RESTRICTED
WORLD TRADE S/WPPS/W/11
5May 1997
ORGANIZATION
(97-1932)
Working Party onProfessional Services
SYNTHESIS OFTHE RESPONSES TO
THE QUESTIONNAIRE ONTHE
ACCOUNTANCY SECTOR
Note bytheSecretariat
This note presents asynthesis oftheresponses received sofartotheQuestionnaire onthe
accountancy sector (S/WPPS/W/7). Responses have been circulated asseparate documents asaddenda
todocument S/WPPS/W/7. Theannex tothisnote gives thelistoftheresponses received sofarand
thereference under which they have been circulated. Wherever relevant, usehasbeen made ofthe
surveys done byUNCTAD (S/WPPS/W/8), OECD (S/WPPS/W/4, S/WPPS/W/4/Add.1 and
S/WPPS/W/4/Add.2) andIFAC. Thecoverage ofthese three surveys interms ofissues andcountries
isshown attheendofdocument S/WPPS/W/7.
Thesynthesis isorganised around thesixareas identified inJanuary 1996 bytheWorking Party
onProfessional Services (seeattachment todocument S/WPPS/M/3) asissues forconsideration for
itswork ondisciplines ondomestic regulation.
Asagreed, whenever possible, thesynthesis makes reference torelevant GATS articles. This
isnotintended, however, toconstitute aninterpretation oftheGATS andisonly provided toassist
inthediscussion oftheissues involved.S/WPPS/W/11
Page 2
Table ofcontents
I. QUALIFICATION REQUIREMENTS AND PROCEDURES 4
1. Qualification requirements 4
A. Distinct qualification requirements 4
B. Higher education 4
C. Post-graduate education 5
D. Practice andtraining 5
E. Professional examination 6
F. Pre-conditions tostart professional education 6
G. Subjects covered byprofessional education 6
2. Qualification procedures 7
II. LICENSINGREQUIREMENTS(OTHERTHANQUALIFICATIONREQUIREMENTS)
AND PROCEDURES 7
1. Licensing requirements forindividuals 7
A. Registration 7
B. Membership ofaprofessional body 7
C. Honesty 8
D. Minimum age 8
E. Oath 8
F. Professional indemnity insurance 8
G. Other 9
2. Licensing requirements forfirms 9
A. Registration 9
B. Ownership offirms 10
C. Management 10
D. Other 10
3. Licensing procedures 11
A. Licensing peractivity 11
B. Timing 11
C. Duration 11
D. Documentation 11
E. Other 12
III. REGULATIONS GOVERNING THE ESTABLISHMENT OFACOMMERCIAL
PRESENCE 12
1. Form ofestablishment 13
2. Restrictions oninvestment andownership 13
A. Restriction based onnationality (Article XVI.2(f)) 13
B. Restriction based onqualification orlicensing (Article VI.4) 14
3. Restrictions onmanagement 14
A. Restriction based onnationality 14
B. Restriction based onqualification orlicensing 14
4. Employment oflocal professionals byaforeign professional orfirm 15
5. International relationships oflocal professional firms 15
IV. NATIONALITY/CITIZENSHIP/RESIDENCY REQUIREMENTS 16
1. Nationality andcitizenship requirements 16
2. Condition ofresidence orestablishment 17
3. Establishment inmore than onecountry 17S/WPPS/W/11
Page 3
V. ETHICS 18
1. Regulation ofprofessional ethics 18
A. Rules andcoverage 18
B. Policy objectives 18
C. Professional bodies andinstitutions 19
D. Sanctions 19
2. Restrictions oncompetitive behaviour 19
A. Restrictions onadvertising, marketing andsolicitation 19
B. Restrictions onfee-setting 20
VI. REGULATIONS GOVERNING ENTRY AND TEMPORARY STAY OFNATURAL
PERSONS FOR THE PURPOSE OFSUPPLYING ACCOUNTANCY SERVICES 21
ANNEX 22S/WPPS/W/11
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I. QUALIFICATION REQUIREMENTS AND PROCEDURES
1. Thispartofthesynthesis isbased ontheresponses toquestions 9,10and11oftheQuestionnaire
ontheAccountancy Sector andonother material provided totheWorking Party onProfessional Services
byUNCTAD (S/WPPS/W/8), OECD (S/WPPS/W/4 andAddenda) andIFAC.
