Accounting for Growth in Latin America and the Caribbean
202 Pages
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Accounting for Growth in Latin America and the Caribbean


YouScribe would like you to have this content free of charge
202 Pages


The importance of moving toward high-quality, global standards of accounting and auditing has never been clearer. In the midst of the global financial and economic crisis, the leaders of the Group of 20 met and issued their "Declaration on Strengthening the Financial System", placing significant emphasis on sound accounting and auditing standards as a critical piece of the international financial architecture.
Transparent and reliable corporate financial reporting underpins much of the Latin America and Caribbean development agenda, from private-sector-led growth to enhanced financial stability, facilitating access to finance for small and medium enterprises, and furthering economic integration.
For nearly 10 years, the World Bank has prepared diagnostic Reports on the Observance of Standards and Codes (ROSCs) on Accounting and Auditing (A and A) at the country level. In Latin America and the Caribbean, ROSC A and A reports have been completed for 17 countries. This book takes a step back and seeks to distill lessons from a regional perspective.
'Accounting for Growth in Latin America and the Caribbean' is the first book to examine financial reporting and auditing in the region in a systematic way, drawing on the World Bank's years of experience and analysis in this area. The book is designed to inform the policy dialogue on accounting and auditing issues among government officials, the accounting profession, the private sector, academia, and civil society in LAC countries. It also seeks to disseminate the lessons learned to key players at the international and regional level, including the donor community, in order to generate momentum for reform of accounting and auditing throughout the region.



