2004年-世界发展银行全球_Sri_Lanka___Accounting_and_Auditing_18页_520kb

Summary of the REPORT ON THE OBSERVANCE OF STANDARDS AND CODES (ROSC) - Sri Lanka

Core Content

This report, prepared as part of the World Bank and IMF joint initiative on Reports on the Observance of Standards and Codes (ROSC), evaluates the accounting and auditing practices in Sri Lanka against international standards. It highlights the progress made in aligning local practices with global norms, but also identifies significant challenges in enforcement, capacity, and compliance.

Main Viewpoints

1. Progress in Alignment with International Standards

• Sri Lanka has made efforts to align its accounting and auditing practices with International Accounting Standards (IAS) and International Standards on Auditing (ISA).
• The Sri Lanka Accounting and Auditing Standards Act (1995) and the establishment of the Sri Lanka Accounting and Auditing Standards Monitoring Board are key institutional steps in this direction.
• The capital market has shown recovery, with increased foreign investment and a rise in market capitalization.

2. Institutional Framework

• Sri Lanka Accounting and Auditing Standards Act (1995): Provides the legal framework for setting and monitoring accounting and auditing standards for specified business enterprises (SBEs).
• Companies Act (1982): Sets basic financial reporting requirements for all companies, including the preparation of consolidated financial statements and annual audits.
• Banking Act (1988): Requires banks to prepare and publish audited financial statements in accordance with Sri Lanka Accounting Standard (SLAS) 23.
• Insurance Board of Sri Lanka Act (2000): Mandates insurance companies to follow specific accounting and reporting standards, including actuarial certification of reserves.
• Colombo Stock Exchange Listing Rules: Require publicly traded companies to submit interim financial statements and disclose significant investment and equity holder information.

3. Auditing and Independence Issues

• The Securities and Exchange Commission (SEC) has issued guidelines on auditor independence, including minimum experience requirements and audit partner rotation.
• However, current regulations do not enforce these guidelines, leading to concerns about auditor independence and potential conflicts of interest.
• Audit firms and auditors are often involved in the boards of the companies they audit, raising concerns about impartiality and the appearance of preferential treatment.

4. Professional Education and Training

• The Institute of Chartered Accountants of Sri Lanka (ICASL) plays a central role in professional education, with most students entering the profession through its programs rather than university degrees.
• University accounting programs lack practical training and focus on IAS and ISA application, resulting in a gap between academic learning and professional practice.
• The ICASL curriculum does not include professional ethics as a separate subject, despite recommendations from the IFAC Education Committee.
• Continuing professional education (CPE) is not mandatory, and there is no effective enforcement mechanism for it.

5. Compliance and Enforcement Challenges

• The Monitoring Board has limited technical capacity to review financial statements and identify noncompliance with SLAS.
• There is a lack of implementation guidance and awareness, which hinders the uniform application of standards.
• The enforcement of legal responsibilities is weak, with few punitive actions taken against noncompliant directors or auditors.

Key Recommendations

• Strengthen regulatory capacity: Increase the number of technically qualified personnel in regulatory bodies to ensure effective monitoring and enforcement.
• Improve enforcement mechanisms: Introduce stronger sanctions and ensure compliance with legal and professional responsibilities.
• Legal reforms: Update laws to include specific provisions on auditors' duties and responsibilities.
• Awareness programs: Educate shareholders and top management on the importance of compliance with accounting and auditing standards.
• Enhance professional association: Strengthen the ICASL to better enforce ethical standards and professional conduct.
• Independent oversight: Establish an independent oversight system for the audit profession to protect public interest.
• Upgrade licensing procedures: Align licensing with IFAC standards to ensure higher quality and competence.
• Separate disclosure of audit and nonaudit fees: Improve transparency in financial reporting.
• Enhance education and training: Develop more practical and comprehensive curricula that align with IAS and ISA, and include professional ethics as a separate subject.
• Implement CPE requirements: Introduce mandatory continuing professional education and ensure effective enforcement.

Conclusion

While Sri Lanka has made strides in adopting international accounting and auditing standards, the lack of regulatory capacity, weak enforcement, and insufficient professional education remain critical challenges. The report emphasizes the need for comprehensive institutional reforms, stronger enforcement mechanisms, and improved professional development to ensure high-quality corporate financial reporting.