1. Qualification requirements
A. Distinct qualification requirements
2. Inseveral countries, there ismore thanoneaccountancy designation, corresponding todifferent
professional bodies, anddifferent qualification requirements. Afirstclear distinction ismade insome
answers between thequalifications required from a"professional accountant andauditor" andthose
required from an"accounting technician" or"book-keeper". Thefirstshould normally have ahigher
education degree, some practical experience andpassaprofessional examination, while thesecond might
have alessspecific education (ashorter university degree oratechnical school) andlesspractical training.
Often professional accountants andbook-keepers areassociated todifferent professional bodies within
onecountry.
3. Asecond distinction canbedrawn between different attributions within thefield of"professional
accountants andauditors". Insome countries different qualification requirements exist forprofessionals
working indifferent fields oftheaccountancy profession. Forexample, insome cases different
qualifications arerequired foraccountants, auditors, statutory auditors andfinancial advisers. Insome
casethedistinction between theattributions corresponds totheexistence ofdifferent professional bodies
foreach category. Thevarious professionals follows different qualification routes andareeducated
andtrained indifferent subjects.
4. Athird distinction concerns theroutes which canbefollowed inorder toobtain aprofessional
qualification. Some countries offer "alternative routes" toobtain thesame qualification oratleast to
perform thesame functions. Thus forexample there canbea"degree route" anda"non-degree" route,
where thesecond iscompensated byapost-graduate course orlonger training. Periods ofpractice and
training canvary according totheprofessional education undertaken (specialised inaccountancy and
related fields orofmore general nature) leading tothesame professional qualification ortoequivalent
qualifications.
B. Higher education
5. Most ofthecountries whohave responded tothequestionnaire require ahigher (post-secondary)
degree inorder toqualify asanaccountant. Thelength ofthestudies necessary toobtain thedegree
ranges form aminimum ofthree years toamaximum offive. Some countries require auniversity
education,whileothersacceptotherequivalentpost-secondaryeducation(polytechnic,technologyinstitutes
andother higher education establishments). Infact, some answers specify thetype ofdegree required
(university degree, BA,undergraduate degree, etc.), while others simply refer toanumber ofyears
inhigher education. Animportant distinction concerns thefield oftherequired higher education. A
number ofanswers refer toanyhigher education degree, leaving professional training inaccountancy
andauditing topost-graduate courses orpractical training. Ontheopposite sideofthespectrum some
countries require specific degrees either inaccountancy orinrelated subjects such aseconomics, law,
management, andpolitical science. Asanintermediate solution some Members askforageneral higher
degree (undergraduate -BA) with aspecialisation (major) inaccountancy.S/WPPS/W/11
Page 5
6. Anumber ofcountries allow graduates toaccess theprofession upon completion ofhigher
education courses, without requiring practical experience, training orprofessional examination. The
higher degree isnormally awarded after afinal examination orafter thewriting ofadissertation in
thefield ofaccountancy (both taketheplace ofthe"professional examination"). Thefinal examination
from thehigher institution isdifferent from thetraditional "professional examination", insofarasthe
firstisadministered byanacademic body, andthesecond byaprofessional body. Besides, thesecond
ismore likely toinclude practical aspects oftheprofession aswell astheory, because itisnormally
undertaken after aperiod ofpractical experience ortraining. Thehigher degrees which allow direct
access totheprofession areinmost cases specific degrees inaccountancy, while only infour cases
isitenough tohold a"related degree" (commerce, economics, law, engineering). Insome other cases
thecompletion ofahigher degree (inaccountancy orwith amajor inthesubject) guarantees access
toaprofessional examination. Inthiscasethere isnorequirement ofpractical experience ortraining,
buttheprofessional body maintains competence intheadministration oftheprofessional examination,
distinct from thefinal examination (ordissertation) necessary tograduate from thehigher institution.
