Accountancy and beyond - Future of profession in Commonwealth nations
Monday, 11 November 2013 00:06
CA Sri Lanka’s historic forum brings together the accountancy fraternity as AAT, CIMA, ACCA and CMA leaders share key insights on strengths of and challenges for the profession and way forward
By Shabiya Ali Ahlam
As accountancy is important in a developing context, the significant role the profession plays in ensuring economic development along with long-term sustenance cannot be stressed enough.
To enhance the profession in a local and global context, the Institute of Chartered Accountants (CA) in association with the AAT, ACCA, CMA and CIMA Sri Lanka brought the cream of the profession together by organising a forum titled ‘CHOGM: Accountancy and Beyond – The Future of the Profession in Commonwealth Nations’.
The forum, which was the first-of-its-kind to bring to one platform the accountancy institutes in Sri Lanka, was held in Colombo last week.
With Sri Lanka being in the global spotlight as it hosts the Commonwealth Heads of Government Meeting (CHOGM) this week, CA Sri Lanka President Sujeewa Rajapakse stressed that as professionals it is the duty of accountants to propel the nation further and show the world it is second to none.
“We are at a stage where demands and expectations are diverse and ever-increasing. This is a period of immense competition, challenges and risks. Therefore the forum is an important one to point out the challenges the profession faces and ways to overcome them,” he told the fully-packed audience comprising members from the five accountancy institutes in Sri Lanka and other invitees.
He noted during his address that for a country in transition, the role a profession can play is immense and despite the growing challenges, it should be able to utilise the opportunities made available through CHOGM. With the nation having converged with the International Financial Reporting Standards, in a global perspective it is in line with other countries.
Pointing out the opportunity the CHOGM brings to the country, Rajapakse said: “The next few weeks and months will prove to be a very crucial period for our country. From a development point of view, not only can CHOGM bring a fresh boost, but it will also propel professionals to carry out business tasks in a greater height of this country.”
Role of accountants
Emphasising the role of accountants in the overall development of the country was Economist/Former Commonwealth Secretariat Director Economic Affairs Dr. Indrajit Coomaraswamy. Delivering the keynote, he stated that while serving the Commonwealth Secretariat he was able to observe that there were many Sri Lankan accountants who were working in the Commonwealth nations and doing extremely well.
Noting that today the world places a high premium on competitiveness, Coomaraswamy said: “The quality of professionals in a country is going to be a key determinant of its future prospects. In my view, the accountancy profession in Sri Lanka is extremely strong. It is arguably the strongest profession in the country. With that come responsibilities and I think they can play an important role in a narrow sense.”
The ambitions of the accountancy firms and profession should be expanded so they can play a much bigger role in terms of sourcing for bigger export services, he said. According to him, the accountancy profession can do much more in terms of providing services for people around the world.
“We have a far more connected world today and that makes it possible to provide services to the world. That is really is a challenge and I don’t think we can talk about 8% growth on a sustained basis without turning around our export performance. With a population of 21 million and with a per capita of US$ 3,000, driving performance in such a small economy, unless you improve export performance, is just not going to happen. The accounting profession is a USP for the country in terms of it doing more inside the country and outside,” asserted Coomaraswamy.
To gather views on the future of the profession in Commonwealth nations, the key highlight of the forum was the panel discussion that discussed in depth the opportunities and challenges accountancy faces in the current context.
Moderated by the Daily FT Editor Nisthar Cassim, the discussion featured as panellists AAT Sri Lanka President Ganaka Amarasinghe, ACCA Sri Lanka Vice President Danushka Samarasinghe, CIMA Sri Lanka Chairman Reyaz Mihular, CA Sri Lanka President Sujewa Rajapakse, CMA President Prof. Lakshman R. Watawala, and Economist/Former Commonwealth Secretariat Director Economic Affairs Dr. Indrajit Coomaraswamy.
Cassim: I would like to congratulate the associations for coming together as this is the first time the four institutions have come together on a common platform. This is a good start. To start with the role of accountants in the Commonwealth, I would like to open it up to the institutions to come up with a brief on the theme of the forum.
