Academic journal article The Journal of Developing Areas

Development of Accounting and Auditing in Egypt: Origin, Growth, Practice and Influential Factors

Academic journal article The Journal of Developing Areas

Development of Accounting and Auditing in Egypt: Origin, Growth, Practice and Influential Factors

Article excerpt

INTRODUCTION

Many factors influence the accounting and auditing profession including political, economic, legal, cultural, and financial systems (Radebaugh & Grey 1997). Some factors are closely related to specific characters of a country (Al-Farah, Abbadi & Al Shaar 2015). Other factors originate from outside the country, such as its past trading and colonial links and current patterns of foreign investment (Roberts, Weetman & Gordon 2005). The lower the economic development level the simpler the economic activities and, accordingly, the accounting practice can be highly underdeveloped (Michas 2011). In contrast, in more developed economies, accounting profession is considered as a significant and sophisticated profession (HassabElnaby & Mosebach 2005). New owners of a privatized company (i.e., shareholders) will demand a higher level of disclosure compared to that level mandated by the government (the old owner) (Hassabelnaby, Epps & Said 2003). Thus, privatization may have an impact on the accounting profession. The demand for accounting increases with the increase of the stock market development (Michas 2011). Along aside with the existence of financial market formal regulation, the reliance on the accounting services increases with the increase of the number of both domestic and international investors who call for more and higher quality disclosure (Hassabelnaby, Epps & Said 2003). The legal system of a country affects the role of the accountants and the way in which the accounting profession is regulated (Roberts, Weetman & Gordon 2005). In code-law-countries, the accounting profession tends to be regulated through a prescriptive, detailed and procedural code set by governments (Ebaid 2016). In common-law-countries, governments usually delegate the regulation of the accounting profession to an independent authority (Roberts, Weetman & Gordon 2005). Culture affects the way a person would like his/her society to be structured and how he/she interacts with its substructure (Ebrahim 2014). The accounting profession may be considered as one of the society's substructures (Nobes & Parker 2008). At the time of transformation, understanding the environmental factors that shape the accounting practices, and assessing their impact, gains a great significance (Ebrahim 2014). Most of the preceding international accounting research studied the accounting profession in developed countries (Kleinman & Lin 2017). Studying the accounting and auditing profession in developing countries has been relatively ignored, despite recent transforms in their political, economic, and accounting environments.

Kamla (2004) stated that very little is known about accounting practices and accounting regulations in the Arab Middle East countries. This paper fills a gap in the literature by investigating major environmental factors and linking them to the development of the accounting and auditing profession in Egypt, a country that has a long history regarding the accounting and auditing profession. The paper also reviews factors that initiate Egypt's adoption of the international standards of accounting and auditing by focusing on enforcement mechanisms that emphasize disclosure compliance. This paper is organized as follows. Section 2 provides background information about Egypt. Section 3 presents the history of the accounting profession in Egypt followed by an analysis of the factors affecting the development of the accounting profession in Egypt (Section 4). The professional bodies controlling the accounting profession in Egypt are then discussed in Section 5. Section 6 discusses the Egyptian revolution and its impact on the accounting profession, and finally Section 7 concludes the paper.

ARAB REPUBLIC OF EGYPT - AN OVERVIEW

Egypt is the cradle of an ancient civilization dating back to 3,000 BC. Egypt has a rather stable mixed economy, which embarked on various stages of development during which the public and private sectors played roles varying in relative importance (Dahawy & Kamel 2006). …

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