Any small business needs to access financial resources or attract investors to expand and grow. Banks require credible financial statements to process a loan. Likewise, investors request reliable and comprehensive financial records to assess a prospective company’s reliability prior to making an investment decision.
A country is similar to a small business and needs to adopt internationally accepted financial reporting standards to attract investors and spur its growth. Such standards guarantee the country’s accountability toward achieving "clean" growth.
The Reports on the Observance of Standards and Codes (ROSC) was first created in the wake of the financial crisis of the late 1990s. The Executive Board of the World Bank and IMF identified 12 important areas and standards needed to sustain both institutions’ macroeconomic stability and operational work. The ROSC Accounting and Auditing (ROSC A&A) review is part of their joint initiative.
Implementation Progress and Challenges Ahead
Sri Lanka has taken significant strides in improving the quality of its financial reporting since the ROSC A&A was last completed in 2004. Seven out of 14 policy recommendations have been fully implemented while 5 remain in progress.
“We are happy to note that Sri Lanka has made significant progress towards adopting international financial reporting standards including simplified standards,” said Jiwanka Wickramasinghe, Senior Financial Sector Specialist at the World Bank. “Since the last ROSC,” she further noted, “the country has improved its professional accountancy education syllabi and made it more relevant to the industry sector by incorporating international standards.”
The ROSC 2015 highlights areas of improvement to make Sri Lanka’s financial reporting system more transparent and attractive to foreign investors. These are:
• Regulating registered auditors,
• introducing mandatory quality assurance processes to accredit institutions delivering accountancy education, and
• Monitoring closely the quality of practical training.