Accounting Challenges in Egypt

Accounting Challenges in Egypt

Abstract

There are studies which tell us that accountants in different countries respond to same accounting standards in different ways due to cultural changes. Accounting values, such as conservatism and secrecy, are directly affected by how accountants interpret these values based on their own cultures. These variations in interpretations can lead to conflicting reports of a same transaction. These findings can be further explained by Geert Hofstede's work in which he pointed five cultural dimensions to help us understand the reasons for similarities and differences between cultures. These researches, along with some studies, will be used to discuss the cultural problems and challenges faced by Egypt in changing their accounting standards.

Discussion

Businesses have now become more globalized than ever. Multi-nationals have operations throughout the world. This results in more inter-connectivity and communication. The advancement in the field of technology has further made running business worldwide much easier. Such globalization also gives birth to a need of harmonization of accounting standards to restrict conflicts. The harmonization of accounting can be described as the process of coming up with a common set of system and standards in preparing financial statements (Osborne, 2001).

This harmonization will aid businesses running all over the world to function smoothly and increase relevancy and comparability of the financial statements issued from different parts of the word.

This was the basic idea behind which Egypt also decided to transform their accounting systems and standards. This transformation was intended to bring their own standards more in line with the global standards. This would not only help businesses in preparing their financial statements, but would also help investors and other stakeholders in making efficient business decisions. Although, the idea of such a transformation looked perfect, Egypt had to overcome many difficulties to achieve their goal. One of the biggest problems in bringing their own set of standards in compliance with the global international standards was the cultural differences Egypt had with other parts of the world.

According to Timothy S. Doupnik (2004), culture is regarded as the biggest factor regarding how people of a country perceive and interpret accounting information. This can be applied to Egypt as well. The culture of Egypt has always played the most instrumental role in determining their accounting standards, even before Egypt tried to converge their standards with the global standards. Accounting standards are formed according to the accounting practices acceptable in a particular culture. In Egypt also, they were evolved according to the norms and prevalent culture present in an Egyptian society. As Egypt evolved its own accounting standards, there were several differences which Egypt had to overcome before aligning their standards with that of the international world.

One example of such a difference can be studied through identifying the practices of auditors in Egypt. Auditors are asked to assess to fairness and completeness of the financial information companies provide in their financial statements. The opinions of auditors should be free from any internal or external ...