The numbers game
The role of the accountant has developed dramatically
in line with the changing marketplace. MIRIAM DUNN spoke to three key
figures at the Malta Institute of Accountants secretary general,
Noel Zerafa, president, Benjamin Rizzo and vice president, Anthony Zarb
on the changes they have witnessed in their profession
How has the role of the accountant evolved over the years?
The accountants job has expanded tremendously over the last couple
Formerly, an accountants primary role especially one working
in industry - was number-crunching and producing historic accounts every
so often . Today accountants are often called on to play an advisory
role at a senior level assisting senior management of which they often
form part of. On an international level, the profession has moved forward
in a two-fold way; partly because of the changes moulded by the changing
economy, but also because of the enhanced status of a number of big
These international accountancy firms have followed their clients and
themselves become global organisations , power houses, if you like,
with a huge concentration of resources and brains. This has enabled
them to produce a number of new methodologies and ways of doing things.
Here in Malta we are affected by what is happening abroad, and we constantly
keep abreast of these changes in relation to our practices. The adoption
of International Accounting Standards for the preparation of financial
statements and the Companies Act requirement to conduct audits in accordance
with International Standards on Auditing means that our take-on of new
developments is very fast, so the roles of both accountant and auditor
are changing all the time, as new rules and regulations come on line.
The Malta Institute of Accountants has been established since 1942 and
has the primary role of representing and monitoring the profession.
For example, with effect from 2001 our members were required to pursue
a stipulated minimum number of hours of post qualification educational
activities and we monitor compliance.
The Institute runs its own examinations providing a route for qualification
as an accountant. We also provide lectures leading up to these exams.
With effect from 2003 we will partner with a leading international professional
institute (ACCA) whereby our students will sit exams under a Joint Scheme
to be operated with this professional body.
You mentioned some of the changing trends we have witnessed in the
profession. Have the legislative changes reflected these?
The government is currently in the process of updating the Accountancy
Profession Act. At present, consultation discussions are being held
with professionals in the field, including our Institute.
This will be a welcome piece of legislation since the law dates back
to 1979. The proposed amendments should help fine-tune a number of areas
that need attention to bring them in line with changing trends in the
For example, we would like to see changes made that will allow accountancy
firms to have partners who need not necessarily be certified public
accountants and auditors. At present, the criteria for appointing partners
is restrictive and we would like to see this changed, following what
has been done in many countries abroad. which would allow for example,
someone who is not an auditor but a tax specialist, to be appointed
as a partner of the accounting firm.
In time, the Institute will also be considering the introduction of
external quality assurance reviews.
In other countries, professional bodies have adopted the practice of
conducting reviews of accounting practices periodically every few years.
In the US this has been in place for 20 years, whilst in European countries
it is being introduced gradually. We believe that it is time to consider
the introduction of quality assurance reviews in the local context.
There have been some cases recently where auditing and accounting
companies have been mentioned alongside their clients when there have
been problems with the business operations. Does this give you
cause for concern?
It is difficult to understand why, if a company goes into liquidation
leaving creditors unpaid, this would that be the responsibility of the
auditors. An auditor is not responsible for a business failure.
As already explained audits have to be carried out in accordance with
International Standards on Auditing which lay down detailed rules on
the conduct of the audit and which also define its scope. There are
very specific guidelines on what to do in various instances, such as
detection of fraud or serious error during the course of the audit.
Furthermore, every accountant is bound by the Institutes code
The Institute introduced this for its members and then this was mandated
on all warrant holders by the Accountancy Board
Accountants, as a profession must remain independent from their clients
and retain objectivity unlike other professionals whose role might be
to remain completely on the side of their client.
This means that an auditor should not be influenced by his client as
he must be ready to qualify his opinion on the financial statements
and in certain circumstances also to resign from his position.
But as far are as anomalies are concerned, the detection of error is
easier than the detection of fraud, since fraud ordinarily involves
acts designed to conceal it. It must also be emphasised that when undertaking
an audit, an auditor adopts an attitude of professional scepticism;
but does nottake on the forensic role... If something doesnt figure
then he will have to follow his suspicions through to a much higher
level of checking.
Unfortunately, there seems to be a public perception that an auditor
who doesnt detect fraud is at fault, and this is not the case.
In spite of a great deal of effort in carrying out an audit, fraud can
still go undetected.
It should also be stated that, following a complaint or the receipt
of other information, the Institute does take action where it believes
someone has not acted in accordance with the professional code and brought
the profession into disrepute.
Can this mean that accountants employed directly by a company are
put in the delicate position of having to please their boss while also
adhering to their code of ethics?
This is, admittedly, a very interesting issue and one that is probably
sometimes rather delicate.
Having said that, there is no doubt that the code of ethics applies
to all professionals. Integrity must prevail, and one is an accountant
by profession, first and foremost, irrespective of who ones employer
Moreover, it can never be in a companys interest to misrepresent
its financial position even though this may seem attractive in the short
term.. Once a business does then it sets out on a path that may be very
dangerous and could invariably backfire.
It should be stressed that an accountant is perfectly entitled to undertake
legitimate tax planning which relates to organising a companys
affairs to minimise tax liability - that is within the law. But it has
been shown time and again that a company that plays around with its
financial statements, whoever it fools in the process, is likely to
suffer in the long run.
You mentioned tax-planning. Have we reached a stage where buzzwords
we keep hearing, such as creative accounting and earning
management have become part of the modern accountants life?
Earnings management is aimed at helping a business to have a convenient,
smooth flow of earnings from one year to another in accordance with
market forecasts, while creative accounting involves the employment
of accounting techniques and policies to help one get the results one
Creative accounting involves the use of tactics that are within the
accounting norms, admittedly, but the practices are open to question
since they may distort the true financial position.
Financial statements are there to give information to users, not to
provide manufactured results, even if these are produced within the
rules. Companies are duty bound to provide accounts that are consistent
from one year to another and accounting standards should be employed
consistently from one year to the next.
Has your role changed with the Finance Ministers bid to clamp
down on tax evasion?
This is not an issue for the Institute. As tax-payers, if there is tax
evasion, we would expect the Finance Ministry to do everything in its
power to ensure people are paying the right amount of tax.
For this reason we also have no problem with benchmarking, which is,
after all, there as a guide as to what someone should be earning in
a certain line of activity, not to increase the tax liability.
Accountants have also been criticised for giving clients the wrong
advice in certain situations which could have contributed to Maltas
cash-flow problems by delaying payment of amounts due. How do you react
It is unlikely that an accountant would advise his client from withholding
payments of liabilities. Granted, the mentality to do this still exists
in some areas, but our notion is that this has more to do with a lack
of funds or the entrepreneurs attitude than the accountants
Yes, there are some businessmen using their suppliers money to
fund their business ventures, but our perception is that a growing number
of business operations are becoming more professional and well-run with
a good financial controller and corresponding set-up in place.This interview
has been reprinted following typological errors last week