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ICAJ embarks on financial system improvement project

THE INSTITUTE of Chartered Accountants of Jamaica (ICAJ) will be embarking on a financial system improvement project to strengthen the enforcement and compliance framework of the accountancy profession and to reinforce the integrity of information provided to investors.

The project is being implemented against the background of the recent failures of international companies, particularly in North America and Europe, as well as developments locally that have eroded public and investor confidence in corporate governance and in the accounting and auditing processes. The ICAJ is presently seeking donor funding from the Inter-American Development Bank (IDB) through its Multilateral Investment Fund (MIF) for the project.

The funding will be used to support a technical programme to assist chartered accountants, financial sector professionals and other users of financial statements in the application of International Accounting Standards (IAS) and International Standards on Auditing (ISA). IAS and ISA were adopted by the ICAJ as the national accounting and auditing standards with effect from July 1, 2002. The first phase of the IDB-funded project involves the appointment of an independent international consultant to conduct a Review of Observance of Standards and Codes (ROSC), according to World Bank standards, and the development of a Country Action Plan. This involves an independent review on the level of national compliance with International Accounting and Auditing Standards. Mr David Cairns, international consultant and former Secretary General of the International Accounting Standards Committee (now the International Accounting Standards Board, based in the United Kingdom), was engaged by the Institute to conduct the ROSC. Mr Cairns visited Jamaica recently and carried out a review of published financial statements as well as interviews with regulators, practising members of the ICAJ and accounting professionals in industry and commerce. The key findings of the review have been presented to stakeholders, which included representatives from the Bank of Jamaica, Financial Services Commission, Jamaica Stock Exchange, Jamaica Chamber of Commerce, Public Accountancy Board, the Ministry of Finance as well as practitioners.

As a result of the demands of the global capital markets and trends in these markets, there is the need for higher standards of disclosure with greater emphasis on the veracity of balance sheet values and more detailed financial reporting as required under International Accounting Standards. In this regard, the project will ensure improvements in the quality and usefulness of financial statements issued by Jamaican businesses. The project will also assist in building adequate mechanisms for the enforcement of IAS and ISA in Jamaica and will complement the efforts of the Private Sector Organisation of Jamaica in promoting and encouraging good corporate governance. The benefits of the review include the promotion of Jamaica as a country suitable for international capital investment. It will also help to rebuild the confidence of the investing public as well as analysts and institutional investors in the financial reporting process. This is of direct relevance to quoted companies, banks, insurance companies and other entities that make their financial statements available to the public and foreign investors. The review will enhance public perception of institutions such as the Stock Exchange and provide a sound basis for investors to utilise in evaluating existing and potential investments in Jamaica. It will also assist Government and its agencies in their regulatory functions and negotiations with multilateral institutions.

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