Phnom Penh, Cambodia — Public trust in financial institutions is important for any country, particularly one that seeks to attract investment. And key to building this trust is the ability to undertake high-quality audits of these institutions.
In Cambodia, achieving these high-quality audits remains a challenge. To help boost the quality of audits, recently the World Bank organized with the Audit Quality Monitoring Committee of Cambodia’s Ministry of Economy and Finance a workshop that discussed, among other issues, the establishment of the Audit Quality Review Mechanism.
Speaking to about 70 participants, who represented private auditing and accounting firms as well as relevant government regulators, Secretary of State of the Ministry of Economy and Finance H.E. Ngy Tayi explained that the workshop aims to inform participants about the audit quality assurance system in Cambodia and enable discussion about how the system can be improved to ensure public trust and investor confidence.
“We understand that auditing is crucial in building trust among the public about financial reports,” he said. “We really want to achieve this public confidence because it is very important to attract more investors and sustain economic growth.”
Foreign direct investment, or FDI, in Cambodia increases slightly each year. In 2016, the flow of FDI was about 10 percent of the country’s Growth Domestic Product (GDP). In her welcoming remarks, World Bank Senior Financial Sector Specialist Ratchada Anantavrasilpa outlined World Bank support over the last 15 years for Cambodia’s financial management and financial sector development. The financial market has deepened quickly in the past few years, she added, underpinning robust economic growth. The sector has grown at an average of 30 percent per year and resulted in a six-fold increase in financial inclusion, to 51.41% in 2015, according to the 2014 Global Findex Survey.
World Bank support for Cambodia‘s financial market deepening has also extended technical assistance in the field of accounting and auditing.
“We all know the importance of having financial information that is relevant, timely, and reliable,” she said. “There are some challenges that need to be addressed together for the development of Cambodia.”
Senior Financial Management Specialist Frederick Yankey shared some challenges and opportunities in the field of auditing quality assurance. He said that the tertiary institutions have still not adopted or fully updated their syllabi to International Federation of Accountants (IFAC) requirements. There are also not many lecturers with knowledge of International Financial Reporting Standards (IFRS) at educational institutions, and collaboration between academia and the private sector in this field remains weak. Lastly, there were still too few professional accountants across the country: only 161 certified public accountants in a population of 13.39 million.
“To improve (the situation), Cambodia may consider improving tertiary level training, by updating their syllabi, investing in knowledge of lecturers, collaborating with private practitioners, and overall take steps to improve the number of professional accountants in the country,” he said.
Stephen Van Kempen, an expert from the Netherlands, explained to the participants about the Cambodia Audit Quality Assurance mechanism and the work undertaken to date. He indicated that the tools and checklists to carry out quality reviews of audit firms have been prepared and are ready, and that audit firms have been trained on the requirements of the International standards on quality control (ISQC 1). Next steps include the first review of selected audit firms.
With that, Cambodia continues to make significant progress towards stronger public financial management.