Amarasinghe: The AAT has an important role to play. In certain countries they use accounting technicians as a designation. But no matter what the designation, an accountant has a role to play in financial reporting. Again there are several countries that organise the AAT. Whether there is an association or not, there is a role to play by these bodies. In 1970 the AAT was inaugurated and was telecast to the Commonwealth countries. In the Commonwealth region there are 125,000 members. We are strong in regions such as Australia, Ireland, UK, and Sri Lanka. We can see that in the Commonwealth region the AAT is playing an important role in the accounting profession.
Prof. Watawala: We have to look at the role of the accountancy profession. Now I don’t know if many know the role the accountants have played in the educational field. One of the important aspects of the Commonwealth is inclusive development. In this respect the accountancy profession has gone into inclusive education and I am not sure if many realise this. It was in the 1970s when the accountancy profession was restricted only to accounting and audit firms. Then the door was opened out and practical training was given to all those in the profession. Today, if you look at the balance sheet of the CA, you will huge surpluses which are because of the large influx of students that have joined.
In 1984 we took the next step, which is to cater to the middle level accountants. The CA took the bold step to take the education to the rural areas, and today 35,000 students have enrolled with that. It is evident how the accounting institutions have propagated the objective of the Commonwealth. With inclusive education, we have to make this more affordable. Affordable to all those in this country and this was brought about by the setting up of the CMA. The accounting institutions can be proud because it has produced members who have taken this profession to a higher level.
Rajapakse: It can be said that the CA can be considered as the big brother of the accountancy institutions. When it comes to the global scenario of the Commonwealth, there are 54 countries out of 21 have established CA. This is remarkable. If you talk of the CA, we are 53 years old and so far have produced about 5,500 professionals. 13% of our membership is out of the country and they remit fairly a large number of foreign exchange to the country. We also have a student base of 40,000, and have 50,000 partly qualified accountants. These individuals are serving in different areas of an organisation and the partly qualified are serving the SME sector. Our institution has brought a unique situation where it has brought all the accounting bodies onto one platform. The CA has taken the leading role in organising this forum and I am sure that in the next two years Sri Lanka is going to be in the spotlight where the Commonwealth is concerned. All the institutions, especially in our profession, will have to play a pivotal role in this situation.
Mihular: We have professional accountants all over the world and this is a good opportunity for us to bring the profession together. If you look at the UK, all the members follow a common ethical code for the profession. I can’t see why we cannot have a common disciplinary procedure since accountants within the charter, if they mess up, the whole profession gets messed up. Why don’t we all agree to have a common code to accredit CPR, so all our members can follow the same? Maybe we should try and use the opportunity of coming together to create a common mechanism.
The only other point is that just a week ago we were declared ‘Outsourcing Destination of the Year’. We should not do BPO-type work but should look at KPO. Outside the UK, together with all the institutions, we have the highest number of accountants. If we come together, we can leverage this position. This is the most valuable export we can get about to the country. Samarasinghe: I would like express thanks for organising a common platform, a unique one that allows us to move forward. The ACCA has 22 offices around the Commonwealth region, and with that, half of the Commonwealth is covered. As CIMA and ACCA, what we can bring to the platform is the experience and the expertise which the organisation can learn from other countries and bring to Sri Lanka. We have to admit that in any sovereign state, we have to work with the premier accounting body, for which in Sri Lanka it is the CA. There is competition within the bodies but it is healthy. The competition allows the institutions to uplift their standards and continue to improve. That is what is needed for the country.
About Sri Lanka being a knowledge hub, and its aim in reaching US$ 1 billion dollars of business in the future, this is what we have to target and improve. The accountants have not only assisted in the growing BPO industry, but the garment industry in Sri Lanka as well, which accounts for almost half of our exports. The large places such as MAS, Brandix and Hirdaramani were built upon the accounting professionals. Now the tourism sector is also on increasing growth, which again needs impetus from the accounting profession. So the role if an accountant is much broader. We need to take this forward.
Cassim: We got a good perspective in terms of strengths of the profession and the skills aspect. Sri Lanka is in a good place now. The world in dynamic and the challenges continue to remain for Sri Lanka. What is your perspective in terms of expanding the profession?