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Published 18 November 2009
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Accounting for Growth in Latin America and the Caribbean
Accounting for Growth in
Latin America and the Caribbean
Improving Corporate Financial Reporting to
Support Regional Economic Development
Henri Fortin
Ana Cristina Hirata Barros
Kit CutlerAccounting for Growth
in Latin America and
the CaribbeanAccounting for Growth
in Latin America and
the Caribbean
Improving Corporate Financial Reporting to
Support Regional Economic Development
Henri Fortin
Ana Cristina Hirata Barros
Kit Cutler
Washington, D.C.© 2010 The International Bank for Reconstruction and Development/The
World Bank
1818 H Street, NW
Washington, DC 20433
Telephone: 202-473-1000
All rights reserved
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This volume is a product of the staff of the International Bank for Reconstruction
and Development/The World Bank. The findings, interpretations, and conclusions
expressed in this volume do not necessarily reflect the views of the Executive
Directors of The World Bank or the governments they represent.
The World Bank does not guarantee the accuracy of the data included in this
work. The boundaries, colors, denominations, and other information shown on
any map in this work do not imply any judgement on the part of The World Bank
concerning the legal status of any territory or the endorsement or acceptance of
such boundaries.
Rights and Permissions
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All other queries on rights and licenses, including subsidiary rights, should be
addressed to the Office of the Publisher, The World Bank, 1818 H Street NW,
Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@world-
ISBN: 978-0-8213-8108-3
eISBN: 978-0-8213-8111-3
DOI: 10.1596/978-0-8213-8108-3
Library of Congress Cataloging-in-Publication Data
Accounting for growth in Latin America and the Caribbean : improving corporate
financial reporting to support regional economic development / Henri Fortin, Ana
Cristina Hirata Barros, Kit Cutler.
p. cm. — (Directions in development)
Includes bibliographical references and index.
ISBN 978-0-8213-8108-3 — ISBN 978-0-8213-8111-3 (electronic)
1. Accounting—Latin America. 2. Accounting—Caribbean Area.
3. Corporations—Latin America—Accounting. 4. Corporations—Caribbean
Area—Accounting. 5. Economic development—Latin America. 6. Economic
development—Caribbean Area. I. Fortin, Henri, 1964– II. Hirata Barros, Ana
Cristina, 1973– III. Cutler, Kit, 1979–
HF5616.L29A33 2009
Cover image by: Imagezoo/
Cover design: Naylor Design, Inc.Contents
Foreword xi
Preface xiii
Acknowledgments xv
About the Authors xvii
Abbreviations xix
Overview xxiii
Chapter 1 Introduction and Background 1
Importance of Accounting and Auditing for
LAC’s Economic Development 2
Accounting and Auditing in the LAC Regional
Economic Context 6
International Momentum for Reform 9
Reforming A&A in LAC: Three Success Stories 11
Drivers of Reform in LAC Accounting and Auditing 14
About This Book 18
Notes 21
Chapter 2 National Corporate Financial Reporting Frameworks 23
Completeness 24
vvi Contents
Coherence 30
Adaptability 33
Differentiation 33
Conclusion 36
Notes 37
Chapter 3 Preserving the Good Name of the
Accounting Profession 39
Structure of the A&A Profession 40
Role of A&A Professional Bodies 41
Entry Requirements: Limits of a System Based
on University Accreditation 48
Requirements to Maintain a Professional License 49
Regulation and Oversight of the Statutory Audit
Function 52
Role of International Organizations and Regional
Cooperation 56
Conclusion 58
Notes 58
Chapter 4 The Role of Education Systems 61
Recent Trends in Higher Education 62
Course Content and Quality of Accounting
Curricula 65
Faculty and Students 70
Conclusion 73
Notes 76
Chapter 5 Adoption of International Accounting and
Auditing Standards 77
IFRS in LAC: Overcoming the Adopt versus Adapt
Dilemma 78
Key Challenges in IFRS Adoption 78
Establishing a Robust Standard- Setting Framework 82
National GAAP: An Uncertain Future 87
IFRS for SMEs 88
IFRS in the Financial Sector 88
Adoption of International Standards on Auditing
in LAC 90
Conclusion 91
Notes 92Contents vii
Chapter 6 Ensuring Compliance with Accounting and
Auditing Standards 95
Few Incentives to Produce Reliable Financial
Information 96
Enforcement of Financial Reporting Requirements 98
Enforcement of Auditing and Professional
Standards 103
Disciplinary Regimes 104
Conclusion 107
Notes 108
Chapter 7 A Roadmap for Reform 109
Pillar 1: Setting Adequate Requirements 110
Pillar 2: Developing Capacity in Accounting and
Auditing 114
Pillar 3: Enforcement 118
The Role of the World Bank and Other
Development Partners 123
Notes 127
A About the ROSC Accounting and
Auditing Program 129
B Coverage of ROSC A&A Program in
Latin America and the Caribbean 133
C IFRS Adoption in Latin America and
the Caribbean 135
D Country Action Plans: Developing a Strategic
Vision for Reform and an Agenda for Action 137
References and Other Resources 143
Glossary 153
Index 159
1.1 ROSC A&A Follow- Up Activities 19
2.1 Public Interest Entities (PIEs) 25viii Contents
2.2 IFRS for SMEs 35
3.1 IFAC Statements of Membership Obligations (SMOs) 46
3.2 Statutory Auditor Registries in Argentina and Honduras 53
3.3 El Salvador’s Independent Audit Oversight Board 55
4.1 Panama’s Authorized Public Accountant
Specialized University (UNESCPA) 75
5.1 Brazil’s CPC: Good Practice in Standard Setting 83
5.2 The European Union’s Endorsement Process for IFRS 85
6.1 Compliance with Applicable Accounting Standards:
Evidence from the ROSC A& A 99
6.2 The Organisation of Eastern Caribbean States (OECS):
A Lesson in Cooperation 101
6.3 Compliance with Applicable Auditing Standards:
Evidence from the ROSC A& A 105
7.1 Cross- Regional Comparison: Certification Systems in Asia 115
7.2 Audit Oversight Systems
in Korea and Sri Lanka 122
xxv1 Three Pillars of Financial Reporting Systems
2 Setting Adequate Corporate Financial Reporting
Requirements xxvii
3 Enforcement Regimes: Varying Degrees of
Public Accountability xxix
4 Four Priority Reforms for Strong Corporate Financial
Reporting Frameworks xxx
1.1 A Comparative View of LAC’s Financial Depth 3
1.2 Latin America’s Deepening Financial Markets 16
3.1 Types of Accounting and Auditing Services and
Size of Firms 40
4.1 Private Enrollment in Latin America and the Caribbean
as a Percentage of Total Enrollment (1985–2002) 63
4.2 Coverage of Accounting Curricula in LAC 68
4.3 Constraints to Offerings in International Standards 69
7.1 Foundations of a Sound Corporate Financial Reporting
F ramework 110
7.2 “Right- Sizing” the Rules 111
7.3 Enforcement 118