C. Post-graduate education
7. Some countries require accountants toundertake aperiod ofpost-graduate education in
accountancy, auditing andrelated subjects. This period ranges from onetothree years andprepares
candidates forthefinal professional examination. Post-graduate education may coincide with partor
withthewhole period ofpractical experience andtraining. Onecountry, which does notrequire ahigher
degree, subjects accountants toaneducation program offered bythenational institute ofaccountants,
2years ofprofessional experience andafinal examination. Theexistence ofthese post-graduate courses
hasledtosome confusion intheanswers toquestions 9and10ofthequestionnaire. Afewanswers
toquestion 10have included higher degrees among the"pre-conditions tomeet tostarttheprofessional
education .Infact, theyhave considered post-graduate courses as"professional education", thehigher
degree being apre-condition toaccess such courses. Themajority oftheanswers ontheother hand
includes secondary school education asthepre-condition toaccess higher degrees, which areregarded
astheonly "professional education". Insuch cases, however, there isnoprovision forpost-graduate
courses.
D. Practice andtraining
8. Most countries require aperiod ofpractical experience after higher education orinafewcases
intheplace ofhigher education. Itwasnoted above thatthisperiod may coincide with post-graduate
education. Practical experience cantake theform ofnon-supervised "professional work experience"
orof"training" under thesupervision ofaqualified accountant. Sometimes there isachoice between
supervised andnon-supervised practical experience, andinsuch cases alonger period isrequired for
non-supervised experience. Practical experience isinmost cases undertaken after thecompletion of
thehigher degree, during theperiod ofpost-graduate education (when applicable) andbefore the
professional examination. There are,however, some important exceptions. Inafewcountries some
experience gained during theyears ofhigher education canreduce thelength oftheperiod ofpractice
required after graduation. Also insome cases anentrance examination oranintermediate examination
isrequired before orduring theperiod ofpractice (and post-graduate education) andbefore thefinal
examination. Thepractice israrely administered directly byanational orlocal professional body.
More frequently itmust takeplace with aninstitution approved bytheprofessional body orunder the
supervision ofaqualified individual. Inmost cases, however, theresponses tothequestionnaire simply
refer topractical experience, without specifying whether itshould takeplace inanapproved practice
oraunder thesupervision ofaqualified individual.S/WPPS/W/11
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E. Professional examination
9. About halfofthecountries who have responded tothequestionnaire require applicants to
undertake aprofessional examination, administered byaprofessional body, asthelaststep before
qualifying asaccountants. Inasmall number ofcases theprofessional examination precedes theperiod
ofpractice andistheonly examination required. Itwasnoted above thatwhen there isarequirement
foranentrance (oranintermediate) examination, itisnormally without prejudice tothefinal professional
examination. The professional examination issometimes substituted bythehigher degree final
examinationordissertation(administeredbythehigherinstitution),butinthosecasesnoperiodofpractice
isrequired. Theanswers tothequestionnaire donotgenerally specify thepreparation required and
thesubject covered bytheprofessional examination. Itisdifferent forthose countries which only have
thefinal higher degree examination (ordissertation), because thequestionnaire (question 11)specifically
asks what arethesubjects covered bythisprofessional education.
F. Pre-conditions tostart professional education
10. Itissuggested above thatthere may besome misunderstanding with respect totheresponses
toquestion 10,duetothedifferent interpretation given bycountries tothecategory of"professional
education". Some countries have listed higher education asapre-condition tostart post-graduate
education, which they regard as"professional education", while some others, which regard higher
education asawhole as"professional education", have included secondary school qualification aspre-
condition. Some answers finally listallqualification requirements andprocedures under question 10
(degree, post-graduate courses, practical experience, professional examination, fee,membership ofa
professional body, age,etc.), interpreting "pre-conditions" asreferring tothefinal qualification rather
then toaccess toprofessional education. Insome countries, where nohigher degree isrequired, the
subjects covered bysecondary education arerelevant toqualifying asanaccountant. Those countries
therefore listaspre-condition (nottostarttheprofessional education, which isnotrequired buttoqualify
asanaccountant) theinclusion inthesecondary school education ofcertain subjects such asmaths,
thenational language andcommerce. Thepre-condition ofageisdifficult toassess inthelight ofthe
misunderstanding onhigher andpost-graduate education. Theminimum ageforaccessing higher
education iseither 17or18years. When aminimum ageof20to22years islisted, itrefers topost-
graduate education. Several countries have nominimum agerequirement atall.Most answers include
thepre-condition ofpayment ofafee,butthere isafairamount ofuncertainty astowhether such fee
isdueforthehigher education course, thepost-graduate education orthemembership oftheprofessional
body. Insome answers itisnotpossible toidentify theconsideration which thefeeispaidfor.Among
thepre-conditions onecountry lists, foroneprofessional body, proof ofemployment oranoffer of
employment with afirm approved fortraining. This seems toserve thepurpose oflinking qualification
andtraining toaccess toemployment, sothatallqualified accountants would beguaranteed ajob.
