Wednesday 16 June 2010 7:57 pm

Accountants are vital for boosting economies right across the world

IT’S clear we are living in unprecedented economic times. Indicators from various sources – including the latest quarterly survey of ACCA members, the largest of its kind in the world – suggest “cautious optimism”, and no more, is appropriate. In 2010, the financial services sector continues to dominate all levels of debate, from its willingness to lend, through remuneration levels, to the very business model itself.My colleagues and I have been thinking about what makes a truly sustainable business world, especially in the face of economic uncertainty and turbulence. Our answer is a report called In Pursuit of Sustainable Business, which we’re publishing later this week. In this we discuss the impact of the last two years, and also look at how the finance professions can make a difference.Accounting was not the root cause of the financial crisis, but it has an important role in supporting and advising businesses on how to find a way out of it. The financial crisis – and its aftermath – is not fundamentally a story about one country, or one sector. Instead, it has highlighted the interconnected nature of the world in which we live and do business. Moving forward is about creating the right environment for long-term business success, with appropriate strategies and plans based on sound analysis of opportunities for success, with the clear evaluation and mitigation of risk. And it is also about the contribution made by accountants and finance professionals to business.In terms of the day-to-day agenda for senior finance professionals in recent years, the story has been about cost, cash and debt. The priorities of chief finance officers (CFOs) have had to change. The Deloitte CFO surveys of 2008 onwards show just how much these priorities have altered. In 2008, respondents said cuts and disposals were top of the list; in 2009, they revealed a more measured view, with opportunities to build a long-term presence and greater capacity in markets,Then in 2010, the respondents looked to bring new skills into the organisation – as well as cost controls, new products and deleveraging.Now to the nitty-gritty of the accountancy world – regulation and standards. The International Accounting Standards Board’s very own Financial Crisis Advisory Group has called for the need to accelerate the adoption of global accounting standards in financial reporting.Convergence was underway well before the financial crisis struck; when asked in 2008, CFOs overwhelmingly indicated that they expected uniformity to bring benefits to their business. Yet the blame placed on certain aspects of existing International Financial Reporting Standards (IFRS) for causing the credit crunch – fair value accounting in particular – has served to decrease the momentum. From a business perspective, uniformity will not only cut red tape, but also improve investor confidence by making financial reporting more transparent. Far from abandoning its efforts towards IFRS, the accountancy profession must now redouble them.Small and medium-sized Enterprises (SMEs) are the engine of the global economy. Yet while studies suggest SMEs have continued to grow in the downturn, they point also to postponed investment, squeezed access to finance and cost-cutting measures. Accountants’ support to small businesses has rarely been limited to regulation and tax, instead spanning finance, marketing, health and safety, pensions, sustainability, IT, HR and beyond.Now, faced with the prospect that credit conditions may never recover to 2007 levels, SMEs depend on this support as never before in order to plan for the long term. Key to creating jobs and innovation, supporting stability and driving macroeconomic growth, their contribution to recovery of developed and developing economies alike is unparalleled. And with around 65,000 members working in or advising small businesses, ACCA’s role, too, is substantial.DEVELOPING ECONOMIES It is vital to support accountants working in developing economies, where the World Bank and the UN report a lack of accounting professionals and recognised accounting standards. The case for capacity-building is compelling; accounting and audit are not just important for avoiding crises, they are also central to reducing the corruption which inhibits growth. Moreover, a growing body of research reveals that governance arrangements – of which accounting forms part – strongly influence social indicators such as infant mortality and adult literacy rates, as well as making countries more attractive to investors and enabling them to develop more rapidly.The accounting infrastructure is part of the entire legal and regulatory system designed to secure property rights, enforce contracts, and provide financial information – all vital to the development of emerging stock markets. With our own surveys suggesting that emerging economies are increasingly integral to the global economy, it is vital that these values are enhanced.Next, and while it is tempting to assume that businesses’ appetite for the principle of sustainable development have slowed along with global economic conditions, reducing the effects of business on climate change must remain a priority for accountants. Reducing energy consumption is not only good for the environment, but also the bottom line. In the future, accountants must increasingly seek cost savings and competitive advantage through green technology, helping businesses to decode taxes, subsidies and penalties and apply a market value to potential social and environmental impacts.Finally, it has become increasing apparent over previous years that business growth is facilitated by the effective management of resources, the clear understanding of risk by the board and by getting the fundamentals right. Yet the financial crisis has underlined that these fundamentals have simply not been observed; the finance function has lacked resources and status within organisations, with risk management and remuneration apparently decoupled.Post-crisis, it is for accountants to ensure risk is properly managed – and for accountants, with their ethical training and professional responsibilities, to drive the adoption of ethical and sustainable business practices from the boardroom downwards.The reality is that accounting is the language of business. Beyond 2010, professionals will need to be well-versed in an increasing number of business operations, across all sectors and all global markets.As the global body for professional accountants, ACCA will seek to address the challenges posed for the global economy, not only by providing our members with the relevant skills and training to enable business to prosper, but also by acting in the public interest through encouraging governments worldwide to create the conditions for long-term, sustainable growth.Andrew Leck is head of ACCA UK