PracticeConsultingComment – Corruption in Eastern Europe

Comment - Corruption in Eastern Europe

Former Soviet bloc countries have been criticised for poor accounting practices and fraud. But it is unfair to use our own standards as a yardstick, writes Sir Peter Kemp.

Chris Laine, president of the English ICA, is reported as commentingg practices and fraud. But it is unfair to use our own standards as a yardstick, writes Sir Peter Kemp. pretty heavily on corruption in the former countries of the Soviet bloc.

According to the report, he talks about poor quality accounting standards, corruption, and invasive and endemic fraud.

He concludes by suggesting eradication of fraud is an essential part of the qualification for joining the EU, and that it would be surprising if the aspiring countries could solve these problems inside five years.

Chris Laine is clearly right to draw attention to the problems here.

But I believe he may have been over-reported: fraud and similar issues are always more fun than most other things, and the reporting was not quite fair to Eastern European countries.

Thus, on accounting standards here, as elsewhere, one has to avoid the common trap of confusing some of the more advanced countries, such as Poland, with some of the less advanced countries, such as the Commonwealth of Independent States.

In some, especially those in the next wave of EU candidates, accounting standards are really coming along rather well; others have much further to go. But they are doing their best from a pretty low base.

As to corruption, the smoke here obviously isn’t without fire. But the countries themselves are acutely aware of the need to do something about this. In any case, we have to be very careful about what is, in this context, ‘corruption’.

Much of it is not, in these countries, corruption; it is part of the way of life and a necessary way of life too.

It is quite wrong to use our own standards, such as they are, as a kind of yardstick for the standards of countries just emerging, and emerging with some difficulty, from very many years of command economies.

In any case there can never be any total eradication of fraud, whether in Eastern Europe or anywhere else, any more than there can ever be any total abolition of human sin. If complete cleanliness is the test, the European Union ought not to exist – look at the recent report by the Court of Auditors, and we should not be in it – look at Maxwell and the establishment of Nolan.

East European countries are doing their best in an uphill task to modernise their economies. They live with the world they are in, as do the rest of us. By our standards, they have some way to go; they start a hundred years or so behind.

Their efforts have to be seen in the history and perspective that these countries have, not just from our own domestic criteria. Acceding to the European Union is a deeply cultural as well as an economic enterprise.

Sir Peter Kemp is chief executive of the Foundation for Accountancy and Financial Management

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