Participants
Talal Abu-Ghazaleh, Chair, (ASCA, Cairo), Anthony Datessio (KPMG, Montvale), Nelson de Carvalho (Expert, Sao Paulo), Ramon J. de Reyna (Expert, USA), Cecil Donovan (IFAC, Dublin), Ravi Kathpalia (Expert, New Delhi), Lorraine Ruffing (UNCTAD), Jean Claude Schied (INTEC, Paris), Claude Trolliet (WTO, WPPS), Michael Walsh (ACCA, London), Peter Walton (University of Geneva).
1. Opening of the meeting
Talal Abu-Ghazaleh opened the meeting. He recalled the conclusions reached during the last meeting on 15 October 1996 and made two proposals. First, that the Group’s membership be widened and after discussion it was agreed that the following be invited to participate : Mr. Gys Bak (NL), expert from China, expert from CIS, representative from European Commission, David Darbyshire (European Federation of Accountants), Eliseu Martins (Interamerican Accounting Association), representative from IOSCO, Alicja Jaruga (Poland).
Secondly, he informed the Group that he was stepping down from his chairmanship of the Group since its formation, and that starting with the next meeting scheduled for 1-2
November 1997 the chair should be rotated among members of the Group. He thanked
UNCTAD staff and every member of the Group for their support and cooperation which made it possible for the Group to launch this historic mission.
The chair gave, in the way of introduction, background information on the General Agreement on Trade in Services (GATS) in general and on trade in professional services in particular. He pointed out that GATS aims at extending the rules covering trade in goods and services. The detailed rules have been adjusted to take into account the differences between goods and services and therefore the way in which trade in services takes place. The basic objective of GATS is to establish a framework for liberalizing trade in services. It tries to achieve this by requiring countries to undertake through negotiations, commitments to modify their domestic regulations towards the gradual removal or elimination of restrictions applied to service products as well as service suppliers. The framework of rules requires countries to apply MFN treatment by no discriminating between service products and service providers of different countries. The national treatment principle stipulates that countries should not treat foreign services and service providers less favourably than their own service products and service providers.
The chair described the World Trade Organization (WTO) as a forum for multilateral negotiations. And although bilateral agreements are permitted as exceptions under the agreement, they will end up by being but a first step towards multilaterality because the application of the MFN principle lays down the basis for nondiscrimination and provides that any bilateral agreements should be open for access by other member countries if they can demonstrate that their domestic standards and requirements are comparable with those of the systems concerned.
That is why, he added, the WTO Ministerial Decision on Professional Services “recognizing the impact of regulatory measures relating to professional qualifications, technical standards and licensing on the expansion of trade in professional services” recommended that as a matter of priority, the ‘Working Party on Professional Services (WPPS) shall make recommendations for the elaboration of multilateral disciplines in the accountancy sector” including “establishing guidelines for the recognition of qualifications” (see attached Decision).
This objective was further emphasized in the Singapore declaration of the first Ministerial Conference of WTO in December 1996 which stated “In professional services, we shall aim at completing the work on the accountancy sector by the end of 1997 and will continue to develop multilateral disciplines and guidelines”.
The chair emphasized that this Group should be inspired by these principles established by the WTO which are bound to tremendously impact the global trade in accounting services. He believed that one raison d’être of the Group was to provide the WTO and other relevant organizations such as IFAC with recommendations on the development of a global discipline on professional qualifications and licensing that would facilitate cross-border trade in these services from the perspective of a world governmental organization, UNCTAD. Realizing that IFAC is a private organization and that the WTO recognized IFAC and IASC in a consultative capacity only as far as accounting and auditing standards are concerned, the discipline governing the licensing requirements, and the related regulatory requirements for educational qualifications and work experience, remain to be by nature matters for negotiation under the multilateral system of WTO. Hence the importance of UNCTAD’s role as a forum of government representatives where the developing and least developed countries can make a substantive input on this issue.
Accordingly the Group should present its report to UNCTAD which may transmit it to WTO as a contribution towards the goals of WTO. And that being the objective, the report should elaborate on the disciplines needed to achieve liberalization of accounting services and hence should cover not only educational and examination requirements leading to qualifications, but also the discipline for granting certificates or licenses or other authorization entitling those qualified service providers to do business in all the WTO member countries.
