A number of UAE companies want to shift over to International Financial Reporting Standards (IFRS) for getting financial reports audited, says David Furst, the President of the Institute of Chartered Accountants of England and Wales (ICAEW). Furst, who was in Dubai to launch the Certificate in Business Accounting Course, said ICAEW can help the UAE promulgate a federal accounting standard.
Lack of regulations do not make the UAE more vulnerable to the economic crisis, Furst said. He, however, cautions that following two different sets of accounting standards can add to confusion in the country. He also called upon the auditors working in the country to do their job of reporting the correct financial information with sincerity.
ICAEW plans to open its offices in the GCC towards the end of 2009, Furst told Emirates Business in an interview. Excerpts:
As an auditor how do you look at the UAE during the prevailing crisis?
In times such as this, clear and transparent financial information becomes even more important, especially from the point of view of international investors and shareholders, allowing them to make decisions with confidence. Auditors provide their opinion as to whether a company's financial statements give a true and fair view and whether they are properly prepared in accordance with the relevant laws. In the UAE, as in the rest of the world, the accountancy profession must play its part in helping to restore market confidence through the continued provision of high quality financial information.
How about the Gulf as a whole? Which GCC country do you think has mature accounting standards?
It is our view that increasingly markets will be converging towards international financial reporting standards. As businesses become more global, they will need one set of accounting standards that will enable them to report across borders. We have been, and continue to be, fully supportive of the work that the International Accounting Standards Board has been doing in this space. With the stock exchanges in the region requiring accounts to follow international standards, there is a trend in the region to converge to IFRS, which will continue to strengthen GCC as an influential international financial centre.
How can ICAEW as a body help improve the situation? Do you think you can co-operate with the country's government and establish a body similar to yours?
In the United Kingdom, the ICAEW has a statutory responsibility for monitoring members for compliance with UK audit regulations. It is the leading audit inspector in the country. This role has given the institute wide experience and expertise in global accounting and auditing policies and procedures. In the UK, as well as internationally, the ICAEW has played a key role in shaping accounting and auditing standards and driving the ethical focus within the profession through our thought leadership work. The ICAEW is a leading contributor to international bodies such as the International Federation of Accountants (IFAC), the Global Accounting Alliance (GAA) and the International Accounting Standards Board (IASB).
The ICAEW is also working with local accountancy bodies and governments in a range of countries across the world to increase cross-border mobility for members, enhance the accountancy profession and ensure financial information is as technically rigorous and ethically robust as possible.
The ICAEW has around 550 members in the Gulf states, working at senior levels in business. More than 300 of these are based in the UAE, with about three in four having more than 10 years experience since qualifying as chartered accountants (ACA - Associate of the Institute of Chartered Accountants in England and Wales).
We hope to be able to share our expertise and knowledge with the Gulf authorities when they require it.
With several accounting standards – from IFRS to GAAP – being followed in the region, do you think there is scope for confusion?
There is a move towards the adoption of IFRS across the world, and the US authorities have recently published a "roadmap" that might lead in due course to US companies using IFRS rather than US GAAP.
In an increasingly global market, international standards will improve consistency and ease the accounting requirements of multinational companies. Producing double sets of accounts is time consuming for companies, and having to make decisions on financial statements based on different accounting standards can also be confusing for those who have to make decisions on the financial information provided.
Internationally adopted accounting standards will ensure increased consistency and transparency.
What do you think is preventing the UAE from developing its own accounting standards?
As we have seen with other markets around the world each is proceeding at their own pace adopting international financial reporting standards in a way and a manner that suits their own local market conditions. The goal is clear but I think it entirely appropriate that individual markets should have the flexibility to make the transition at a time when it is right for them. We have learnt a lot from the adoption of IFRS in Europe and were commissioned by the European Commission to do a study of the implementation of IFRS and the Fair Value Directive. Our learnings can be found on our website.
ICAEW also offers an IFRS learning and assessment programme, which aims to help businesses with the challenges represented by complying with IFRS. Both learning materials and assessments are available online.
