Untapped Potential of the Third World Using Accounting Principles
“Eighty percent of humanity lives on less than ten dollars a day” (Shah). While this statistic is vast and immense in nature, it perfectly sums up the inability of the third world to join other countries in any international economics. The accounting profession in the third world is virtually non-existent, and what is stopping these third world countries from developing is the lack of an international accounting system, capable of traversing barriers of language, differentiated standards and resources, education, and government. Ultimately and most importantly, there needs to be more emphasis on the importance in why the accounting system is so essential to development.
“Accounting is the facilitating service for business. Members of the accounting profession have always been reactive in meeting business’ changing needs for information” (Garner and McKee). Accounting plays some important roles in economic development, particularly as a key player in information analysis. Accounting encompasses such a wide range of financial aspects. In a thriving economy accounting is responsible for reporting financial data, costing labor and materials, and ethically running a business or company. The primary participants are management, government, and stakeholders. Without these three things, in terms of accounting information, no economy would thrive let alone a third world country.
Realizing the issue is bringing accounting to the third world, there are some obstacles in the way preventing any sort of rapid growth via accounting. First and foremost, accounting, for the most part, is lost in translation of other languages other than English. It might seem somewhat simple, seeing as numbers are universal, however there is a lot more to accounting than just numbers. While international methods are becoming more mainstream (IFRS), there is still that barrier of coming to all of the third world languages that is preventing any sort of progress.
The second hurdle to get passed in the third world is the scarcity of information, especially that of statistical analysis. In the United States as well as the United Kingdom, information about accounting standards, whether they are GAAP, IFRS, etc… is everywhere. Whereas information about standards in a third world country changes from place to place (and are more than likely obsolete by the time it gets to the third world), and depending on how advanced the country is, accounting information might not even be able to be kept.
Third and somewhat controversial is the accounting education in the third world. Regardless of where in the world accountants come from in the third world, because there are little to no standards in some countries it is virtually impossible to develop some sort of educational/certification program. There is “no use producing more and better qualified accountants if the information they provide is not understood or required by the user” (Briston, Samuels, and Wallace). This, combined with the lack of funding that accounting education receives in the third world, creates an environment alone where accounting cannot and will not thrive.
Finally, the last hindrance to accounting in the third world is the fact that the needs of the third world are completely different and diverse from that of the western world, in that more developed countries use a more conservative approach to accounting than is needed for rapid development (Rahaman). This assumes that every country has the same form of government; letting western society’s methods of accounting go unchallenged. Western civilization was founded primarily on capitalism, and our financial accounting systems reflect that.
Ultimately, for change and development in the third world there are a variety of things that need to happen before an accounting profession exists. While the world is increasingly doing more research on the matter, an international accounting standard has yet to be adopted by the majority of accounting users of the world. “As the international economy develops, this variety of standards creates problems for multinational corporations and multinational holding companies” (Garner and McKee). This is the first step in providing developing countries with the tools necessary for growth. While development of international standards is slow and extremely far from being perfect, the third world is in need for some sort of standard that is not out dated. Globalization is calling for an accounting system that every country can get behind including the third world.