1. Junio 1995
STATEMENT OF POLICY OF COUNCIL *
RECOGNITION OF PROFESSIONAL
ACCOUNTANCY QUALIFICATIONS
CONTENTS
Paragraph
Introduction 1-6
The Changing Rules of Recognition of Accountancy Qualifications 7-12
Principles of Recognition 13-27
Process of Recognition 28-30
Barriers Considered as Unrelated of Professional Qualifications 31
Appendix 1: Key provisions of the GATS
Appendix 2: Examples of Mutual Recognition Initiatives
____________________
*Effective ay 2000 the IFAC Council was renamed the IFAC Board
STATEMENT OF POLICY

2. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
Introduction
1. The mission of the International Federation of Accountants (IFAC) is the worldwide
development and enhancement of an accountancy profession with harmonized standards, able
to provide services of consistently high quality in the public interest. Inherent in this mission
statement is the understanding that services of consistently high quality implies that
professional standards governing those services are also of consistently high quality. Consistently
high standards will facilitate the international practice of the accountancy profession.
2. Accountants have traditionally practiced internationally, both as individuals and as firms. The main
impetus behind this movement has been the globalization of business, which has accelerated
especially m recent years. As enterprises became multinational, they asked that their financial
advisors be equally multinational. As a result, professional accountants have organized
themselves into global organizations, providing a wide range of services throughout the world.
3. Notwithstanding these developments, national professional institutes and national regulatory
authorities have been reluctant to accept the professional qualifications of foreign accountants
for regulated services. Conditions of residence, citizenship, special educational criteria and
examinations have been set, conditions which are, in many cases, impossible to meet.
Moreover, some of these criteria do not pertain to the professional qualifications. Given the
international scope of the accountancy profession, professionally qualified accountants, both as
individuals and firms are increasingly seeking to be recognized in foreign countries, and often
see these barriers as unreasonable.
4. The demand for recognition of foreign accountancy qualifications has been given special
impetus by the successful completion of the Uruguay Round on Trade negotiations, and the
General Agreement on Trade on Services (GATS) The GATS addresses regulatory obstacles
to international trade and foreign investment in service industries, including the cross-border
practice of accountancy and other professions. It sets out a series of rules to discipline
government intervention in the marketplace, to ensure that foreign or internationally-affiliated
service providers, firms and professionals enjoy the same privileges as their domestic
counterparts competitors with respect to government regulation and to remove discriminatory
obstacles to market entry and practice by persons from other countries. Signatories to the
GATS and its provisions bind their national and sub-national regulatory authorities.
5. The Council* of IFAC acknowledges that a truly international market for accountancy services,
with equal access to all qualified professionals, is consistent with its mission, and it encourages
national professional accountancy organizations and regulatory/licensing authorities to provide for
recognition of foreign accountancy qualifications. Of more concern, however, is the public
interest, and IFAC believes that any mutual recognition efforts must insure that the overriding
need for high standards must be scrupulously respected. In this regard, benchmark international
standards, such as those promulgated by IFAC and IASC, can be especially useful in meeting this
need.
6. Given the above situation, the Council' of IFAC has issued this Statemen1 of Policy, to be used by
its member bodies and other interested parties. The provisions of this Statement of Policy will
assist with the implementation of the provisions of GATS, as well as helping to insure that the
proper standards of professional qualifications are also maintained.
________________________
*Effective May 2000 the IFAC Council was renamed the IFAC Board
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3. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
The Changing Rules of Recognition of Accountancy Qualifications
7. Traditionally, the mutual recognition of qualifications of professional accountants of one jurisdiction
in another has been arranged between professional organizations with close relationships and
with similar traditions, goals and objectives. Sometimes such recognition has been extended by
licensing authorities where permission to undertake audits/attest or other reserved functions has
been extended by a licensing authority rather than by a professional body.
