INTERVIEW: Hazem HASSAN
Chairman of the Egyptian Society of Accountants and Auditors (ESAA)
Interview conducted by Mohamed Yehia, Senior Financial Management Specialist, GGP/MENA, World Bank
CVMENA: What are the ESAA mission and goals?
HH: The Egyptian Society of Accountants and Auditors (ESAA) was established by a Royal Decree issued on April 24, 1946, and the ESAA was re-proclaimed on January 5, 1977. ESAA was originally founded by a number of Egyptian accountants, many of whom had obtained their professional qualifications in England. Hence, ESAA rules and examinations were designed according to the British system. The ESAA aims to enhance the academic and practical knowledge of accountants and auditors, and maintain international professional recognition of the accounting and auditing profession in Egypt.
CVMENA: How does one become an ESAA member?
HH: The applicant would need to pass the intermediate and final examinations of membership. He/she is required to have training for three years (after graduation) at an auditing office of an ESAA member. However, to expand the membership base and absorb large numbers of accountants, ESAA eased the condition of prior training at its member offices, allowing for such training to be done at non-member offices as well, provided they meet the standards set forth by the ESAA Board of Directors, thereby ensuring training quality and acquired experience. Holders of international certificates — such as the US Certified Public Accountant (CPA) / the Association of Chartered Certified Accountants (ACCA) designation / ICAEW Chartered Accountant (CA) — are exempted from taking the intermediate examination. However, they would need to pass final examinations in financial accounting, law, and Egyptian taxes. Holders of PhDs in accounting shall also be exempted from the intermediate examination, but they would need to pass the final examination. ESAA curricula and examinations are reviewed and developed regularly in line with the standards of international professional associations. The examinations cover many topics. The intermediate examination includes financial accounting, auditing and assurance services, tax accounting, costs and administrative accounting, law and corporate governance. The final examination covers advanced financial accounting, advanced auditing and assurance services, advanced tax accounting, and finance and accounting information systems.
CVMENA: How have the ESAA membership and organizational structure developed in order to cope with professional advancement and member needs?
HH: There has been a steady annual increase in ESAA membership. There are now about 2000 members, compared to 1912 members at the end of last year. In the past 5 years, 482 new members joined ESAA, including 148 new members in 2013. ESAA is run by a Board of Directors composed of 15 members and elected by the General Assembly. Two-thirds of the Board, at least, should be elected from members of the General Assembly who possess professional experience of no less than 15 years. In its first meeting after the General Assembly meeting, the Board elects its chairman, deputy chairman, treasurer and secretary general, each of whom should have at least 15 years of professional experience. ESAA technical work is undertaken by a number of committees formed by the Board and chaired by a board member. They are: the membership committee, the examination committee, the standards committee, the curriculum development committee, the training and continuing education committee, the cultural committee, and the complaints committee. The Board is assisted by an administrative/financial/ executive body composed of a general manager and a number of administrative employees. This body is responsible for: member affairs (subscription, certificates, information, and other services); administrative organization of examinations and supervision; administrative organization of training courses, seminars and workshops; and follow-up of continuing professional education.
CVMENA: What is the ESAA role in promoting the application of international standards for accounting and auditing, and the code of ethics?
HH: The ESAA Standards Committee played a major role in preparing the Egyptian Accounting Standards, which were issued in 2006 in line with International Financial Reporting Standards (IFRS) applicable at the time. In 2013, the committee also updated the Egyptian Accounting Standards in order to comply with the latest IFRS. These updated standards were referred to the Higher Standards Committee at the Egyptian Financial Supervisory Authority (EFSA) for review and approval. The committee comprised many ESAA members, including the ESAA Chairman, and the Chief of ESAA Standards Committee. Hopefully, the updated standards shall be issued before the end of 2014 to be put into force early in 2015. Also in line with international standards, the ESAA Standards Committee prepared standards for auditing, limited review, and other assurance services. These standards were issued in 2008 by the Minister of Investment after a review by the Capital Market Authority (CMA) — which was later merged in the EFSA. The Committee also prepared a code of ethics, similar to the international code. The CMA Authority issued that code of ethics to be applicable to the registered CMA auditors. ESAA issued the same code of ethics to be applicable to ESAA members. It is worth noting that the Central Auditing Organization (CAO) has approved the accounting standards which were prepared by ESAA. These standards shall apply to the preparation of financial statements of companies of the public and public business sectors, and all economic units. The CAO approved the Egyptian standards for auditing, limited review and other assurance services. The CAO also approved the code of ethics, which shall be applicable as well to CAO staff. The CAO Chairman issued guidelines for the application of the code of ethics. Regarding training, the ESAA organizes training sessions for its members and others to explain the standards and their applications. The ESAA also organizes semi-annual training sessions in cooperation with the ACCA for those interested in obtaining the ACCA International Financial Reporting Standards (IFRS) Diploma.
CVMENA: To what extent is ESAA reaching out to and coordinating with accounting departments and professors at Egyptian universities?
