Discussion of the accounting and auditing professions takes on a special character, especially in these conditions that these professions suffer from at the level of the Arab nation, for many reasons. Also, discussing accounting gains a particular significance in these circumstances in which many questions are raised on the mistakes and falsifications
that occurred in some closed companies and what the legal responsibility is for auditors in this regard.
These and various other questions which were on peoples’ minds, were carried by “Alanba’a” to one of the Arab pioneers of the auditing profession who tirelessly seeks to develop the profession and strengthen its standing and level internationally. Accordingly, there was a three hour interview with Mr. Talal Abu-Ghazaleh who appeared –despite all the aforementioned- very optimistic of the future.
We asked him many questions, one of which was related to what was published on tampering with the Arab Monetary Fund. His response was the first direct answer that surfaced on this issue. Following is the interview:
Beginning, I asked him a question relating to what was said about the Arab Society of Certified Accountants (ASCA) since he was its chairman. He said:
The uproar that was raised had two aspects to it –positive and negative- and both of these are useful and productive. The society, with all the professional leaders that it has as members, is at such a level of maturity to expect these types of situations and deal with them positively.
In this regard, I would like to point out to the interview where my colleague Dr. Issam Miri, the Secretary-General of the society, responded to all the inquiries raised about the society and what was raised as far as positive and negative points are concerned, and clarified this situation adequately.
Suffice to say that our definite conviction is that attitudes will transform into support more day by day as a result of understanding the goals and purposes of the society, and the efforts we exert.
As some intellectuals have stated, most problems of the world result from a lack of understanding and communication and not in a lack of the basics.
At the society, we believe that we have a responsibility to clarify our position and the situation that we are in, and if we fall short on this, we apologize.
We believe that the General Federation of Arab Accountants and Auditors, which is an aggregate of Arab unions and societies -where their creation is permissible- , will support the society as will the rest of these aforementioned organizations. This is because these entities are motivated by the welfare of the profession, so they will no doubt support a venture such as the society that aims to serve the vocation and has no conflict of interest with those societies and unions or their goals.
Objections to my withdrawal from the federation are expected
The objection of the federation to the society –after I withdrew from the federation to completely avail myself to work in the society- is a temporary objection in this transitory phase.
Many member societies of the federation declared their support for ASCA.
ASCA is a professional knowledge establishment and not a union. It also doesn’t claim to represent professionals or speak on their behalf, yet rather seeks to fill a large gap which is qualifying and graduating certified accountants.
As certified accountants we feel ashamed that up till now there hasn’t been such an organization in our Arab region that qualifies the certified accountants, similar to what exists not only in advanced countries, but in other countries less-developed than our Arab nations as well.
Now the creation of ASCA is significant because it is not only an organization that excels in qualifying certified accountants, but also because it has associated itself with the largest and oldest accounting society in the world, namely the British Certified Accountants Association. Therefore it is benefiting from its resources in testing, training and various technical materials. Yet more so it benefits from its international stature in the recognition of ASCA’s certificates, because we want to guarantee for our graduates an international recognition of their degree.
So the goal of ASCA is twofold:
Qualifying the certified accountant in such a way that he/she is recognized globally, and then monitoring the ethical and technical performance of this certified accountant. Both these goals are currently missing from the Arab region.
After this, the society seeks to lay down accounting and auditing principles and standards such that professionals and businesspeople understand the bases on which the accounts were prepared, and on which the auditor’s report was presented.
The important thing is that we are now working diligently for the obtainment of a full understanding of the society’s purposes and beliefs and extend our hands in the spirit of cooperation to work with the federation and societies and any party that aims to service the profession even if there are no channels for mutual recognition due to the disparity in formation and goals.
Increased support and turnout
The existence of a knowledge institution cannot be an unacceptable or wrong act. So if we need to rectify our path, we accept any type of guidance. We declared this since our launch; that we need this type of guidance. We feel positive about our goals and we hope that our brothers and sisters who seek the welfare of the profession and the Arab region will put their hands in ours and work with us on this. This is indeed happening and we are receiving more support every day.
The Secretary-General (of ASCA) made clear that the turnout for membership and studies has surpassed our expectations and led to the increase in size of our apparatus and capabilities. In fact, the increase was so large such that it started to create an administrative and executive burden. This is due to the increased awareness of the need for such a knowledge establishment and the unfortunate vacuum that had existed throughout our professional lives.
