The lack of international accounting standards makes it difficult for countries to attempt to control multinational corporations. Similarly, investors and analysts cannot make the comparison of performance of companies in the same industry, but in different countries.
This was stated by David M. Hunt, Member of Council for Nottingham, Derby and Lincoln and Chairman of Professional Accounting Group for Education, while delivering the 17th Shoaib Memorial Lecture, organised by the Institute of Cost and Management Accountants of Pakistan (ICMAP) on Wednesday
He said it was rather difficult for countries to compare themselves with other countries when the results of one corporation can differ by a factor of up to 25 depending under which accounting standard the profit is reported.
Hunt pointed out that the harmonisation of international accounting standards was only possible if the countries and corporations were ready to accept compromises in the extreme reporting measurements.
The renowned financial expert said there were major changes occurring which are likely to have a significant effect on the world economy in the next few years, adding the increasing manufacturing strength of the Far East countries, the political emergence of the Eastern European countries and increasing economic instability of the former Soviet Union republics are major factors to be considered.
He said while the oil rich countries were more or less able to protect themselves when major world economic decisions are taken by Group-7 countries, the other developing and Third World countries will only be able to influence events through greater co-operation.
With regard to the liberalisation of trade under WTO, he predicted that increasingly strong and increasingly international consumer and environmental lobbies could well affect demand and patterns of trade. It is, therefore, likely that there may be return to more natural (or greener) products with less emphasis on environmentally damaging processing of those resources. He said it is possible that the less developed economies may well benefit as long as there is not a counteracting and economically damaging increased dependence on oil and oil-based products.
Hunt pointed out that in a number of countries in order to stimulate the economy, their governments have sought to introduce a more competitive environment not only for commercial and industrial organisations, but also for the professions, saying this, in turn, has posed threats to independence, integrity and standards.
On the other hand, he said consumer and environmental movements for increased accountability and responsibility within the society have led, in turn, to calling for stricter standards both technical and ethical in many areas.
He said the accounting profession has so far led to the establishment of accounting and auditing standards, however, this apparent and total self-interest has recently led to calling for non-accountants to be brought into the standard setting process.
Earlier, presenting the address of welcome, ICMAP President Sher Afgan Malik said that Shoaib Memorial lecture is biannually held to commemorate the accomplishments of Muhammad Shoaib, the founder of ICMAP.
He said the lecture has traditionally been delivered by eminent scholars of high professional repute and international stature.
Turning to the subject of this year memorial lecture, he said one of dominant themes in Hunt's lecture is the topic of how an accountant can manage the changes that are taking place within the rules and governing standards of our profession.
Malik said ironically, accountants are more often associated with conservatism than propensity for change. He, however, said accountants feel the pulses of the business, as they put financial statements that give an accurate picture of a company's financial health of an entity, whether private or public.