Regulation divides west from the rest

The World Congress of
held in Istanbul was heralded as on event that would bring the
profession in both the developing world and the developed world closer together.

Speakers ranging from outgoing International Federation of Accountants
president Graham Ward to K Rahman Khan, deputy chair of India’s upper house of
parliament, queued to praise improving relations between accountants in the
third and first world and called for even stronger ties between the two in the

But there was one respect in which key differences between the developing
world and the West were evident: in their attitudes to regulation.

‘I am concerned that government oversight of accounting is violating the
profession’s independence. Accounting can only be independent when it regulates
itself. If professional accountants are guided by the state, it hinders the
development of free markets, especially in developing nations,’ Dr Masum Turker,
president of the Expert Accountant’s Association of Turkey, said.

Turker’s impassioned plea, jarred with Western professionals who are becoming
ever more used to independent regulation.

After the corporate scandals of Parmalat, Enron and WorldCom, first-world
capital markets have demanded that accountants are independently regulated.

There are still pockets of self-regulation; the institutes in the UK still
handle a certain number of cases in the first instance. The UK’s Financial
Reporting Council, too, is in part paid for by the industry, indicating an
element of self-regulation, even if it also receives funding from the state.

Allen Blewitt, chief executive of ACCA, said the accounting profession in
first-world economies had accepted that self-regulation of accounting was no
longer an option.

‘The consensus in the developed world is that independent regulation is the
only way to go, and the profession is comfortable with that. The developing
world sees it rather differently. There is still scepticism around state
regulatory intervention. There is some way to go before independent regulation
is accepted,’ Blewitt said.

Charley Niemeier, a board member of the Public Company Accounting Oversight
Board in the United States, said that although self-regulation had been
effective in the past it was simply no longer feasible.

‘In the United States we used to have a form of self-regulation known as peer
review which I felt used to work quite well, but after Enron independent
regulation of the profession became a must,’ Niemeier said.

It may make sense for less well developed professions to create their own
regulation. But it is at least marked evidence, in terms of the profession
becoming increasingly more globalised, that we are all at different stages in
the project.

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