Accounting vital to commerce

Business

ACCOUNTING is vital to commerce and is undertaken by professionals and qualified people. It is an industry in itself. Business reporter MARK HAIHUIE talked to Certified Practicing Accountants PNG president RICHARD KUNA about the state of the accounting industry and its role as a regulator of the profession.

HAIHUIE: Could you give an overview of the Certified Practicing Accountants (CPA), its various operations and functions?
KUNA: The CPA is established by an Act of Parliament called the Accountants Act (1996). It has been mandated to promote, develop and maintain high standards in the accountancy profession to meet the needs of stakeholders. It strives to ensure that the accountancy profession in PNG is globally recognised, bringing value to its members, the profession and the public. It further strives to deliver its mandate to the greatest extent possible to the long-term economic development of PNG. As a professional accounting body, it strives to promote and develop the accounting profession in alignment with international best practice and principles. The organisation is governed by a council which meets every quarter to deliberate on the strategy and operations of the organisations. The secretariat located at head office administers the daily running of the organisation with 14 staff. Two branches in Lae and Kokopo serve members in the provinces. Some of its core functions are to coordinate the continuing professional development and CPA professional exams. The branches assist with the hosting of the annual national conferences in Port Moresby, Lae and Kokopo.
HAIHUIE: The accounting industry comprises private accounting firms and the office of the Auditor-General. Could you broadly comment on the state of the accounting industry?
KUNA: The accounting profession is dominated by the ‘Big Four’ international chartered accounting firms. They are Deloitte, KPMG, PricewaterhouseCoopers and Ernst & Young. Under the requirements of the Constitution, the Auditor-General conducts audits, evaluations and investigations to assess the economy, efficiency, effectiveness and accountability of public resources entrusted to public sector agencies and their programs. The Auditor-General reports the outcomes of the audits to Parliament, at which point and in the normal course of events, these reports are referred to the Public Accounts Committee. Where appropriate, the committee conducts a hearing on the matters raised and the Auditor-General with others are called upon to assist with the inquiries. The Auditor-General is a very important government institution. It is committed to produce timely and relevant audit reports to Parliament and stakeholders with audit reports of Government and its agencies.  The number of graduates entering Government departments is growing. The accounting industry is growing with the increase in economic activity in the country. The Accounting Registration Board is mandated to perform the regulatory function of registering practitioners and granting them license to practice.
HAIHUIE: What are the main challenges faced by the accounting industry (firms and professional accountants) and possible solutions to address them?
KUNA: The main challenge firms may face is the labour mobility of skilled personnel. After a staff has been trained for a good period of time, he or she can hop onto another firm or employer. The investment and development of skills and training provided by the accounting firms are of the highest standards. Loss of personnel due to personnel seeking greener pastures is a challenge to firms that they may have to contend with. A challenge for accounting graduates coming out of institutions in the country is that there is a less number actually progressing onto the CPA pathway. Many of the graduates do not progress on towards professional certification. It is estimated that only about 20 per cent of graduates go through the CPA programme and less than 5 per cent go out as certified practicing accountants after completing the CPA PNG professional programme. The possible solution is for the Government as the single biggest employer and the private sector to invest in the graduate accountants by enrolling them in the CPA programmes and getting them to complete it. In the long term such investment achieves staff retention and adds value to the organisations.
HAIHUIE: What are the levels of qualifications at present and how can accountants in PNG be marketable internationally?
KUNA: CPA PNG has clear pathways for graduates to go through its professional programme and become qualified CPAs. There are two categories – the certified accounting technician which is a lower tier, and the CPA category. These pathways provide for graduates with diplomas and degrees in Accounting and non-accounting degree qualifications to reach their full professional qualifications. The lower category offers seven  subjects while the CPA category offers eight. The qualifications are conferred after the examinations and after three years of relevant work experience.  Having gained a CPA makes the candidate marketable in  PNG and internationally. Our CPA brand is highly respected and recognisable by the public and business community.
HAIHUIE: What is the current capacity (human resource, funding, and infrastructure) of the accounting industry in PNG? Is it enough to cater for the demand in services from the public and businesses?
KUNA: The need for accounting and business advisory is becoming increasingly important and it is growing. The level of experience and skills required to perform accounting, auditing, taxation and a wide spectrum of business advisory services are varying. Generally speaking, the requirement for accounting personnel is more but the graduates coming out of the educational institutions lack hands-on training.  There are growing numbers in non-government organisations in project managements whose funding comes from donors. They require skills and technical knowledge to perform accounting jobs. There is demand for skilled and technically competent accountants in the country.
