The conference of The World Bank Centre for Financial Reporting Reform

Paul Cooper reports on the conference of The World Bank Centre for Financial Reporting Reform, held in Vienna on 2–3 June 2014. The conference covered two programmes that support accounting, auditing, and institutional progression in a number of countries in Eastern Europe and the former Soviet Union.


The conference covered two programmes. The first is run in Albania and the countries of the former Yugoslavia that have yet to join the EU (Bosnia & Herzegovina, Kosovo, FYR Macedonia, Montenegro and Serbia), or have recently joined (Croatia). The second assists certain former Soviet republics (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine).

The conference events provided insights into a part of the world which has the potential for growth in both its economies and accounting profession, once it does overcome a number of long-standing problems. At the moment, the support of western European governments and the EU, via the World Bank projects, represents certainty and a means of achieving progress.

PAO (Professional Accountancy Organisations) Regional Forum, 2 June

This Forum discussed the development of SMPs. As well as the World Bank, IFAC and FEE presented (see below for an explanation of acronyms).

The session on moving beyond traditional accounting services focussed on assurance engagements. This is price-sensitive work, but can be more profitable than audit, involve the use of judgement and be effective for building staff competency. However, the audience questioned how popular this work is proving with clients. Sustainability and integrated reporting were, in fact, seen as providing the main opportunities for advisory work, which would take SMPs beyond core accounting services to those offered by a ‘trusted advisor’.

SMPs focussing on accounting compliance tend to perform low-fee automated work, with high initial costs. More specialised SMPs can differentiate themselves by their competency and professional standards, but need to avoid becoming too close to their clients, and face language barriers when starting to do business across borders.

IFAC pointed to the practical problem that translations of Standards are expensive, but need to be of a good quality. Countries have developed more than one PAO, based on the area of work (eg the Audit Chamber, tax professionals), but this is inefficient for small countries, which in the ‘East’, also still have an element of government involvement in their accountancy sector. IFAC produces a guide on SME audits, and believes that it ‘thinks small first’, so that its standards can be applied proportionately without the need for a ‘light’ version to cover SMEs/SMPs. In a response to a question from ACCA, IFAC confirmed that it will be looking at the difficulties faced by small practitioners in applying and understanding IFAC requirements.

ACCA also raised questions on SMP competencies as IT use increases, and the scope for assurance services and compliance advice. A talk on ‘where SMPs are now’ identified opportunities as well as difficulties. The former include developing a niche, and wide-ranging compliance help (not just on accountancy-related matters). SMPs also need to ‘stand-back’, and this will not be helped by a decline in audit training and a potential over-reliance on the information produced by IT systems.

The session on technologies drew on the ACCA–IMA report, Digital Darwinism: Thriving in the Face of Technology Change, (October 2013). The profession is seen as conservative in its use of IT, and issues for SMPs include security, access to systems from outside the office, and a lack of audit programmes written in the national language. The World Bank is working on a set of audit programmes suitable for more than one country.

Ministerial Conference, 3 June

The theme of this related day was the development of financial reporting frameworks for SMEs in the same ‘eastern’ countries as above. One session was held by national ministers, whilst others were mainly presented by international bodies, such as IESBA, EFRAG and IFAC.

Setting the scene, it was reported that the Balkans have high rates of unemployment, and the World Bank is funding lending to local SMEs, the more dynamic of which create the majority of jobs. It has been found that regulation and other administrative burdens are not as harmful to small businesses as many believe, although it remains the case that they do have the highest compliance costs per employee.

The Finance Ministers’ session proved particularly interesting. The Ministers of Albania, Serbia and Moldova all have strong academic and/or business backgrounds (rather than coming to the role as elected politicians), and each provided their insight into the challenges they face, and the progress made nationally. The three countries have not made as much progress as hoped for in the past 20 years, and more pressing social challenges, such as job creation, have overshadowed developments in accounting and financial reporting. State ownership and a lack of support for entrepreneurs remain obstacles for the SME sector: there are still very few large private companies.

Positive developments include the adoption of International Standards, partly driven by the World Bank’s projects. For example, the use of the EU Accounting Directive in Moldova has facilitated access to finance from local branches of international banks. The resources provided by the projects are helping to secure longer-term improvements in financial reporting, at a time when governments are pre-occupied with more immediate social problems. Financial education also needs to be more rigorous, and to cover business owners (this is already starting to happen with government officials).

The Standard-setters’ Panel (IESBA, IAASB, IASB, EFRAG) focussed mainly on the IFRS for SMEs, including the current IASB review (like ACCA, respondents generally want certain optional treatments to be included), and adaption as opposed to adoption, as the EU does not endorse the IFRS for SMEs (nor, in fact, views it as appropriate). The UK approach of adaption (FRS 102) was discussed. It was reported that the Accounting Directive has removed all but one inconsistency (relating to unpaid share capital) between the IFRS for SMEs and EU law. Audit developments discussed by the IAASB included the revisions to audit reports, action as a result of findings on the implementation of the clarified ISAs in practice, and the encompassing of non-statutory assurance work. Both here and with the Code of Ethics (IESBA), panellists raised the concern that ‘proportionality’ still has to be looked at for SMEs.

The final main session of the day was a Practitioners’ Forum at which the main presentation was by a director of an Austrian ‘Mittelstand’ family company, which is the largest cinema operator in Austria, and has faced challenges in expanding eastwards into countries such as Albania and FYR Macedonia. The other panellists represented IFAC and FEE / PwC. They identified a need for improved competency amongst SMPs, but also more entrepreneurship to achieve growth. Factors which remain familiar are the importance of accounting / compilation work, the benefit of a trusted relationship in providing advice to SMEs, and the increasing view that time-based billing should now be obsolete.

Explanation of Acronyms

Organisation full names link to their website (in a new window)


European Financial Reporting Advisory Group


Fédération des Experts-comptables Européens

FRS 102

The financial reporting standard applicable in the UK and Republic of Ireland, issued by the Financial Reporting Council


International Auditing and Assurance Standards Board


The International Ethics Standards Board for Accountants


International Federation of Accountants


The International Financial Reporting Standard for Small and Medium-sized Entities, issued by the International Accounting Standards Board


Institute of Management Accountants


Small and medium-sized enterprises, which approach SMPs (see below) for accounting services and other advice


Small and medium-sized practices, such as those run by ACCA-qualified professional accountants