Accounting Profession in the UAE - Essay Example

Accounting profession in the UAE Your Name Tutor’s name College May, 19, 2011 Introduction The accounting profession in the United Arab Emirates (UAE) is unregulated and it is under-developed. In addition, it relies mainly on foreign accountants. There is a need for serous reforms. This can be achieved through the government. In the past decade, the growth of economic development in the United Arab Emirates has been rapid. This has expressed a growing need for qualified accountants which are to perform their duties in various departments. This is particularly the expanding commercial sector, in the accounting practice, government departments and al the other sectors that requires accountancy. The recruitment and training of professional accountants has been left to the individual accounting firms as well as companies and government departments. This is mainly due to lack of government policy directing to the development of the accounting as a profession. However, the government could change all this as it embarks on the recommendations from the International Monetary Fund (IMF) and other organisations. These organisations are calling for the UAE to establish a modern legal framework to regulate the profession. This would introduce serious setting and enforcing of accounting standards. There has been a relative annual growth in the number of qualified accountants in united Arab Emirates. However, many of these professionals are foreign nationals. This is because it is difficult to develop local accounting talent due to the attraction of public sector employment. • Emiratization of the work force According to Dan et. Al. (2006), emiratization is an initiative by the government of the UAE to employ its citizens in a meaningful and efficient manner. The government has been working hard to make this a reality in the public and private sectors. The public sector has been implementing this practice for some time now and the results have been realized. The emiratization program has been in place for more than a decade but its impact has not been felt in the private sector. The citizens at the private sector represent only a low percentage of total private sector workforces. Emiratization is very important mainly for social, economic and political reasons. There is general agreement over the importance of Emiratization however; there is some contention as to the impact of localization on organizational efficiency. It is to be proven whether employment of nationals generates returns for Middle East. However, research has cautioned on localization. It has argued that it is not always advantageous for firms operating in the region as it effectiveness depends on a number of contingent factors. It is estimated that more 3,500 qualified overseas accountants work in the UAE. However, this is mostly in Dubai and Abu Dhabi as these are the two leading emirates and the major economic and population centers. It’s also noted that most accountants working in the UAE have been recruited overseas. This is replicated in other Gulf countries that rely on expat accounting professionals. With some 1,000 to 1,200 Indian accountants employed in the UAE, are believed to be the largest group of overseas accountants. They work mainly for private companies and in the government. The UAE has successfully tapped the international market to fill its accounting needs. Relatively, accounting firms and other organisations in UAE are aware of a growing need to establish the UAE’s accounting profession on a similar footing to the profession’s high standing in other countries. Developing the profession The Ministry of Economy and Commerce regulates accounting in the UAE but accounting profession itself remains unregulated. It’s noted that there is no UAE organisation that is a member of the International Federation of Accountants (IFAC). Although The Accountants and Auditors Association (AAA) is the nearest entity in the UAE to a professional association, it lacks authority under its present status. Its statutes state that its main objective is to develop and consolidate rules and standards for the accounting and auditing profession. The work of AAA is to study and make proposals regarding the implementation of accounting and auditing standards. In addition, it makes proposals for the organisation of the accounting profession. Relatively, it’s also empowered with undertaking tasks set by competent authorities to develop the accounting profession and services in UAE. The organisation is also mandated to maintain current data on the profession in the UAE and overseas. The AAA has several hundred members; most are mostly Emirati or Pan-Arab. It’s noted that AAA is trying to pull things together but has no regulatory power. Auditors and Accountants Group in the Dubai Chamber of Commerce are present in UAE concerned with matters with the government however there is no similar UAE national body. During the past decade, International accounting institutes such as the ACCA and ICAEW have been set up in the UAE and other Gulf countries. They have been mandated to train students to meet the region’s growing accountant needs. Relatively, they also advise governments on developing the accounting profession and providing advice on accounting standard setting and regulatory issues. Careers for women in the UAE According to Gulfnews, more UAE women aged 25-34 are financially independent compared to older women. The majority of women have full time jobs. According to gulf news survey, the younger a women is, the more likely she will have a full-time job. There is a wide range of professions in which women belong. Relatively, more than one third works in middle or senior management sectors. Their incomes sometimes exceed $4,000 and sometimes over $8,000 (Gulfnews, 2005). In addition, clerical or office jobs also score highly among all nationality