In summary, the creation of the society is without exaggeration, the most important event in the history of the Arab accounting profession. Such a significant event can only be a topic of discussion and satisfaction for some and dissatisfaction for others. This is something we accept and deal with positively as long as personal attacks and non-constructive criticisms are absent from the equation.
Action plan
ASCA has put in place an action plan based on three phases. All of our programs are structured for the service of the examinations that our students will sit for. The phases are:
First phase: The exams held will be those of the British association. This means that our students in ASCA will sit for the exact same tests that currently exist and are used by the British association. This will give us a chance to train on how to administer private exams.
As they say, it’s no use re-inventing the wheel, so instead of re-exerting the efforts of hundreds of years past to re-invent it and develop all over again, we want to start where the world left off. Now we have the opportunity -and this is a huge accomplishment- to utilize and benefit from the resources of the British association, as most qualified practitioners in the profession in the Arab world today are members of it. Naturally, they currently form the backbone of the profession.
Second phase: We prepare what are known as common exams, which is a mix of the British association exams and our own. As for the latter they are for topics related to
the region such as tax laws and companies’ laws. As for the other subjects, they are general that apply to any country such as administrative and financial accounting, auditing principles or company accounting.
But when we come to taxes for example, we offer something special for the first time so that the student can sit for exams in areas that are concerned with his country and material that he will practice. This is where we used to have a deficiency in the past. Basically we would get members of societies that were recognized and of a high-level, yet despite this these members would be unable to practice the “Zakat” law for example (i.e. Almsgiving), because they would know nothing about it and hadn’t studied it in the USA or Britain.
Yet here however, we will be teaching alms and other subjects in accordance with the needs of Arab states. As such, our graduates will be qualified to practice in accordance with the laws and needs of the region. This is a vacuum that we hope to fill in the second phase.
Third phase: We launch our own exams independent from the British association and God-willing all our exams will be in the Arabic language. This will be a big achievement.
To execute this difficult and ambitious program, we require great efforts. To date we have come some of the way to ensure the smoothness of this process, and our administrative apparatus at the highest levels is now complete.
As for our regional structure, in addition to our center in Britain, we also have one in Amman after we were honored to receive the recognition of the Hashemite Kingdom of Jordan. The center in Jordan will be a major hub for training and exams, and will be in contact with some Arab universities and ministries in order to create centers there for studies and exams. This will allow students to continue with their work while also simultaneously sitting for exams and attending courses in Britain or Amman.
Legal responsibility for mistakes in closed companies
I asked Abu-Ghazaleh on the auditor’s legal responsibility in light of the mistakes and falsifications that took place in some closed Kuwaiti companies, and his evaluation of this responsibility. His response:
Every profession has its problems, and only God is perfect. There is not a global auditing firm out there that has not faced problems that Arab accounting offices are facing today. Their problems were even bigger and more complicated than what we have today.
Yet firms, businesspeople and the economic community in civilized nations know that the final word goes back to the judiciary and that an accusation doesn’t mean a conviction. The phenomenon is bound to take place since we are entering the era of public and holding companies and this is a natural development.
I can mention numerous points here that may lead to discussions and/or further research, and I do not claim to be a researcher myself, yet hope that my colleagues in the discipline and intellectuals will assist me in the crystallization of this research. My analysis here is founded in my study of the rulings and jurisprudences of the American justice system in particular and the western one in general. Our judiciary of course will form its own opinions on this.
Efficiency and Fealty
I can say that the auditor needs to do his job with the efficiency and fealty expected of him in consideration of the circumstances of his work, environment and country. So the auditor is punished if he abuses this fealty or had malicious intent or acted with bad intentions.
Shortcomings with good intent are not considered to be a crime except in rare cases of which one condition is this shortcoming being flagrant and serious. This means firstly that it caused a grave transgression of performance in comparison with what is expected of him in his country and related to his uprightness and efficiency.
Secondly, it means that the transgression directly resulted in the damage that took place.