8. Generally, the recognition is conditional upon an applicant satisfying some agreed additional
education, experience, examination or residence requirements to recognize differences in the
jurisdictions concerned. Because of sometimes conflicting economic, social and political factors,
such arrangements were not widespread. Diverse requirements for qualification as an
accountant variances in educational systems anf1 differences in accounting and auditing
standards and related laws an regulations, as well as differences in the way the profession is
regulated in various countries, has tended to inhibit mobility. Additionally, criteria related to
citizenship and residency have added further barriers.
9. The new GATS addresses regulatory obstacles to international trade and foreign investment in
service industries, including the cross-border practice of accountancy and other professions. by
setting out rules that intend to:
• Ensure that foreign or internationally-affiliated service providers. firms and professionals
enjoy the same privileges as their domestic counterparts or competitors with respect
to government regulation:
• Remove discriminatory obstacles to market entry and practice by persons from other
countries, by concentrating solely on those issues that relate to professional
qualifications; and
• Provide transparency to all service providers as to the rules governing recognition of
qualifications.
Although they apply to the full range of service industry and professions, two of the GATS
rules have particular relevance to the accountancy profession (Article VI on "Domestic
Regulation" and Article VII on the "Recognition of Qualifications and Licenses" which are in
Appendix 1).
10. In essence, GATS seeks to ensure that persons from one country wishing to provide services in
another enjoy the same privileges as their domestic counterparts. Recognition requirements may
not constitute unreasonable barriers to trade in services. It is expected that rules will be developed
on a sector by sector basis to ensure that licensing requirements are based on objective and
transparent criteria and are not more burdensome than is necessary to ensure the quality of the
service.
11. The GATS requires that all countries have adequate procedures in place to verify the qualifications
of professionals from other countries seeking the right to offer services within their jurisdictions.
This will have implications both for the professional accountancy organizations, as well as for the
licensing and regulatory authorities.
12. Although the GATS is multinational in scope, it does provide for bi-lateral implementation, IFAC
believes that the most effective way to achieve recognition is through bi -lateral initiatives. The re
are differences in educational and examination standards, experience requirements,
professional issues, regulatory influence and various other matters, all of which make
implementing the recognition on a multilateral basis extremely difficult. Bi-lateral negotiations will
enable the countries involved to focus on the key issues related to their two environments. Once
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4. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
bi-lateral agreements have been achieved, however, this can lead to other bi-lateral agreements,
which will ultimately extend mutual recognition more broadly.
Principles of Recognition
13. The GATS requires that criteria for recognition of qualifications may not
exceed what is necessary to ensure the quality of service. Each country is
expected to have a methodology for comparing professional qualifications
and this must be applied in a fair and consistent manner to all applicants.
IFAC recommends that the appraisal process be founded upon the key
components of a professional qualification, falling into the following three
areas:
• Education—entry standard s/body of knowledge
• Examinations—tests of professional competence
• Experience—relevant to the practice function.
14. In implementing the appraisal process, the following principles are
suggested. These parallel the recommendations of International Education
Guideline (IEG) 9 and are put forward because they have been found to be
widely acceptable within the profession in meeting the need to uphold its
high standards and protect the public interest. Additionally, they can assist
countries that are negotiating mutual recognitions in making informed
decisions as to the degree of equivalence in basic educational requirements.
This is a crucial procedure, since, when there is sufficient equivalence in the
basic education requirements of the two bodies, the negotiating parties can
proceed more efficiently.
Education
15. Initially, the subjects and skills covered in their bodies of knowledge should
be compared. The theoretical knowledge to be contained in the body of
knowledge of persons seeking recognition should include at least the
following subjects:
• Analysis and critical assessment of financial statements:
• Audit;
• Consolidated accounts;
• Cost and management accounting;
• General accounting;
• Interna! control systems:
• Legal and professional requirements relating to the exercise of the reserved
function(s) concerned: and
• Standards relating to financial statements.