groups. Work or career is of great importance to UAE women. A few women think of work as something to do with their time, however, the majority feel that their main motivation for working is to get a fulfillment in their financial need or advance their careers (Gulfnews, 2005). Relatively the majority of women in UAE are satisfied with the way women compared to men are being treated at their work place. • The growth of the private sector in the UAE The UAE's purchasing managers index (PMI), which is a composite indicator of the performance of the non-oil private sector, remained stable in December. This expresses a solid recovery in the private sector. The index is normally based on data compiled from monthly replies to questionnaires sent to purchasing executives in various private sector companies in the UAE. These represent the manufacturing, construction, services and finally retail sector. The recent PMI reading suggests that the economy continues to normalize. The Overall results for the survey indicate that the non-oil private sector economy continued to expand in the final month of the year. This was both the output and new orders grew rapidly and job creation picked up at a moderate pace. Stronger demand conditions, alongside unfavorable exchange rates, contributed to a series record rise in input prices. The data points out at an improvement in foreign demand for UAE non-oil private sector goods and services. Relatively, new orders rose at a fast rate that was recorded to be the strongest in over a year. This was due to favorable business conditions and successful promotional campaigns. They resulted to key reasons for growth. In addition, some firms noted that there were good demands from Saudi Arabia which was greatly driven by government spending. Relatively, index data for December shows input price inflation accelerated noticeably. The principal factors underlying inflation was the stronger demand for commodities and unfavorable exchange rate fluctuations. Though there was some increase in output prices, it is unlikely that this rise fully compensates for the pick-up in input costs. Average labor costs remitted by UAE non-oil private sector companies rose slightly in December this was after a fractional decline in November. This was the eighth time in the past nine months that firms in the sector had increased their staff costs. However, this indicated that higher employee payments reflected better company performance (IMF, 2003). To guard against uncertain future rise in commodity price and in anticipation of further new order growth, the UAE private sector companies built up input stocks in December. Holdings of raw materials and semi-finished goods were experienced for the second month running. There was a combination of factors as there was an increase which was approximately twice the proportion that saw a decline. Reports have recorded that a combination of improved product innovations, demand conditions and aggressive marketing drove the latest expansion. Recent reports from a number of international and multilateral agencies in the UAE confirm that the economy is going through a strong economy phase largely driven by the non-oil private sector. Organisations such as The International Monetary Fund (IMF) has forecast 2.4 per cent growth for 2011 while the Standard Chartered has forecast 4 per cent growth for the UAE economy. However, UAE should keep in mind that the economy is on early stages of recovery path although there is good enough reason to believe that the UAE economy is on the recovery process (Gulf News, 2005) Conclusion The establishment of formal regulation of accounting profession in the UAE may involve some time consuming technicalities. This is once the government decides to push ahead as relatively all professions are believed to be similarly lacking officially-approved qualifications. IMF was involved in a financial system stability assessment in the UAE in 2007. The report made several recommendations for improvements. This ranged from the financial sector legislation to liquidity management. One of the recommendations for financial sector legislation is that the UAE was the government to update and implement major revisions to the 1980 Banking Law and the 1984 Commercial Companies Law. In addition, the IMF also recommended that the UAE government enact an accounting law that would adopt IFRS as the mandatory standard for public companies and also create national accounting standards for other companies. There have been no public details on these recommendations although the government is understood to be preparing to update the UAE’s Companies Law and introduce an Auditors’ Law. In addition, It also remains unclear whether the new regulations will be implemented as a national initiative. In UAE, the accounting firms are awaiting the new Auditors’ Law with interest. They are eager to see if the government has decided to support the development of a modern, well-regulated profession. The Auditors’ Law will clarify some standards on improvement of professional training, ethics, quality assurance and independence. An external authority will be mandated to monitor the law as it applies to Dubai Financial Services Authority (DFSA) entities. This will keep audit firms on their toes. In addition, improved regulation will also boost the market for accountants’ services as company’s compliance requirements increase. This as a result is expected to increase the need for more qualified accountants in the future.   Work cited Dan, R. and Ann B. Proceedings of the 13th European Conference on Information Technology Evaluation. London: CASS Business School, 2006 Gulfnews, inside the minds of women in the UAE, 7 May 2011 retrieved from http://gulfnews.com/opinions/your-say/inside-the-minds-of-women-in-the-uae- IMF, United Arab Emirates, selected issues and statistical appendix, Issues 5-268, 2003 Read More