HAIHUIE: What are the views of CPA on the development and the future prospects of the accounting industry?
KUNA: The accounting industry is changing rapidly. Some of the critical trends that we observe include fee pressures, rising staff labour costs, and lack of quality staff forcing firms to carefully examine their mix of services, and their positioning in their marketplace relative to their technical/consulting resources and competition. Career development and leadership training will continue to grow as the need for quality professional staff increases. Firms will have no choice but to invest in their best and brightest in all stages of their careers to remain competitive and develop succession plans along the way. On the development front, our professional certification programmes are growing. Presently 38 per cent of the members are qualified CPAs. The rest are progressing towards either a CPA qualification or a Certified Accounting Technician qualification. Our training of graduates is ongoing focused and consistent in achieving our organisation’s goals of developing accountants in PNG. CPA PNG aims to achieve international recognition as a professional accountancy body from the International Federation of Accountants.
 HAIHUIE: What are the views of the CPA on the effectiveness of Government agencies such as the IRC in dealing with private accounting firms and possible reforms in the area of corporate taxation?
KUNA: The  IRC works with the taxpayer community to achieve its mandate in key areas of tax compliance and tax reform. Recently there have been many areas in taxation that the review committee looked into. Some of this may become law soon. It is important to note about the IRC and accounting firms that the Income Tax Act 1959 as amended is the most important legislation that the commissioner-general administers. The tax office tries to maximise revenue collection. On the other hand accounting firms interpret the tax law to provide the best advice on the tax consequence of a business transaction. The dominant aim of the firms is to maximise taxation benefit to their clients. As far as possible that the tax law could allow, they structure their clients’ transactions in such a way that minimises tax liabilities. It is important to note that advances in technology have increased the level of challenges faced by taxation authorities in their endeavour to achieve tax compliance measures. With IRC’s new Sigtas computer system, it is stepping up aggression on securing greater compliance measures within its tax jurisdiction and territorial borders.
HAIHUIE: There are institutions which offer courses in Accounting.  There is a common sentiment that the quantity and quality of accountants joining the industry annually is not enough.  What are the views of the CPA on this?
KUNA: The quality of graduates depends on a range of factors. Some of such factors include the ability and intelligence of the individual, educational instructors, physical resources, duration of study and the required content. Therefore we need to be open about what constitutes quality. We believe everyone has the capability to reach their full potential if they are provided the appropriate training and coaching focused on producing results. We believe many graduates are raw talents that need to be coached into gaining hands on exposure and experience. Only then they are able to develop fully. The government institutions can only absorb 25 per cent of school leavers. Government institutions do not have space to accommodate the reaming 75 per cent. The private institutions are carrying the burden to provide training for some of the 75 per cent of school leavers. Quality can suffer where there is inadequate infrastructure for education, teaching and learning. CPA PNG continues to provide the necessary training and development for graduates seeking careers in accountancy. Given the economic conditions we face, the accounting jobs are growing slowly. The educational institutions are pumping out graduates at an increasingly high rate. Employment opportunities must be created to cope with the increasing number of graduates.
HAIHUIE: The cost of services for private firms is considered high and at times even unaffordable for citizens.  Is there a need for price regulation on this by the Government?
KUNA: The pricing structure of professional services vary. They could include fixed fee, hourly fee, startup fee and project fee. A firm’s dominant aim is to offer fair-value prices for the range of services they provide and to ensure that they meet the evolving expectations of clients and at the same time increasing their profitability. We also note that different clients require complex reporting and financial management, which does require oversight by highly trained professionals. These same highly trained professionals may be the ones monitoring and managing more common bookkeeping tasksbut charging clients a single “rate” for services would potentially put them at risk for paying hourly rates that are not always in line with the level of knowledge required to deliver a service. Instead, evaluating an approximate amount of time required to perform each task in a period and establishing monthly, fixed fee rates for the complexity of work required is more appropriate. This can achieve an equitable and fair pricing on the part of the firms. On the part of price regulation, a proper study may need to be done in order to determine the possibility of price regulation for pricing of accounting services.