How relevant are audits in the region with people using accounting standards of their choice and with no regulator to whom the reports need to be submitted?
The key to confidence in auditors' independent opinion on accounts lies in the standards followed, as they provide the framework for the judgments the auditor makes. In today's global business environment, it is important for shareholders and investors to be able to trust the financial information on which they make decisions and to compare information from companies and organisations in different countries – something they can do with more confidence if the standards followed are international and widely adopted.
It is generally accepted in the UK, and increasingly internationally, that a principle-based approach to auditing based on rigorous technical and ethical frameworks provides better quality audits than detailed rules for auditors to follow.
There is a strong presence of chartered accountants from India in Dubai and in the entire region. How do you compare the Indian accountancy laws compared to international laws?
There is a difference between qualifications that are awarded in different markets and the accounting standards which each market adopts. While chartered accountants must meet the requirements of the professional body they qualified with, they are – of course – subject to local laws.
We can't speak for other accountancy bodies but we take our regulatory responsibilities very seriously to maintain the quality of our qualification and the reputation of the ICAEW and its members.
India has a well-respected Institute of Chartered Accountants (ICAI), which ICAEW has recently signed a Memorandum of Understanding with, allowing members of one body to become members of the other after passing a series of set examinations.
Recent cases of fraud such as Madoff's Ponzi scheme and Satyam have emerged in the most regulated environments. What would happen in a country like the UAE where there is no accounting regulator?
Fraudulent activity can happen under any accounting regime in any market and one shouldn't be complacent as to where or when it could happen. The question is really what steps can be taken to reduce the likelihood of fraud taking place. Certainly investing in appropriately qualified finance professionals is one route. Ethics is a key component in the ACA qualification, integrated into every module and exam. We would hope that instilling a strong sense of ethics into our members and ensuring compliance with our ethical code would help.
You have launched the Certificate in Finance Accounting and Business (CFAB) course in the UAE. Will a CFAB holder stand in the same position as a Chartered Accountant from the West or from India?
CFAB – Certificate in Finance, Accounting and Business – is a qualification which gives students a thorough introduction to and understanding of key international finance, accounting and business principles. It is a flexible qualification that can be obtained through self-study or tuition, with exams being completed electronically. It typically takes a year to complete. Holders of the CFAB are not chartered accountants. Qualifying as an ACA typically takes three-five years. It is a challenging qualification that combines work experience with theory and integrated exams.
The CFAB is built on the six knowledge modules of the ACA qualification and can provide a stepping stone to the full ACA. It is a qualification in its own right, particularly aimed at those who would like a "taste" of the chartered accountancy profession – who might later decide to go on and study for the full ACA – and those who hold finance roles within an organisation who do not necessarily need a chartered accountancy qualification but could benefit from a greater understanding of business and finance, accounting, assurance, tax, management and law.
Are there plans of launching similar courses in the other GCC countries?
ICAEW launched the ACA in the Gulf in 2007 and offers exams in UAE (Dubai), Bahrain (Manama) as well as tuition.
Tuition and exams for CFAB are available in Dubai, UAE and in Bahrain. Tuition may become available in other Gulf states as the ICAEW increases its presence in the region. We are continuously looking to increase ICAEW's presence in the Gulf Co-operation Council countries, and aim to open an office there towards the end of 2009 to enable us to better support the needs of our many members in the region, to improve access to training and to build relationships with key stakeholders.
Currently, there are about 550 ICAEW members holding the ACA qualification in the GCC. Three hundred and thirty of those are in the UAE. Of these nearly two thirds work in business. Another 100 students are currently studying in the GCC to become Associate Chartered Accountants.
PROFILE: David Furst President, ICAEW
Furst has been a Chartered Accountant for the past 36 years. He was admitted as a member of the Institute in 1973 and was co-opted on to the council as a "senior partner of a group A firm" in 2002. His client work is focused on the provision of strategic and management advice to professional firms. He was a founding member of the Association of Partnership Practitioners and is currently a member of its multi-disciplinary practice sub-committee.