16. In addition. the body of knowledge should cover at least the following; areas
insofar as they are relevant to the reserved function(s) concerned:
• Basic principles of the financial management of undertakings;
• Business, general and financial economics:
• Civil and commercial law: Information technology and systems;
• Law of insolvency and similar procedures;
• Mathematics and statistics:
• Provision of financial services, advice, etc.;
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5. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
• Professional conduct and ethics;
• Social security and law of employment; and
• Tax law.
Applicants should have covered these subjects in a breadth and depth sufficient to enable
them to perform the relevant function to the expected standard. In order to ensure that this is the
case, a detailed review will need to be made of the respective educational programs and their
content.
17. Areas of truly substantial difference (in terms of breadth and depth) in subjects which are
considered essential to the practice of the profession in the respective countries should be
identified. Applicants seeking recognition will accept that they may be required to take further
courses, gain local experience or undergo some further assessment in key subject area(s).
18. There is considerable international diversity in the educational backgrounds of professional
accountants and sometimes in the quality of education itself. in particular, in many countries, an
undergraduate degree in accounting is required, while others accept different education and/or
accept experience in lieu of formal education. Educational standards should not be considered in a
vacuum. Rather they should be viewed in the overall context of the experience required for
recognition and of evaluation of the professional examinations taken by an applicant of his or her
professional background.
Examinations
19. Candidates for recognition of professional qualifications should demonstrate that they have
passed an examination of professional competence. This examination must assess not only the
necessary level of theoretical knowledge but also the ability to apply that knowledge competently
in a practical situation. Objective evaluation of professional examinations thus becomes a key
component of the recognition process.
20. Member bodies should not only satisfy themselves that the assessment(s) undergone by applicants
indeed tests the body of knowledge and the ability to apply it, but that the policies and procedures
for its construction, security and marking are adequate to ensure the integrity of the assessment
process. Agreement should also be reached on the need for a periodic review of the education and
assessment process for qualifications being recognized so as to ensure that the conditions for
recognition continue to apply.
21. The content, rigor, scope and length of professional examinations administered by professional
bodies or other examining authorities also vary. Some are case study based, while some make
extensive use of objective testing. Some are highly computational, others more discursive.
The task is to ensure that applicants have been adequately assessed in relevant areas to the
extent necessary to enable them to operate competently in the reserved functions of their
choice.
Experience
22. It is crucial to any professional to not only have a sound theoretical knowledge but also to be
able to apply that knowledge competently in the world of work.
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6. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
23. It is suggested that, prior to recognition for the purposes of performing a reserved function, an
individual should have completed a minimum of two] years approved and properly supervised
practical experience primarily in the area of the function concerned and in a suitable
professional environment.
24. Member bodies, or other authorities considering recognition of other qualifications, should assess
the respective experience requirements and determine how to deal with any emerging differences.
Differences normally relate to:
• The nature and extent of required experience (for example, in some countries,
experience outside public accounting is not regarded as acceptable for purposes of
recognition of practice),
• The length of the period of the experience gained, and
• The procedures required to certify the experience gained (for example, some
countries require employers attestation, while others rely on periodic reports by
those gaining the experience).
Any assessment will need to have due regard to the extent of experience relevant to the
reserved function which has been obtained by the applicant. The analysis might result in a
requirement that, before recognition in the jurisdiction of the host organization, an applicant
might be required to, undergo further experience.
25. The host country may also seek to impose a period of practical experience in the host country
itself to demonstrate competence in the host country laws, practices and/or regulations. In these
instances, such a requirement should be for that purpose only. It should not be unreasonably long
for an individual who otherwise meets the basic practical experience requirement, as in paragraph
23.