However, itconditions thepossibility ofbeing trained asanaccountant tohaving already found ajob
inthesector.
G. Subjects covered byprofessional education
11. Thelarge majority oftheanswers include: accountancy, auditing, general law, economics,
management, finance andprofessional ethics. Accountancy andauditing areoften broken down tomore
specificsubjects,suchasgeneralaccounting,consolidatedaccounts,costaccounting,financialaccounting,
internal auditing, external auditing. Several answers include alsosubjects such asaccounting standards,
taxation, information technology, statistics, specific lawsubjects (commercial law,company law,civil
law, taxlaw, trade law), marketing andfinancial mathematics.S/WPPS/W/11
Page 7
2. Qualification procedures
12. Theresponses tothequestionnaire ontheaccountancy sector focus mainly onsubstantive
qualification requirements andonly give succinct indications onqualification procedures. TheIFAC
survey included aquestion dealing with "access topractice authorization", which isdefined as"the
offering ofaqualifying examination andtheprocessing andapproval ofapplications". Asthisdeals
with both qualification andlicensing procedures, itisdifficult totellprecisely what isthemeaning
ofresponses forqualification procedures only. According totheinformation received from IFAC, about
half, outof49professional bodies in38countries, allow access topractice authorization inauditing
andaccounting onayearly basis. About thesame number ofbodies allow access ondemand. Only
onebody allows access lessthan once peryear.
II. LICENSING REQUIREMENTS (OTHER THAN QUALIFICATION
REQUIREMENTS) AND PROCEDURES
13. This partofthesynthesis isbased ontheresponses toquestions 19and24inthequestionnaire,
aswell asanyrelevant material provided totheWorking Party onProfessional Services byUNCTAD
(S/WPPS/W/8), OECD (S/WPPS/W/4 andaddenda) andIFAC.
14. Inanalysing theresponses, adistinction ismade between licensing requirements, which cover
thesubstantive administrative obligations toberespected inorder tobeauthorised topractise thevarious
regulated activities intotheterritory ofaMember, andlicensing procedures, which cover theconcrete
administrative steps tobetaken inorder toobtain thisauthorisation topractise from therelevant licensing
authorities oftheMember.
1. Licensing requirements forindividuals
A. Registration
15. Inorder toobtain alicence, theapplicant must register with theauthorities granting thelicence.
Theregistration involves thesubmission byaprofessional ofadossier containing ingeneral astandard
application form, hispersonal andprofessional details, proof ofcompliance with allother requirements
likeeducation andtraining (discussed elsewhere inthispaper), membership ofaprofessional body,
honesty, etc.andafee.Theauthorities can,onthebasis ofthatdossier, verify thatallrequired conditions
arefulfilled bytheapplicant. Itthen leads totwoother steps which aretheissuance ofthelicence
orauthorisation topractise (whatever form thismay take) andentry onthelistofallprofessionals
authorised topractise. This listispublic andmaytaketheform ofaregister, amere directory, aroster,
etc. Inafewinstances, these twolatter steps may becombined, astheauthorisation topractise flows
from theinscription onthelist. Aquarter oftheresponses indicated thatnoregistration requirement
existed intheMember country, whilst only oneMember saiditdidnothave anylicensing requirement.
Given thatregistration andlicensing areintrinsically linked, there appears tobeacontradiction between
these twofigures. Apossible explanation could bethatsome form ofregistration exists inthesector
inalmost allMembers, although itmay notalways beidentified assuch bytherespondents.
