The UAE needs to have common accounting standards on the lines prevalent in the West and East Asian countries, the President of the Institute of Chartered Accountants in England and Wales (ICAEW) said.
David Furst, who was on a visit to Dubai recently, said the UAE can seek help with established national accountancy organisations when it decides to take a step in this regard.
"There is scope for improvement to bring them up to the Western Europe and American standard. As for us, if we are asked to help, we will be glad to do that," Furst said.
Enquiries revealed that accountants in the country supported an overhaul of the existing accountancy standards. They emphasise that the need for overhaul is all the more essential due to two reasons: The plans of UAE to introduce a tax structure; and secondly, the credit crisis.
The need for a change has been felt at the very top level of the existing financial regulatory framework in the country, Furst said.
Chartered Accountants (CAs) in the UAE broadly follow the International Financial Reporting Standards (IFRS) principle. In the absence of a UAE accounting standard, other standards prevalent in the Western countries are also followed. There are a number of CAs from the Indian Subcontinent working in the UAE and they claim to be following "international standards", while auditing reports.
"The problem is that there is no regulator to whom an audit report needs to be submitted. So even if you have companies getting their accounts audited there is no central authority that they need to submit their accounts to," said a chartered accountant working for a Dubai-based media firm.
Companies across the world are required to submit their audit reports to a regulatory body specially set up for the purpose. Though the UAE federal law calls for audits of all companies registered as LLCs, these audit reports are not scrutinised for their authenticity by a government regulator.
"Presence of a uniformed accounting standard could have in fact helped companies during the credit crisis. Banks especially have been asking for three-to-four years of audit reports before giving loans. It would have made the entire process of dealing with the banks much more easier had there been a uniformed accounting standard prevalent. Also if a body especially meant for the purpose scrutinised the reports," said Jeetendra Chauhan, Director of UHY Saxena Associates, a Dubai-based chartered accountancy firm. Chauhan pointed out a need for beefing up corporate governance laws and a firmer regulatory structure.
Alternatively, unified accounting principles would be of help for the government, while taking policy decisions, Chauhan said. "A tax structure that GCC states plan will be difficult to attain in the absence of auditing. Furthermore, it will be difficult for the government to emerge with plans for specific industries such as small and medium enterprises (SMEs)," added Chauhan
"There is of course a need for improved governance. We have had a meeting with the Chief Executive Officer of DFSA. And we understand that he is keen to do so," Furst said.
The ICAEW President said companies in the region need to understand that a lacklustre balance-sheet does not necessarily reflect bad state of affairs at the company. "It just reflects the true state of affairs at the company. It does not mean that the company is doomed to fail," he said.
Furst said that auditors and chartered accountants have played a minimal role in the current crisis and put the ratio of companies whose audits proved wrong at 10,000 to 1.
"It's primarily the aggressive marketing policies that have played a greater role in the crisis," he said.
Meanwhile, ICAEW also launched a new business qualification in the UAE – the Certificate in Finance, Accounting and Business (CFAB). "The Certificate in Finance, Accounting and Business in the Gulf is designed for those people working, or aspiring to work in either practice or business. For those who complete CFAB, it provides an open door to become an associate chartered accountant (ACA)," said Furst.
More than 500 members of ICAEW now work in the Gulf – not just in the largest accounting firms but also in a range of industries including banking, tourism and sovereign wealth funds.
In the next few years, ICAEW is looking to grow its presence in the region, both in terms of the service and support available to members and qualifications. It launched the ACA qualification in the Gulf in 2007 and the first 100 students have now started their training.