Discussion Ieader

Francesco SERAO

Discussion Ieader

Italy

Mr. President, Ladies and Gentlemen,

It is a great pleasure for me to address this Mediterranean gathering of professionals and try with all of you to define the challenges of a liberalisation process, which necessarily involves the Mediterranean area in different ways. Liberalisation implies a process of deregulation at national level and the search of a new balance between the market forces and the quality assurance in the provision of professional services. But deregulation in national legislation does not necessarily mean that no other rule can be introduced or applied.

The aim of this second session is to in-depth examine the following aspects:

First of all, to be sure about the objectives of a liberalisation process in the professional services field; and the first idea that comes to mind is the quality which should result from a competitiveness condition. It is important to define clearly what we intend with the term "quality". In a broader sense quality means also the respect of ethical rules and a high degree of independence, which is the subject dealt with by the third round table. If quality can be expressed in terms of trustworthiness then it leads me to highlight the second aspect of this theme. The process of liberalisation and the concrete achievement of a marketplace, where professionals can provide services in other countries, are necessarily based on several premises and on the harmonisation of a minimum level of the professional activity. Five main fields are then to be harmonised in order to give concrete value to liberalisation:

a. The scope of professional activities subject to regulation (regulated and unregulated activities). In this sense statutory auditing and some legal services are to be considered as regulated activities.

b. The professional standards of auditing and accounting. The disclosure of IASs and ISAs is very important not only for the impact on liberalisation and reliability of the audited accounts but also for a cost-effective management of enterprises.

c. The education curriculum as requirement for mutual recognition. The recent initiatives in this field, supported by the ISAR (Intergovernmental Standards of Accounting and Reporting) within the UNCTAD, and IFAC (through its Educational Committee) are very interesting because it is not only the statutory auditing field which is addressed, as in the EU eight directive, but a larger view of the profession is aimed at. However, the creation of a benchmark is sometimes criticised and considered to be a weak compromise rather than an enzyme of competition.

From another point of view it is interesting to reflect on the role that Multinationals firms can play in achieving uniform standards (quality and access) as alternative to external (or governmental) regulated models.

d. Another area, which might be considered as a safeguard measure is the area of ethics and independence rules, both for individuals and legal entities. At a European and International level the discussions on the minimum common requirements for the constitution of professional partnerships and firms is still vivid; the debate is concentrated on composition of the capital (both of the majority and of the minority) and the choice of the legal form.

e. And a last interesting consideration is with regard to e-commerce transaction and the on-line provision of professional services. We are all aware of the high rate of development which characterises this sector and the need to reach clear and precise rules for certain legal aspects. Because of the global vocation of e-commerce it is important to reach harmonisation on an International basis. Some aspects are already addressed by European legislation, such as the Directive on electronic firms (3 December 1999) and the very recent Directive about e-commerce (8 May 2000). Between EU and USA the "Safe Harbour" agreement has been reached with regard to the transfer of personal data between the two continents. Another aspect, not satisfyingly defined is related to ensuring that intellectual property and other content transmitted on the Internet is afforded adequate levels of protection. But I did not mentioned the most complicated aspect, which is far from being harmonised or even transparent and clear which is the taxation of on line services. We must then think about all the implication of this mode of supply also in terms of specific ethical rules.

All these elements together create the conditions for liberalisation.

For each of the mentioned aspects a specific role and tasks can be stimulated and covered by the profession and this is the challenge of today’s accountancy and auditing profession. Some very important steps have been taken but the way to run is still long while the time, as always, is running short. We should, therefore, try to change the pair of glasses that each of us uses in our everyday working life and put on a new pair, which will allow us to see the same path with the same colours and avoid myopia for a professional community which can allow itself to look far away.

The third aspect to question is the impact of the liberalisation process on transitional economies. It is quite easy to point out the major barriers to cross border provision of services among equally developed countries. But specific problems arise when we consider the implications for countries in which the profession does not even exist or where the profession is practised in its strict traditional scope. In this area the role of the profession is not only to give solution to conflicting domestic discipline, but also to strengthen the infrastructure of the profession and the entrepreneurial texture of these transitional economies.

The search for a coherent framework: as we know there are different initiatives and projects at International level, which not only recommend the removal of actual barriers, but also propose new schemes for the professional services market. It is important to evaluate the underlying concepts and targets of these projects and see whether the proposed standards are indeed capable of defining a coherent framework. International associations and bodies, such as IFAC, FEE, WTO, UNCTAD and EC have developed recommendations, guidelines or rules with regard to the accreditation or recognition of professional qualification and of professional partnerships. These different projects have a different objectives and sometimes the proposals are even contradictory, creating a "new confusion" rather than a "new order" in the global market. As a result of this undefined frame the objectives of safeguarding the public interest and the quality of the service are at risk.

In addressing the general issue a specific consideration will be dedicated to the issue of legal entities and to the recognition of professional qualifications.

Questions:

1. What are the "new" rules, or the "International" rules that should be proposed by the profession in filling in the "holes" created by national deregulation ?

2. Which are the projects proposed by the various International organisations and is the proposed framework coherent with the public interest which must be safeguarded at any cost (Independence, ethical rules, quality)?

3. Please highlight the concrete proposals with regard to recognition of professional qualifications and treatment of legal entities.

4. Impact of liberalisation on transitional economies and the risk/benefits derived from an oligopoly asset(if not monopoly) of the professional services market (big firms).

Conclusions:

The liberalisation process has certainly begun and we are part of this process. Domestic discipline has to be reviewed but it does not mean that all the rules, which govern the professional practice, have to be abrogated because of liberalisation. It rather means that "something" more should be done and that "someone" has to do it. Surely the professional bodies, through an International approach, can and should give their contribution to rethink the rules and the right balance between on the one hand the general, public interest to be safeguarded and on the other the search for higher quality in the provision of professional services.