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Al-Ahram Weekly On-line 23 - 29 November 2000 Issue No.509 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly On-line 23 - 29 November 2000 Issue No.509
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Focus Travel Living Sports Profile People Time Out Chronicles Cartoons Letters Called to account
By Aziza Sami
Minister of the Economy Youssef Boutros-Ghali this week issued six new criteria for accountancy and auditing in Egypt -- delineating principles and procedure and outlining a new code of ethics for the profession. It was also announced that a draft law is currently being prepared to regulate the adaptation of Egyptian accountancy practices to recognised international standards.
The publication of the six new criteria comes after a long period in which there have been no clear or enforceable standards governing accountancy practice or the integrity and independence of accountants. And the result has been the loss of an estimated LE10 billion annually in tax revenues.
At a time when proper book keeping on the part of tax payers is one of the legs upon which the government's planned fiscal reforms rests, a major task for the Finance Minister Medhat Hassanein is to ensure that taxation departments become far more aware of the extent of the operations of commercial enterprises. Faulty accounting has played no small role in aiding and abetting the evasion of indirect taxes which account for some 64 per cent of tax revenues. It is a situation that has lead to the bulk of tax income being generated from personal tax payers, many of whom find their modest salaries taxed at source.
Poor accounting standards inevitably impact negatively on the stock market as well. The accurate reporting of company accounts is essential if investors are to make informed decisions. But what we have, at the moment, is a situation in which many accountants are operating as virtual brokers. Their integrity has been fatally compromised and, rather than acting as independent agents they have become de facto defenders of their clients. It is a position in which the credibility of accountants is suffering to an intolerable degree.
Even high-profile companies -- leading market movers such as MobiNil and Media Production City -- are tarred with the same brush. The ability of these and other, less prominent, companies to circumvent the necessary transparency by issuing partial or else obscure financial statements has created the position where it is impossible for informed investment decisions to be made.
Although the new listing rules of the bourse have been tailored to ensure that companies' financial results will first be announced through the channels provided by the stock market, it is important to reinforce the procedures governing the publication of company results by monitoring accounting and auditing practices. And the most efficient means of doing this is likely to be a self-regulatory one, operating within the profession, rather than being imposed by an outside body such as the Capital Market Authority.
In our keenness to become part of the global financial system there must be a realisation as well that the world's major accountancy firms are working towards an internationalisation of accounting standards, largely through bodies such as the International Accounting Standards Committee (IASC) which are working strenuously towards standardisation.
Many small and medium sized accountancy firms are in urgent need of raising their professional standards, in which regard the Accountants and Auditors Association, which comprises the chairmen of all the major Egyptian accountancy firms, could have an important role to play. Yet at the moment their recommendations carry no legal weight. They can verbally admonish, but there is no mechanism in place by which they can force accountants to apply the minimum standards embodied in the Ministry of Economy's six point plan.
Non-adherence -- in practice, despite the lip service which suggests otherwise -- to uniform standard and procedure will if not seriously redressed, have many negative repercussions on the national accounting sector as it opens up to the global economy as is demanded by the General Agreement on Trade in Services.
Save for the lucky few local accountancy firms -- the big ones that have managed to align themselves with international consultancies -- it is hard to envisage how the rest will cope with the competition when it comes.
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