The Iranian accounting profession has been developing as rapidly as the profession in Western countries in recent years. Industry figure Gholamhossein Davani speaks with Carolyn Canham about the state of the industry, its global successes and ambitions for the future. The relationship between Iran and the West has produced news headlines for decades. The most contentious recent issues have been the republic’s nuclear programme and election results disputed loudly both at home and abroad. But in the face of high-level political wrangling, Iran’s accounting profession is moving ever more closely in step with the rest of the world.
The Iranian Accounting Association (IAA) is holding Iran’s second international accounting conference in December, following a successful inaugural event in 2008.
Conference board member Gholamhossein Davani says the issues on the conference agenda are similar to those reverberating around the rest of the world. Specific areas to be covered include accounting education, international accounting standards, corporate governance, corporate social responsibility and capital markets development.
Accounting education is one area where Iran has particularly close international ties. Davani lists at least three Iranian accounting professors teaching in the US and the UK, including University of Memphis professor Zabihollah Rezaee, who is expected to appear at the upcoming conference.
The IIA is one of three professional accounting bodies in Iran. The oldest is the Iranian Institute of Certified Accountants (IICA), which was established in 1972 by a group of Iranians who were members of UK accounting institutes. The IICA is member of the International Federation of Accountants (IFAC).
The second is the official Iranian Association of Certified Public Accountants (IACPA), which was established by the government in 1999 and is an associate member of IFAC. The third is the IAA, which Davani compares with the American Accounting Association in its role of promoting excellence in accounting education, research and practice.
The IACPA currently has about 1,600 members. As of January 2008, it listed 173 registered member firms.
Davani estimates there are about 45 active audit firms and the fee income of the largest in 2008 was about $1.5 million. This minute size reflects a profession that is heavily government-controlled and in need of development.
Of the world’s 10 largest accounting networks, just four have member or correspondent firms listed on their global websites. None of the Big Four do.
Davani is managing partner of Dayarayan Auditing & Financial Services, an RSM International correspondent firm, which Davani says has been the top ranking firm in terms of fee income twice in the past five years.
Davani explains that prior to the Islamic Revolution in 1979, all the large international organisations were represented in Iran. But following the revolution, many private enterprises were confiscated or came under direct government supervision. Subsequently, three audit organisations were formed within the public sector to audit and performing statutory services for these newly state-owned enterprises.
A 1983 Act of Parliament merged the three organisations and an earlier government audit organisation to form the Audit Organization.
Today, the Audit Organization is a financially independent legal entity affiliated with the Ministry of Economic Affairs and Finance. Davani says its revenue forms about 50 percent of the Iranian audit market’s total revenue, which in 2008 was about $100 million.
Davani says audit fees in Iran are very low and the market needs support to help it develop.
“Iranian auditors have demonstrated, through the development of audit and consulting practices and tax services lines, that they will continue to invest in new service capabilities when they see demand,” Davani says.
However, he warns if audit policy does not change in line with wider privatisation processes the nation will find it hard to compete globally.
“Demand for certified public accountants in Iran is progressive and the future outlook for auditing and professional services depends on opening the market to foreigners and international accounting firms,” Davani says, adding there are many opportunities for the local profession to partner with foreign investors to help build the Iranian economy.
He estimates the Iranian audit market has the potential to be worth more than $200 million.
The Audit Organization is also the official standard setter, authorising the audit and accounting standards that the profession must follow. Davani says accounting standards are about 95 percent in line with IFRS.
One critically important role for the audit and accounting profession moving forward is fostering accountability, transparency and responsibility. Davani says accountability in Iran is unfortunately weak as 90 percent of the economy is in the hands of government.
“I believe all governments try to run away from accountability and transparency, especially when they are not accountable.
“However, I think under-developed countries must support accounting and auditing to fight with corruption and develop transparency to stabilise accountable and responsibility,” he says.