Other Factors to be Considered
26. Although the basic elements of education, examination and experience will
be the foundation of any recognition arrangements, there are several other
important factors to be addressed:
• Diversity in accounting and auditing standards may cause problems in
the matter of recognition. Such standards develop in response to
changing social, economic, legal and political environments. Those
countries with extensive technical standards may be hesitant to
authorize for practice persons from countries with significantly
different technical standards, particularly in the area of the reserved function. This
difficulty can be resolved if it is generally accepted that applicants may reasonably
be expected to demonstrate an adequate knowledge and understanding of the
relevant standards as applied in the host country.
•
Ethical practices differ between countries. When a professional accountant is
recogn¡2ed in a host country, he/she would ordinarily be subject to die host country
ethics. Where differences appear significant, however, the host country may be
reluctant to accept foreign accountants. As with accounting and auditing standards
above, demonstration of knowledge of host country ethical practices is a
reasonable expectation. Additionally, reference to the IFAC Cade of Ethics for
Professional Accountants can also be helpful in evaluating the significance of
differences.
_________________________
1The suggested tow year requirement was subsequently modified by the Education Committee to three
years. See International Education Guideline (IEG) 9, paragraph 49 (revised October 1996), to reflect current
circumstances.
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7. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
• Clearly, if one is to practice competently one needs reasonable written and oral skill
in the generally used business language of the host country.
• Requirements for continuing professional education {CPE), as opposed to pre-
qualification education in paragraphs 15-18 above, are becoming more common
within the profession as a condition of a right to practice. The effect of a compulsory
requirement in this area will need to be addressed since in many countries,. CPE is
often voluntary. Difficulties will arise where one body has- a mandatory CPE policy
in place and this is not the case in the jurisdiction of an applicant. In such
circumstances, some further qualifications may need to be agreed for persons
seeking recognition by the body which has CPE requirements in place. However,
any arrangements being made should be reasonable and designed to facilitate
applicants in meeting the necessary requirements within a reasonable period.
27. The GATS relates to mutual recognition of professional qualifications. It
does not relate to reciprocity of membership in professional organizations.
This will be especially important in those countries where the
licensing/practice authorization function is separate from the professional accountancy
organization. IFAC believes that the spirit of mutual recognition extends to membership. It
encourages al I professional accountancy bodies to develop membership classifications or
other processes by which recognized foreign professionals can also be pan of the accountancy
organization. Membership for recognized foreign professionals will help those individuals
maintain and enhance their competence in host country practices by access to technical
publications, contact with local professional accountants, knowledge of ethical practices and
other issues. Enhancing technical competence is of direct benefit to the public interest.
Process of Recognition
28. In attempting to establish procedures for recognition of foreign qualifications, care must be
taken to address the differences in the organizational structure for the profession. In a country
where the accounting profession/licensing process is not centralized, a national organization
might need to negotiate on behalf of its members at provincial-or state level with local licensing
authorities, which might themselves have widely differing requirements. In some countries,
recognition for practice purposes requires membership of the locally recognized accountancy
bodies, while in others recognition is gained either through affiliation with such a body or from a
governmental licensing authority.
29. The GATS requires that each country establish a process to provide for recognition of foreign
qualifications. Moreover, the process must be transparent and be equitable for all those
individuals seeking qualification. Some countries and member bodies may already have such
processes in place while others have not. In the emerging climate of greater global mobility, the
former will now need to review their systems and to create more formal structures and the latter
will need to put appropriate facilities in place without delay. The following matters should be
addressed:
• Close lines of contact with professional organizations in other countries, to assess
the different standards.
• A process by which the educational system, curricula and degree programs in
foreign countries can be assessed vis-a-vis the local requirements; this will be
especially important in those instances where pre-qualification education does not
always rely on the university system.
• Evaluation of the examination system in foreign countries, both as to the content of
the examination and the process.
• Evaluation of the experience requirements and the way in which such experience is
monitored and controlled.
• Establishment of an agency review board, or similar structure, which will analyze the
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8. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
results of the processes above and publish and administer the program to facilitate
recognition of foreign qualifications; such an agency would use international reference
points (for example, IFAC's IEG 9) and would recommend special examinations and
other programs to enable applicants to demonstrate competence in uniquely local
requirements.