The chair suggested that IFAC from its own perspective should start a similar project as a further contribution towards the same goal. IFAC representative responded by saying that about a month ago IFAC education committee started preparing a document on examinations pointing out that licensing requirements were not part of his committee’s mandate. He also requested that the minutes should reflect his statement that IFAC’s plans had not been motivated nor affected by the Group.
2. Current developments
The staff of UNCTAD outlined other recent developments such as a series of articles in Accountancy on the necessity for a global qualification. The Group was quite pleased that the issue was getting the public airing that it deserved. Most importantly the International Forum of Actuarial Associations (IFAA) has started a parallel exercise to produce a minimum global guideline for the education of actuaries. They felt that this was necessary in order to protect both their professional rides and the public. They have prepared a core syllabus for actuarial training worldwide and are organizing seminars for the implementation of the core syllabus. UNESCO together with the Council of Europe is establishing basic principles for assessment of qualifications. Whereas previous assessments of foreign qualifications often entailed a derailed comparison of curricula and lists of materials studied, the emphasis now has shifted to a broader comparison of the qualifications earned. The UNESCO recognition convention to be adopted in Lisbon would obligate all parties to provide for a fair assessment of all applications for the recognition of studies, qualifications, certificates, diplomas or degrees earned in another State. The assessment should be based on transparent procedures. The Group felt that this convention was less relevant to its work than the exercise of IFAA. The IASC is also concerned that once it has developed a core set of standards, developing countries should receive assistance in their implementation. In this regard the Group might consider building international accounting and auditing standards into a global curriculum.
The representative of WTO concurred with the chair that the WPPS would develop multilateral disciplines for market access (licensing), use of international standards and guidelines for the recognition of qualifications. The WPPS has decided not to do anything more on the development of international standards. Regarding the multilateral guidelines for the recognition of qualifications there is an advanced draft which should be finalized before summer (attached). The guidelines would be voluntary and would streamline the negotiating process. The guidelines contained a list of all the items to be addressed to make the recognition of agreements similar and avoid new obstacles. In general there should be multilateral treatment for recognition but exceptions are allowed by the GATS and the guidelines described above would be for bilateral negotiations so that the overall discipline is not violated. The guidelines will not change the existing bilateral agreements allowed under Art. 7 of the GATS.
The Group closed this item by agreeing once again that it was developing its recommendations for the professional qualifications of the public accountant that is those who offer the highest level of auditing services. A number in the group felt that it would not be useful at this point to develop a two tier qualification.
3. Review of trends in accounting education
One of the experts presented a summary of the recommendations of major bodies regarding professional education such as the IFAC and the US Accounting Education Change Commission. The pronouncements of IFAC and AECC are not prescriptive from the point of view of accounting curricula but instead describe the skills necessary to be an accountant. The chair suggested chat the Group adopt IFAC IEG 9 as a basis or framework and move immediately to fill it in by developing a “model” curriculum, a ‘model” examination process as well as guidelines on qualifications and certification.
The Group reviewed the summaries prepared by one of the experts of the educational requirement of the American Institute of Certified Accountants (AICPA), the Arab Society of Certified Accountants (ASCA), the Canadian Institute of Chartered Accountants (CICA), and the syllabi of the Association of Chartered Certified Accountants (ACCA) and Institute of Economic Techniques and Accounting (ITEC), two long-distance learning programmes for qualified accountants. For example in the US most accounting programmes are moving towards 150 hours or 5 years. After completion, the student is allowed to take the CPA exam The passing grade is 75%but only 25% pass the first time. The student usually must complete a practice requirement to receive an audit license. The normal progression is to take a professional exam, complete a 2 year experience requirement, get a license and then become a member of the AICPA which is voluntary.
The ACCA syllabus is also prescriptive in that it sets out 14 papers for which the students have to sit for examinations. It gives a practical professional credential or membership in the ACCA and not an academic degree. The 14 papers teach accountants what they must know. It is an integrated syllabus and the subjects are progressive. Each paper assumes previous knowledge. The 14 papers must be completed within 10 years. Some papers can be waived if a student has a relevant degree. Three years experience is also required. The ASCA has adopted 6 papers and a US style exam in that itcan be done in one sitting. After passing the exam, the student receives a certificate and with this can become a member of ASCA. INTEC’s progamme consists of 3 separate certificates which must be earned before a candidate can progress to the highest level, expert comptable. In the French system the three levels must be completed before the student can do the practice requirement. After this he has two final papers to pass and a dissertation to write. The advantage of the French system is that it produces a marketable qualification at each stage.
