IFAC’s globalization attempts in LDCs: a success story?
In 2006, the International Federation of Accountants (IFAC) issued seven statements of membership obligations (SMOs) to assist ‘high quality performance by professional accountants’. The member bodies of IFAC, which includes national accountancy bodies from most of the countries in the world, were required to give their best efforts to abide by the SMOs, and failure to do such without satisfactory explanations would result in suspension or removal of membership. The seven SMOs issued by the IFAC covered areas such as audit quality, audit education, code of ethics for professional auditors, disciplinary procedures to be adopted by national auditing bodies, adoption of ISAs and IFRS, and accountability and auditing in the public sector.
Like many other researchers and academics in this area, I was also initially skeptical of the applicability of these SMOs in a less developed country (LDCs) such as Bangladesh, given that that these mechanisms, developed in the context of developed economies, would only work under assumptions of an efficient capital market, higher investor sophistication, and presence of effective second order institutions (such as efficient regulators, judiciary etc) that would complement such governance schemes. However, a few years down the line, it appears that some of these globalization attempts are actually producing results that might change the image of the accountancy profession in this impoverished yet economically promising nation.
This article was originally published in Business & Economy - Banking, Finance, Markets on August 1, 2011.