In other words, what this means is that courts have decided that if an auditor makes a mistake in his report and its presentation and did not discover embezzlement or other mistakes, but his shortcoming was not a direct cause of the loss or damage yet was only an oversight to this loss or damage, then he is not responsible for this loss.
Also, courts have taken into consideration the difference between mere non-disclosure and deliberate hiding of the facts. This means that if an auditor deliberately hid information that he should have shown, then he is considered responsible for this action. On the other hand if the auditor did not disclose the information not with the intention of hiding it but merely because he forgot to mention it or wasn’t aware of it and had good intent, then he is not legally responsible, and so this distinction must be made.
For example, let’s say that an auditor issued a budget for a company, and he didn’t know that this company had a debt, and so he didn’t mention this debt in the budget when he released it. Here, he didn’t disclose the debt but he also didn’t actively hide it, so he is not legally responsible for this, because the information that he provided was in the scope of the information provided to him.
Issue of collaboration among officials in an organization
Events in the world indicate that it is nearly impossible to discover embezzlement in the case of collaboration among high-ranking officials in any organization.
So if a group of decision-makers and people in authority in an organization agreed with each other and collaborated, they can indeed hide this from any auditor. Collaboration among the authoritative apparatus in an establishment creates a barrier that cannot be penetrated.
Forgery; who’s responsibility?
It isn’t the auditor’s responsibility to discover forgery, because the auditor is not supposed to be an expert in this field. The responsibility of this lies with the forging party itself, which should be punished. Yet there is no auditor who can claim to be able to discover every forged document.
Here, I say that imperfection is not a crime. Yet what is required is a fair amount of diligence and efficiency as stated in rulings of western courts.
So the auditor needs to declare that he did what is regularly required of him, for someone in his position and with his efficiency, and as a result of the tests he conducted confidently state that the accounts are a reflection of reality. This is analogous to a security guard, as the guard cannot guarantee no theft and doesn’t become a thief if it takes place; the criminal remains the thief himself.
Here a question comes to mind which is what is the benefit of the auditor or rather what use is the auditor (?) The benefit of the auditor is similar to those in other professions, such as a doctor, lawyer, the engineer and others. I’ve never seen a doctor who guarantees the outcome of a surgical procedure or a lawyer who can guarantee winning a case. The discipline of accounting is similar and demands training and qualification and a certain level of efficiency and fealty. Yet this doesn’t guarantee the result. Similarly, the auditor needs to do his job the best that he can and the way it is expected of him.
An auditor of accounts doesn’t prepare the accounts but rather is witness to them and provides his report on them and states that he reviewed them based on the known and used standards. If he finds errors and embezzlements then he has the responsibility of reporting on these. But if they aren’t found, then he cannot be held responsible for this, as only God knows what is hidden.
Abu-Ghazaleh summarized by stating that the responsibility of an auditor should be a point of discussion and the auditor should indeed be questioned on what he has done, yet his responsibility does lie within what is reasonable, since “our profession, as with others, does have its limitations.”
Every auditor does his job based on samples and cannot audit accounts in a 100% fashion, meaning that if an auditor wanted to audit every single document there would be no organization that could afford this.
First reaction on the situation at the Arab Monetary Fund
We asked him about the situation relating to the Arab Monetary Fund after some papers reported on embezzlements in its funds. His response:
The Arab Monetary Fund was one of the institutions that we were proud to serve since its establishment and till the end of last year. We were proud to have audited its accounts, and thank the fund’s governors for their trust. With regards to the uproar that took place and what was mentioned about the fund’s accounts: The ethics of the profession prevent us from commenting on this issue. Additionally, the policy of our organization is adhering to complete silence in relation to our clients, because the particulars of a client are sacred and can be divulged only to certain parties.
When the uproar ensued –and both before it and after it- we didn’t make any statements to any party except the official parties involved. Therefore I would like to clarify that our office in Abu Dhabi, which was in charge of auditing, is ready to cooperate with the concerned authorities as it is its duty naturally to do so. We are at the authorities’ disposal at any time. The office has been practicing for years and it is fully equipped and ready to conduct its duty and anything required of it.
Suffice to say that our respect for the parties concerned and our trust in them, is enough of a response for anything directed at us, and our respect for the ethics of the profession results in our silence. We are fully confident in the efficiency of our employees in Abu Dhabi and their absolute integrity.