- 1. Lessons Learned inAccounting andFinancial
TransparencyReforms:A Regional Perspective Henri Fortin
2. Background World Banks engagement in strengthening corporate
financial reporting
- Improving accounting and accountability is part of the
development agenda
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- Growth agenda: business climate conducive to investment; better
access to finance; economic integration with major trading
partners
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- Governance agenda: higher accountability of state-owned
enterprises; improved system of corporate tax collection
- ROSC A&A program since 2001
3. ROSC: Accounting & Auditing
- Insolvency and Creditor Rights
- Monetary & Financial Policy Transparency
- Securities Market Regulation
- Anti-Money Laundering - CFT
A&A Strong A&A and financial sector regulation/
supervision are mutually supportive Financial sector standards
Transparency standards Market integrity standards AA-CG
interrelated 4.
- Consultation with the authorities
- Tailoring the methodology to the country
ROSC Accounting & Auditing Overall approach, main activities
Initiation Diagnostic ROSC Report Country Action Plan
Implementation
- Diagnostic Tool, perception survey, academia survey
- Due diligence, review of financial statements
- Discussed with authorities, stakeholders before its
finalization
- Widely disseminated in the country (normally published)
- WB role is to assist in drawing the action plan. The
authorities are to prepare it
5.
- Measures to improve corporate financial reporting included in
WB operations
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- Technical assistance loans/credits
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- Development policy lending
- Grants to support institutional strengthening and
implementation of new regulations
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- Institutional Development Fund: supreme audit institutions or
accounting professional bodies
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- FIRST Initiative, DFID LAMIT, etc.
- Linkage with MIF-FOMIN (more information to come)
Implementation phase WBs engagement 6. ROSC A&A Latin
America and the Caribbean X : report published 7. What are some of
the lessons learned? 8. Solving the A&A puzzle A roadmap for
reform and capacity development
- Corporate financial reporting is a puzzle of
Enforcement Education & Training A&Aprofession Laws,
regulations and standards
- Reforms need to be gradual and properly sequenced
- Capacity development activities need to be included
- Improved A&A practices require a holistic approach several
inter-related issues need to be addressed
9. Collaborative approaches, Outreach,Stakeholder
involvement
- Reforms should be based on collaborative arrangements between
stakeholders
- Synergies need to be drawn from closer collaboration (e.g. work
of external auditors and supervision work of financial sector
regulators)
Government Tax authorities Company registrar Financial sector
supervisor(s) Commercial banks Capital markets World Bank Other
partners Accounting Oversight body Corporate sector (enterprises)
Accounting- Audit profession Academia Reporting Monitoring
Educating 10. Recognizing varying levels ofpublic accountability in
the corporate sector
- SMEs are often subjected to stringent standards
- Conversely very large companies may be subject to relatively
lenient requirements
PublicInterest Entities SMEs Micro-enterprises Listed companies,
large SOEs, banks, insurance companies, etc. Large private
non-listed companies, and other SOEs Full IFRS L ocal GAAP (or s
implified IFRS) Limited or no F/Robligations Degree of corporate
accountability Category of company Financial reporting standards
Simplified IFRS (or local GAAP) Laws andregulationsshould be
adapted toreflect these varyingdegrees of accountability 11.
A&A Standards TheAdopt v. Adaptdilemma(1/2)
- Advantages ofadoptingIFRS (ISA)
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- Stronger recognition than local GAAP (GAAS)
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- Standard-setters efforts can be focused on dissemination,
training, etc.
- Advantages ofadaptingIFRS (ISA)
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- Country idiosyncrasies better reflected
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- IFRS (ISA) too complex for the country (?)
12. A&A Standards TheAdopt v. Adaptdilemma(2/2)
- Recommended approach for accounting standards
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- For public interest entities
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- Set IFRS adoption as ultimate objective
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- Establish procedures for reviewing draft IFRSs
-
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- Design plan for an orderly transition
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- Provide for a sufficient transition period
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- Consider adopting SME IFRS
-
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- Alternative: improve/simplify existing GAAP
- Auditing standards: ISA adoption
13. Regional cooperation
- Some achievements to date, but impact limited
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- Consultation among financial sector regulators
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- Accounting profession: regional seminars, contacts, exchange of
views
- Need for stronger cooperation at regional level
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- Translations of international standards in Spanish
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- Comments on exposure drafts
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- Common arrangements for regulating of the audit function
- LAC can also learn from other Regions
14. Further information
- www.worldbank.org/ifa/rosc_aa.html