Amarasinghe: In terms of the IFRS, although the objective is to have common standards internationally, it is not possible for two reasons. In Sri Lanka, bringing IFRS to rural areas is a big challenge. As an organisation, our challenge is to bring this knowledge to those areas. The AAT aims at shifting knowledge from Colombo to various rural areas. We focus on these challenges and make the shift.
Prof. Watawala: Especially on the expenditure side, my worry is that today there is not much of cost control and financial discipline is not there at a high level. This is where the accountants and finance professionals can get involved. Today one of the biggest spenders is the Government. We have to make sure there are proper systems and procedures in place for that. Not only ensure there are proper systems, but also ensure certain rules and regulations are applied. It should be stated that if the institution does not comply with such, then officials are responsible. Today the officials do not take over the responsibility. I don’t think that should be allowed. If the accounting profession is to be strengthened, there should be rules and regulations applicable where responsibility should be integrated. This should be in one way, not only in public organisations, but also in private organisations. The Companies Act talks about the responsibilities of the director but the responsibilities could be placed on the officials.
On the challenges, there are many the profession faces. From local institutions, many are attempting to have strategic partnerships. This is one of the values of the Commonwealth. This is an area where we can establish partnerships with international organisations. We need to have official recognition. However, we have done very well on the new challenges that have come up in corporate governance sphere. On the IFRS, unfortunately the practical aspect is of most importance. Today we must have more workshops and seminars to educate our members not only in theory, but also the practical aspect where they can apply the same.
Rajapakse: When you look at the challenges from our institute’s point of view, they are different. We have the challenges at an institute level and from a members’ level. From the institute side, many are aware that the CA is the sole authority which is empowered to amalgamate accounting and auditing standards of this country. The challenge is that there are many changes taking place in the global arena. We need to make sure that the standards are localised and must ensure they are put into good use. We also need to make sure that this knowledge is disseminated to the professionals. We have been conducting workshops to make sure the entire stakeholders are equipped with the technical point of view. From the members’ level, there is a major challenge since they have to be equipped with the latest auditing and accounting standards. If not they will be completely taken out from the market. Thing are changing rapidly. Another important element is professional ethics.
Mihular: We are producing an army of graduates who are largely unemployed. So what CIMA has done is that we have negotiated with CIMA UK, so that the students who are reading for their degree can also opt for CIMA and the subscription has been given with a major discount. The idea is that when they finish their degree they would also have a professional qualification at hand, which makes them more employable. I am sure lot of other institutions can also do this.
Another key point is that if we are going to make full use of this outsourcing destination status, we should be able to keep our professionals. Our young accountants want to go out of the country, but they come back. We should be able to use the Commonwealth to allow them to work for a specified period in member countries. We should be able to negotiate this within the Commonwealth region. We will then have experienced people who will remain in the country.
Samarasinghe: From an industry perspective, we have three challenges. One is supply. We are an island of accountants, and to meet the requirement and the knowledge of accountants for the export industry and the service sector. The second challenge is to produce more jobs and the third is retaining them. Looking at ACCA the members, most are overseas. Another challenge is job creation. People will not go for greener pastures if things are better here. But that is an outcome of the broad macro-economic development. If I am talking about the student population and increasing the membership of the accounting bodies, we need to look at much more than what we are currently doing. We should think out-of-the-box and should look at financial solutions such as concessionary loans with State banks for students. We should look at adapting a system like those in Singapore in terms of student loans. We need to think of such measures to increase the accounting population because it is needed for our nation for it to reach its goals. If you look at how to stop the brain drain, we cannot put hard and fast rules and sort of limit certain individuals. But maybe they can reduce the PAYE taxes paid by professional accountants to address this.
Cassim: Can you mention the issue about IFRS? It is a challenge. People think it is more work. How do you respond to this, especially in the case of smaller organisations?
Mihular: The IRFS is formulated for public listed companies, and for public interest companies. It is not for the private companies and the SMEs. For those institutions there are separate standards. There is also another document on this because accountants have the mindset where they try to apply the full set of standards. Now there is guidance released on how IRFS can be used for SMEs. This will be issued soon by the ISB. There are gaps at different levels of accountancy. There is a confusion that organisations have to comply with the full IRFS. That is not required.
