Written by Anthony A. Chan, 4 September 2008
The Association of Southeast Asian Nations (ASEAN) members the Philippines, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam have recently signed the Mutual Recognition Arrangement Framework (MRA Framework) on Accountancy Services.
This took place during the 40th ASEAN Economic Ministers’ (AEM) meeting in Singapore last August 5.
What does the MRA Framework on Accountancy Services provide?
First, it encourages ASEAN member states to enter into bilateral or multilateral negotiations of MRAs on accountancy services. By virtue of the MRAs, a practicing professional accountant (PPA) of a member country will be recognized and allowed to provide accountancy services in other member countries.
Second, it also intends that the member states exchange information in order to promote and take into consideration the development of the best practices on standards and qualifications in the accountancy profession.
Administratively, the National Accountancy Body (NAB) or Professional Regulatory Authority (PRA) of each ASEAN state will be tasked to provide the criteria or standards in assessing and recognizing PPAs such as education, licenses, demonstration of competencies and experience. In this regard, member states are encouraged to take into account the standards and guidelines set out by the International Federation of Accountants (IFAC).
The MRA Framework, however, notes the varying levels of development of accountancy services among ASEAN member countries and recognizes the right of each ASEAN member to regulate the supply of accountancy services within its territory.
Specifically, the MRA Framework provides that any bilateral or multilateral MRA on accountancy services between or among ASEAN member states shall not prejudice the rights, powers and authority of each ASEAN member state and its NAB and/or PRA and other regulators of the profession to establish and monitor the necessary domestic regulations.
In the Philippines, the Professional Regulation Commission (PRC) and the Philippine Institute of Certified Public Accountants (PICPA) are the regulatory authority and accountancy body, respectively, in charge of accrediting and monitoring certified public accountants (CPAs). It will be interesting to find out about the impact of the MRA Framework and any future bilateral or multilateral agreement that may be entered into the Philippine accounting profession, in particular.
For one, the Philippine Constitution of 1987 reserves the right to practice all professions including accountancy to Filipino nationals only, except in certain cases prescribed by law. Up until the Seventh Regular Foreign Investment Negative List under Executive Order no. 584, which is effective until December 2008, the practice of accountancy is reserved only for Filipino nationals.
Furthermore, the readiness of Filipino CPAs for international competition, whether actual or perceived, will have a big influence on how the MRA Framework or future agreements will be received by practitioners in the Philippines. The MRAs will effectively liberalize the accountancy services which will result to accountants having to compete not only locally but also against their international counterparts.
Filipino accountants, nonetheless, will have a relative advantage because of their familiarity with local laws and related peculiarities.
Notwithstanding the legal restrictions and possible limited acceptability of foreign accounting practitioners, it is without doubt that these MRAs will have far reaching effects on the practice of accountancy in the Philippines.
As it is, the MRAs may be viewed by Filipino accounting practitioners providing assurance, tax, and other related consultancy services as a positive development, on the one hand, or a threat to the accountancy profession, on the other hand.
On a positive note, this will open a well of opportunities for Filipino accountants to be recognized abroad and to offer their services without further requirements or restrictions. Filipino accountants may also benefit locally from the transfer of latest know-how on best practices/technology from working with foreign accountants. At the same time, the mutual agreements will also pave the way for other countries’ accountants to perform accounting services in the Philippines.
In such case, the continuous improvement by Filipino accountants of their profession and the deliberate upgrading of their practice to international levels will be critical on whether they will ultimately gain from such agreements.
Since it is merely a matter of time before the regionalization of the accounting practice is implemented and operationalized, it may be good for my fellow CPAs to start honing their skills and be ready to face the challenges from regional and global accounting practitioners.