30. Inevitably, such structures will have cost implications. Administrative and
legal expenses are examples. These could be significant, It would be
reasonable that applicants for recognition should be prepared to contribute
to the costs incurred in dealing with their applications and to be aware from
the outset of the extent of the charges involved. In some countries, the
cost/charge element may be a matter for the state of which the professional
organizations/licensing authority is acting.
Barriers Considered as Unrelated to Professional Qualifications
31. The GATS stipulates that qualification requirements should not constitute unnecessary barriers to
trade in services and should not be more burdensome than necessary to ensure the quality of
service and to protect the public interest.
32. Countries impose various restrictions that do not necessarily relate specifically to professional
qualifications. Examples are:
• Requirements that only citizens are eligible to receive professional titles or licenses;
• Requirements that candidates for professional titles or licenses must have been
resident in the licensing jurisdiction for a period prior to making the application;
• Requirements that the licensed professional be permanently resident in or permanently
established in the licensing jurisdiction; however, if the applicant is not permanently
resident or permanently established, he/she could reasonably be expected to
demonstrate that he/she intends to practice the reserved function; and
• Requirements that an applicant attend a specified educational institution or
requirements that only a university degree (with no consideration of experience or
other types of training) will satisfy educational requirements.
IFAC believes that further research is necessary before it can be concluded as to whether or not
such restrictions are unnecessarily burdensome. This research should give due regard, inter alia,
to the impact on the capacity of the local national profession to develop itself.
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9. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
Appendix 1
Key Provision of the GATS
Background
The Uruguay Round trade package. negotiated under the auspices of the General Agreement on
Tariffs and Trade (GATT) included the first multinational agreement removing obstacles to
accountants who wish to practice across borders. Some of these, such as exchange controls and
visa restrictions, are faced in common with other service industries and providers. Others, notably
difficulties in obtaining, certification to practice in foreign jurisdictions, are unique to the
professions.
The multilateral agreement, the General Agreement on Trade in Services (GATS), addresses
these problems in qualifying to practice in foreign jurisdictions in two ways.
1.First, its provisions on domestic regulation require countries to administer their licensing or
certification rules in a reasonable, objective and impartial manner and forbids using them as
disguised barriers to trade. To carry out this broad mandate, the agreement envisions the
development of more specific binding disciplines in the future. Countries are also required to
establish specific procedures for verifying the competence and credentials of professionals from
other countries.
2.Second, the agreement encourages countries to recognize other professionals, either
autonomously or through mutual recognition agreements. It further sets out guidelines to ensure
that such agreements are not used simply to discriminate against professionals from countries
that are
not party to them.
Articles of Special Interest to the Accountancy Profession
There are two articles within the GATS that are of particular interest to the accountancy
profession:
• Article VI on domestic regulation is one of the rules that only applies to accountancy in
cases where individual governments have made specific commitments in their
schedules. It contains three important features:
Governments agree to apply regulations affecting service industries and professions in a
reasonable, objective and impartial manner so that they do not act as barriers to trade.
Qualification requirements and procedures, technical standards and licensing requirements should
not constitute unnecessary barriers to trade in services. Further disciplines or rules shall be
developed on a sector-by-sector basis to make sure such measures are based on objective and
transparent criteria, are not more burdensome than necessary to ensure the quality of the service
and, in the case of licensing requirements, do not in themselves serve as restrictions on the supply of
the service. International standards should be taken into account in determining compliance with these
principles.
All countries must have adequate procedures in place to verify the qualifications of professional from
other countries seeking the right to practice within their jurisdictions.
• Article VII on registration of qualifications and licenses applies across the board to all
services and professions in all signatory countries regardless of whether specific
commitments have been made. Like Article VI, this article has three features relevant to
the accountancy profession:
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10. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
Countries may choose their own approach to recognizing foreign qualifications and licenses, through
unilateral recognition, bilateral reciprocal arrangements or international harmonization.