Cassim: You saw the strengths of the Sri Lankan accounting profession. How can we use the Commonwealth as a platform to share this success story? Having served the Commonwealth, how can Sri Lanka draw interesting lessons in taking the profession forward and making them more professional?
Dr. Coomaraswamy: Given the fact that the future vision of Sri Lanka is around the five hubs, Singapore is a very good example as to how they have developed their profession well by giving credibility in terms of the quality of their profession.
In terms of challenges, accountants have a high reputation. Going forward there will be a high premium in maintaining the quality and the integrity of the profession. What is going to drive the future of this country requires professionals to have absolute credibility. The accountancy profession is really at the heart in gaining the credibility of the system and the structures. The responsibility of the profession is going to increase. So yes, Singapore is a good example.
In terms of using the Commonwealth as a platform, it is not an easy challenge. However, that does not mean one should give up. For instance, it could be tried from the secretariat if they can facilitate business leaders in this regard. It is an up-and-down process, particularly as activates become more globalised. The way the world economy is getting organised means that there will be more mobility. So over time I can see this happening and the Commonwealth is a useful network. The professional associations are a key component of the Commonwealth family, and I think it is through such associations that one can lobby to bring about the changes the accounting profession is talking about.
Cassim: Dr. Coomaraswamy spoke about giving credibility. I think the challenge is about gaining trust of the stakeholders. We had some concerns with the Europe with the recent financial crisis. In Sri Lanka what is the status in winning trust and what is the challenge in going forward particularly when the country is growing rapidly, as the temptations are greater in trying to make a quick buck. How would you address that issue?
Watawala: This is an issue that is prevailing. We have found a networking arm for the Commonwealth countries. We have really taken the necessary action and we are setting up what is called the Commonwealth Association of Accountants. This is something that will be done to ensure that the Commonwealth countries will have an association to address such issues. Sri Lanka has taken the initiative and will be launching this.
On the challenges, today we have different types of training that are carried out. The foreign bodies do it in the English medium. Our education system is such that the training is done in Sinhala and Tamil as some students are not proficient in English. As a result of this we are finding that this is a big challenge that is faced by the accountancy profession. The professional bodies will have to play an active role. The other important thing is that the students from the private sector, the training is necessary. The business sector will have to do some programs to bring them in.
To gain the trust, these are two areas where we have to work. The profession also has to have trust. That is why there are various processes laid out by the different bodies. But are these practiced? Today we find very fine annual reports. But how could one see that the practical aspect is there? We may have to find some monitoring mechanism to ensure that what is put down on paper is also being practiced. That way we can see if what the accountants are recommending are bring done. The trust of the public also has to be earned.
Rajapakse: From the CA point of view, I believe that our institute has a major challenge on gaining the public trust. Why I am saying this is because we have accountants who issue assurance reports. The moment there has been a corporate failure, people start pointing at fingers at the auditors. That is the important thing to note. Looking at our past experience what I can say it that the trust has to be earned. The challenge for our institute is to maintain that public trust. As a responsible institution we will make sure that we will always focus on that.
Mihular: We all claim and have the same code of ethics. We know that any profession or any community will have a few people who take less vigorous views of things. The only way we can ensure this is to demonstrate to society. That is why we have to join hands and ensure that our disciplinary procedures are harmonised. So if somebody falls back, there is will confidence in the public that it will be dealt with in a certain acceptable norm and not based on individual associations. That to me is important to ensure that integrity is maintained, because without that we are lost.
Samarasinghe: I am of the same view as Mihular because integrity and ethics is an ongoing process. In any industry you will have few rotten eggs. It is about how you iron out those issues and move forward. So a common platform for disciplinary action, yes it is important.
Cassim: Is there any real action taken up when there is something highlighted with regard to ethics? You may be dealing with it but it is not made public. Is there any reason for that? There is no adequate disclosure that an action is taken so there is a perception that the institute is not doing much?
Rajapakse: I don’t think that we have gone up to that extent but I must confess that we have a very stringent procedure. We have our Ethics Committee headed by a very senior accountant. We have been following the process, but there have been instances where there have been certain delays. But clearly, we have followed the process; we have never compromised. I agree with you that in the Sri Lankan context there is no set process when it comes to publicising it.
Pix by Lasantha Kumara