Abstract
Previts et al. have assembled essays on financial reporting for a group of countries which is disparate both in location and in history, as the book’s title already implies and the chapters confirm: Egypt, Iran, Israel, Russia, Saudi Arabia, South Africa and Turkey. Their Foreword, sensibly, does not offer an attempt to discern shared features or dominating trends in the history or present-day performance of financial reporting. The common feature they identify is that these essays will enable a wide range of readers to “improve their understanding of the origins and development of accounting, financial reporting, and public policy in key economies of the world in the early twenty-first century” (p.xi). This is an objective that can be attempted in a variety of ways, some more effective than others, as the book’s essays demonstrate. The significance of “origins” differs in each study.
The shortest chapter, in which Mostafa Ali deals with Egypt, looks back the furthest distance, beginning in 3300BC with the early dynastic period of the Pharaohs. In fewer than three pages, it gets from there to “Modern Accounting” which, it claims, began in 1883. That was the date of the Commerce Act which required businesses to keep accounting records. Subsequent relevant events – the recognition and growth of an accounting profession, the creation under Nasser of a centralized national system and the transformation post-1973 to a market economy, eventually adopting IAS – are all treated as part of this single “modern” period. The result is that the story of Egyptian accounting is viewed simply as a series of key dates rather than as the development of a particular national system. What is lacking is the idea of an Egyptian method of accounting, with particular practices that are introduced and accepted or rejected in the face of tradition. To take one example: Mostafa Ali notes the development of the accounting profession from 1914 onwards, and the later formation of a professional body: he records also that the profession went through a “horrible time” (p.9) when a governmental agency dominated audit in the 1960s/early 1970s. But how did the profession survive and recover despite the loss of audit? What are the current influences on it, as it encounters international standards? Mostafa Ali notes that there are problems for the auditors of small companies in adjusting to these, but has nothing to say about the evidence for these problems or the steps being taken to avoid them and adjust to a new environment.
It is interesting to contrast the chapter on Egypt with Al-Hogail’s treatment of Saudi Arabia. He admits that this is a country with a “fairly short” history (p.107) that begins with formal foundation in 1932. After decades in which accounting was mainly the preserve of international fuel and banking companies, relevant local regulation began with Companies Acts in the 1960s. But this did not result in a single system: Al-Hogail makes the interesting point that Saudi Arabia was subject to a number of different influences, thanks to companies and professionals who were based there but came from the US and from various parts of Europe (p.112). It was only in the 1980s that the Ministry of Commerce and Industry (MOCI) initiated a project to control accounting by creating a national system, with contributions from academics, the profession and local businesses. From then onwards, accounting practice and the accounting profession developed with an awareness of international practice, what Al-Hogail calls “leveraging on the successes achieved in other developed countries … a pragmatic approach” (p.132).
The two essays are worth comparing because they seem to demonstrate alternative approaches to the editors’ objective. Mostafa Ali packs a great many dates and facts into his treatment of accounting in Egypt, but what is lost is the sense of any kind of development or change. Things keep happening, some positive and some adverse: it is not clear, though, how a particular Egyptian accounting emerges. Al-Hogail is perhaps less challenged by a country with a shorter history, but is also assisted by a particular conception of the extent to which the Saudi profession and reporting system have been developed: first by an assortment of international influences and then by a deliberate programme of observing and copying successful international strategies.
And another question is raised by the two contrasted chapters. How far into the past is it possible to trace a “history” of accounting for countries which were abruptly modernized by Western influences in the twentieth century? This is the case for all the countries in the collection. Colonization, global business and rapid, drastic modernization, singly or jointly, have shaped them and created a distinct split in accounting practice. The Anglo-Saxon model, with a slow accretion of regulation from the eighteenth century onwards and the steady growth of a specialized accounting profession, is not applicable to Israel or to Saudi Arabia, for instance. The chapter on Israel begins with the statement that accounting and bookkeeping “have existed in this ancient land for centuries” (p.49) but the rest of it necessarily traces the development of practice and profession from 1931 (briefly) and then at greater length from 1948 and independence. It shows the successful introduction of IFRS thanks to the “innovation and adaptation” that Eden and Elnathan describe as “cultural characteristics” (p.72) of Israel.
In some chapters, the twenty-first century position is one of steady “innovation and adaptation”, in others a contested, difficult process of abrupt breaks with the past, as in Russia or Iran. It is a process that suggests scope for a comparative history rather than the series of individual studies assembled here. Carnegie and Napier, in their exploration of comparative international accounting history (CIAH), offer different bases for comparison: synchronic (different countries at the same point of time), parallel (different countries over the same period) and diffusion (the international movement of an accounting technique) (2002: 695–696).
I suggest that this collection presents an example of the potential value of CIAH, in comparing the process of accounting change in countries where it has been rapid and uneven. What are the most potent forces – government, global companies, the profession – and how rapidly does change establish itself as generally accepted practice? This collection offers an overview of the different ways in which change is enacted, and a stimulus towards more detailed studies of the process.