There is no obligation for a country to enter into such arrangements. However, if a country decides
to do so, whatever approach is chosen must be applied in a consistent, objective and fair manner to
all other countries seeking recognition of their professionals.
Countries are encouraged to cooperate with intergovemmental and non-govemmentaí
organizations toward the establíshment and adoption of common internationaí qualifications and
standards of practice.
Implementation
The operation of the GATS, as well as the GATT itself and a new agreement on the protection of
intellectual property, wiil be overseen and administered by the new World Trade Organizaron (WTO).
The GATS also creates a Council on Trade in Services made up of representatives from the
signatory countries, to continué ¿otiations on outstanding íssues and otherwise to take up questions
that arise in the operation of the services agreement,
It is known that, in the context of professional services, the Council on Trade Services wiil be
establishing a working party when the agreement comes into forcé to o versee the implementation of
services agreement and that its work relating to accountancy has been designated as "'a matter of
priority."
The foílowing three stage agenda has been set fbr the working party:
1. The additional disciplines and rules envisioned by Article VI shouid be developetl to make
sure that national qualification requirements and procedures, technical standards and
licensing requirements in accountancy do not constitute unnecessary barriere to trade.
2. The use of intemational standards with respect to qualifications and the practice of
accountancy should be encouraged through cooperation with relevant intemationai
govemmental and non-governmental organizations. IFAC and the IASC are the obvious
non-govemmental organizations to be involved in this effort.
3. The cross-border recognition of qualifications should be encouraged, in accordance with
Article Vil, through the deveiopment of appropriare guidelines for recognition agreements.
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11. RECOGNITION OF PROFESSIONAL ACCOUNTANCY QUELIFICATIONS
Appendix 2
Examples of Mutual Recognition Initiatives
The European Union
The (rué legal foundation for the philosophy of mutual recognition was the 1957 Treaty of Rome.
However, it took several decades to develop the necessary political w>'l- Tliis happened wíth The
Single European Act 1986 which enshríned the philosophy of mutual recognition. The general
system of mutual recognition of diplomas seeks to permit professionals in the European Union to
circuíate more fteely ,md easily from one member state to another. This system concems only
individuáis and ignores firms which may be part of the relevant profession. In addition, the directive
relates oniy to establishment-based. provisión of Services and does not address the question of cross-
border provisión of services.
The end result sought is the right of the professional to practice his/her profession in the hosi member
state or provide services there under the same conditions as those to which professionals in that
country are subject. The progressive impiementation of 'he first directive in member states and the
effective organizations of local knowlcdge examinations for the accountaney profession should result
in a significant inervase in the number of accountants benefíting from the mutual recognition of
diplomas.
Nonh America
The North American Free Trade Agreement (NAFTA) establishes basic rules and oblig;itii>ns to
facilítate cross-border trade in services. Whilí recognizing the need for regulaüon, NAFTA encourages
broader market access by províding that licensing requn.nnents must be based on objective and
transparent criteria, such as proii'sjional competence. and must be no more burdensome than js
necessary to enj-ntv :he quality'of service provided.
In 1991, an agreement was entered into between the Canadian Institute of Chartered Acivu^tants,
The American Institute of Certified Pubíic Accountants and the Nat:o»;1| Association of State
Boards of Accountaney which became effective in 5oir.. sul not a¡i QS states in November 1993. A
holder of one designation may qiu-¡:' for the other by passing local knowledge examinations and by
meeting cer:.i:« ^xperience requirements. Cancüdates for reciprocal recognition, who qualify by
íM.vsuig the local knowledge examinations of one of the bodies, will be exempt troni ;ÍÍO obügation to
write the final qualiñeation examination of that body.
11 STATEMENT OF POLICY