result of sanctions negotiations, the relationships between Iranian audit
firms and the international ones have started, but
there have been no official agreements between
He doesnt share, however, the analysis
expressed by his colleague at HLB Modaberan
Auditing Services, partner Nasrollah Saleh.
For Vafadar, the exodus of international firms
has prevented Iranian firms from accessing up-todate methodology, knowledge and best practice,
particularly first-class advisory capabilities which
are one the highest sources of revenue for firms
globally, he says.
Vafadar also regrets that the sanctions do not
allow Iranian companies to list on foreign stock
exchanges, which consequently hinders the aspirations of Iranian audit firms to enter the global
market of professional services. And internally
the embargo has reduced demand. <


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Carlos Martin Tornero, The Accountant Editor:
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2014 State Street UK Institutional Press Awards

January 2015 y 19


140 years