HH: There is currently no regulated mechanism or integrated coordination between ESAA and the Egyptian universities. However, there is some knowledge and experience exchange that takes place as some ESAA members work as part-time lecturers at a number of private universities. Moreover, there are some ESAA and Board of Director members who are also accounting professors at Egyptian universities. However, there is a need for an integrated mechanism to harmonize ESAA curricula and examinations with university accounting and auditing curricula.
CVMENA: What is the ESAA role in ensuring quality control and good professional ethics?
HH: The ESAA role with regard to the control of quality and good professional ethics is limited to what is stipulated in the ESAA statute, where the complaints committee can investigate shortcomings of any ESAA members, as well as professional ethics issues. The committee can impose sanctions including freezing ESAA membership. Concerning all accountants registered with the Egyptian Financial Supervisory Authority (EFSA), including ESAA members, there is a unit formed by the EFSA statute for the quality control of the work of those accountants. The complaints and investigations committee for practitioners at the Egyptian Syndicate of Commercial Professions can also investigate complaints against accountants registered with the Syndicate on grounds of work shortcomings or poor work ethics. The committee can impose appropriate sanctions, which may include removing the name of the member from the list of practicing accountants at the Ministry of Finance.
CVMENA: What are the levels and nature of competition among companies working in the field of accounts control? What opportunities are available for small- and medium-sized offices?
HH: Generally, large offices conduct auditing for most banks, insurance companies, branches of international companies in Egypt, and companies registered with the Egyptian Stock Exchange. Competition is most intense between companies in these sectors. The small- and medium-sized offices offer auditing services for a wide range of small- and medium-sized companies, as well as individual companies and establishments. However, in the light of the importance of the small- and medium-sized companies, it is likely that large accounting offices may offer services to these companies and compete with smaller offices in this area. On the other hand, based on the legal requirement by some regulators for auditors’ rotation within a specified time, it is expected that medium-sized accounting offices may start competing with large offices in auditing the accounts of large Egyptian companies.
CVMENA: How can ESAA contribute to supporting economic growth in Egypt?
HH: ESAA can contribute to supporting the Egyptian economy through upgrading and advancing accounting and auditing practices. For example, the implementation of accounting and auditing work according to high international standards gives credibility to the financial statements, thus increasing investor trust and attracting foreign capital. Due diligence review in auditing and providing technical advice in the governance area shall also lead to the strengthening of infrastructure for investment. ESAA training sessions — covering accounting, auditing, governance, and taxes — contribute to upgrading work in these areas and help strengthen the economic performance of companies and corporations. ESAA’s success in providing increasing numbers of qualified graduate accountants contributes directly to the availability of technical expertise and cadres needed to fill important financial positions in general. In addition, ESAA is represented at many control and supervisory agencies — such as the High Standards Committee, the Control Council for the Quality Performance of Auditors, the Listing Committee at the Egyptian Exchange, the Accountant Registration Committee at the Ministry of Finance, and the Committee for the Unified Accounting System at the Central Auditing Organization.
CVMENA: In your opinion, what are the most important ESAA achievements in recent years?
HH: First: ESAA membership increased over recent years. ESAA maintained the high professional level of its members through upgrading the level of examinations, and training and continuing professional education. These efforts led to wider recognition of the professional competence of ESAA members by the business community, various government agencies, as well as the prosperous work of the offices of ESAA members in the Egyptian market. Second: The availability of accounting and auditing standards, as well as the professional code of ethics, was largely due to ESAA efforts which facilitated the preparation of financial statements in line with international standards. Third: ESAA established prestigious new headquarters in the 6 October City (fully financed by ESAA members), with 3000 square meters, including auditoriums, facilities, and equipment for holding training sessions for about 400 trainees at the same time, and conducting examinations at the ESAA headquarters. Each examination session serves about 300 candidates. Fourth: ESAA is the sole representative of Egypt at the International Federation of Accountants (IFAC) and the Federation of Mediterranean Accountants (FCM) which chose ESAA Chairman, Mr. Hazem Hassan, as the first FCM chairman. Fifth: ESAA signed a protocol with the ACCA (the British Association of Chartered Certified Accountants) to represent it in Egypt. The ESAA also established an office for the ACCA and designated a special relations officer. Both ESAA and ACCA participate in the qualification of Egyptian accountants through the granting of the IFRS Diploma upon passing the required examination. The examinations are prepared and evaluated in England.
CVMENA: What are ESAA’s current priorities?
HH: The establishment of a separate ESAA training center to serve larger numbers of members and non-members in all areas related to the work of accountants and auditors. Developing and upgrading the ESAA organizational structure in light of the expanded activities and moving to the new headquarters. Effective participation in modernizing the Egyptian standards in line with the latest international standards.
CVMENA: What is your personal vision, and what are your aspirations for the future of the profession in Egypt?
HH: I hope that the accounting profession in Egypt will flourish to the extent that all ESAA members and non-members enjoy high and comparable professional levels. This will only come true by replacing the current law for practicing the profession issued in 1951. It has undergone no change since then. A new law should be issued reflecting the professional developments of the accounting and auditing profession over the past 60 years. The new law should limit permitting professional practice to those who have passed examinations and tests, in a manner similar to the ESAA examination arrangements. The qualified accountant should also comply with the Continuing Professional Education (CPE) requirements.