In continental Europe and the US it is possible to lose your professional credential if you stop practising or if you do not meet certain standards or engage in continuing professional education. In Argentina an accountant can graduate in economics, then fulfill additional steps and receive the title of ‘accountant’. In most of Latin America there are no national professional examinations. In Brazil there is a two tier system in which after a three year technical course the accounting technician is allowed to prepare financial statements. The Brazilian securities commission has extended its requirements for accountants because of this weakness. The Group’s recommendations on qualifications for accountants could not be more opportune and necessary for Latin America. More Latin companies are listing for Latin American Depository Receipts (LADRs) and if the Group can come up with something it will be very timely.
One expert suggested that since the Group had accepted the IFAC education guidelines as a framework that it be compared with the syllabi. The chair agreed that certain national curricula should be reviewed within the context of the IFAC framework to develop a model curriculum. It was suggested that the experts construct a matrix ofcurricula using Canada, India, United Kingdom, France, Australia, the ASCA and Mexico by August. The expert asked if general subjects were to be included or just business and commercial subjects? The chair thought that general business knowledge, marketing and pricing should be examined.
The ACCA (see above), Canadian and French syllabi were discussed. The Canadian syllabus contained modules on taxation planning, legal framework and tax framework which did not belong in a global curriculum. International accounting standards and auditing standards needed to be built into the curriculum. Other subjects were also missing such as environmental accounting, forensic accounting, accounting for the public sector and the process approach to auditing. Otherwise the Canadian curriculum is the state of the art.
The IFAC representative cautioned the Group not to assemble a syllabus which is difficult for students to complete. The Indian expert agreed but stated that it was also necessary to merge modernity with tradition. Many enterprises are subject to state audits; so therefore the government may make some additional requirements for qualifications.
In Professor Scheid’s opinion, the French system did not produce pure accountants or auditors but professionals who were also concerned with the organization’s management. Audit fees are only 10% of the total accounting revenues in France.
4. Auditors
The Group then turned to other issues such as language requirements, pre-qualification requirements, continuing education, revision of an educational standard. The expert from Latin America wanted to upgrade the profession in his region and so believed that a university degree should be required. The representative from KPMG stated that if universities are offering accounting programmes such programmes should be given recognition. The Indian expert also thought that the university facilitates the student’s professional education. The IFAC representative thought that what is important is not what the Group likes or what exists. Professional qualifications should not be based on the lowest common denominator but a compulsory university degree might not be realistic for the world. The Group opted for the IFAC approach in that a university degree should not be required for the entry level to professional studies. Regarding exemption systems, the IFAC representative believed they could not be designed. However, both the Indian expert and the ACCA representative believed that they are feasible.
The Group also discussed whether the exam should be given in stages or could be taken in one sitting. The Group thought that the papers or subject matters could be divided into stages such as the foundation stage, the certificate stage, the professional stage. Exemptions might be given for the pre-professional exams. The professional stage could be one exam; that would mean for example sitting 6 papers at once under the ACCA system. The ACCA representative stated that some students took 4 at one time but that 6 would be difficult and those that tried usually failed. The Group discussed whether the examination process should be part of the guidelines? What about quality control? Testing with the proper marker? Security? General rules should govern the exam process.
Regarding requiring experience before the professional exam, 4 were for it and 5 against.
Regarding continuing professional education, IFAC CP2 requires 30 hours. The larger accounting firms provide continuing education; a practising accountant must keep abreast. In the Irish system competence is checked every year.
5. The final product/deadlines
The Group agreed that the draft proposal for a global qualification/discipline should cover the following: model curriculum (including continuing education) examination process, experience requirement, licensing requirements/procedures. The first draft should be ready by end September 1997 so that it can be circulated for the next meeting 1-2 November. Also the discussion at the World Congress of Accountants in October 1997 in Paris should be taken into account since the chair would be making a presentation there on this subject. A second draft should be ready by early spring.
The chair stated that examination, exemption, licensing procedures, local knowledge requirements were as important as the content of the curriculum. He suggested that the experts examine various recognition agreements such as US/Canada or Australia/NZ.