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Accountancy standards must be beyond reproach.
The economic and financial crisis which began in 1998 in certain Asian countries and spread to other regions of the world, as well as recent spectacular bankruptcy cases in the United States, underlined the need for reliable and transparent accounting and financial reporting to support sound decision-making by investors, lenders and regulatory authorities.
Accounting standards are essential to the efficient function
ing of the economy because decisions about the allocation of resources/investment rely on credible, concise, transparent, easily comparable and understandable financial information about the operations and financial position of companies. In today's globalized economy, business decision makers are becoming more vocal about the universal application of identical accounting principles which would be a major contribution to creating better and more easily comparable standards of financial reporting. ( ICC/Ifo pol l)
National accounting standards should be in conformity with international accounting and financial reporting standards established by the International Accounting Standards Board . Many countries already endorse these International Accounting Standards as their own either without amendment or with minor additions or deletions. For assistance in designing new standards or improving existing ones, countries can turn to international initiatives such as the Financial Stability Forum and the International Forum on Accountancy Development .
In addition to designing national accounting practices according to internationally accepted standards, it is crucial to make sure that the enterprises operating within the jurisdiction comply with the established standards. Failure to enforce compliance with international standards will only raise the potential for problems.
There is a broad consensus on the following basic principles:
Companies preparing financial statements:
- Management should not use legitimate or illegitimate accounting strategies to artificially enhance their reported earnings
- Companies should not disclose only information on financial performance, but the intangibles and nonfinancial information that matter most to value creation and sound decision-making;
Auditors:
- The auditing function should be performed by a qualified and an independent entity
- Auditors should alert accounting and auditing standard setters about emerging techniques of dubious propriety
- National professional accounting bodies should ensure that their members, as auditors of financial statements, comply with applicable professional standards;
Regulators (government supervisory authority or self-regulatory organization):
- Regulators should properly monitor accounting and disclosure requirements
- Regulators should set appropriate punishment for non-compliance and violation of rules.
Useful links:
International Accounting Standards Board - IASB
Fi
nancial Stability Forum
International Forum on Accountancy Development
International Federation of Accountants
Association of Chartered Certified Accountants
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