B. Membership ofaprofessional body
16. Adistinction canbedrawn between those Members where membership ofaprofessional body
isrequired (intwo-thirds ofthecases) andthose where thisisnotthecase. Intheformer, licensing
requirements willbeidentical tomembership requirements imposed bytheprofessional body. Inmany
cases, thisflows from thefactthattheprofessional body isactually thelicensing authority intheMember
country, either because ithasbeen established bylawforthatpurpose among others (50% ofthecases),S/WPPS/W/11
Page 8
orbecause thelawhasdelegated orgranted toitsuch aroleafter ithadbeen established byprofessionals
themselves. Mandatory membership ofaprofessional body canalsoco-exist with anindependent (and
generally governmental) licensing authority. Such authorities canbepartoftheministry offinance,
ofjustice, ofeducation, ofindustry, etc.orpartofthestock exchange orfinancial market regulators,
oreven aspecific body initsown right whose main taskistoregulate andsupervise theaccountancy
profession. Inallcases, these aspects oftheregulation ofthesector aretheconsequence oftheway
theprofession hasdeveloped andstructured itself over theyears ineach Member, more than anything
else.
C. Honesty
17. Guaranteeing thehonesty ofprofessionals isarequirement inthree quarters ofthecountries.
This takes avariety offorms, according totheculture, tradition andorganisation ofeach Member, but
theobjective ofthemeasure isgenerally thesame: preventing anybody who hasbeen dishonest in
thepastfrom practising certain regulated activities. Topassthattest,applicants need inalarge majority
ofcases todemonstrate theydonothave acriminal record inrespect ofcertain honesty related violations,
have notbeen bankrupt andsoon.According tocountries 'traditions, they willmerely have tostate
thattheydonothave such criminal records, orinother Members toprovide apositive proof ofit(official
record, forexample). Afewcountries complement these points with apolice enquiry onthemorality
ofapplicants. Therequirement maynotalways beformulated insuch aprecise wayasmany countries
only require thatapplicants be"fitandproper persons" without being specific ontheway inwhich
thisshould bedemonstrated.
D. Minimum age
18. Beyond themain requirements noted above, alarge range ofother provisions exists inthe
regulations oftheresponding Members, none ofwhich isshared byamajority ofMembers, however.
40% oftheresponses indicate thatapplicants need tobeofacertain minimum ageinorder tobe
authorised topractise. Theminima arecomprised between 18and25years, according tocountry.
Itisourimpression, however, thatinalarge number ofsuch cases, theonly requirement imposed on
professionals istobeoflegal age,i.e.tobelegally fully capable. Ontheface ofit,those countries
where theminimum ageimposed onprofessionals ishigher than thelegal majority constitute atiny
minority. Itcanbesafely assumed thatinmost, ifnotall,Members which didnotindicate anyminimum
agerequirement intheir response, professionals would infactneed tobelegally capable inorder to
beauthorised topractise.
E. Oath
19. Aquarter oftheresponses shows thatnewly authorised professionals have totake anoath.
Theoath cantake several forms andcaneven betaken inwriting insome Members, butitscontent
isgenerally very similar. Theprofessional must undertake toabide bythelaws andregulations ofthe
country when practising theprofession andbehave inanhonest manner. Thisrequirement isinprinciple
amere formality which canbecompleted bythose who fulfil allother requirements. According to
countries, itoccurs atdifferent stages inthelicensing process (oncompletion ofthestudies, when
registering with thelicensing authority, etc.).
F. Professional indemnity insurance
20. Aquarter oftheresponses indicates thatprofessionals need tohave aprofessional indemnity
insurance inorder tobeauthorised topractise. Inthose cases, acertificate from theinsurance company
needs tobeattached totheapplication. Certain responses specify thattheinsurance policy needs to
respect certain minimum specifications likethecoverage ofafixed amount ofdamage (peryear, perS/WPPS/W/11
Page 9
case). Such anobligation istotally independent from theform under which theprofessional intends
topractise: with joint andseveral liability orwith limited liability.
G. Other
21. Aresidency orestablishment inthejurisdiction where theprofessional istobelicensed, ora
condition ofnationality orcitizenship have also been mentioned in20and30% oftheresponses
respectively, butthese licensing requirements willbediscussed specifically inanother section ofthis
paper.
22. Theother requirements shown intheresponses remain specific tooneortwoMembers only.
Although itisobvious thatnotallresponses provided anidentical level ofdetail, wecannot derive any
useful trend from these miscellaneous requirements. Ontheother hand, itwassurprising thatnone
oftheresponses referred toanobligation thattheprofessional remain inpublic practice (i.e.providing
services toclients asaliberal professional, byopposition tooccupying accountancy posts inindustry
oracademia forexample; seedocument S/WPPS/W/2, I.2). This isarequirement inallcountries
where functional titles exist forthepractice ofcertain designated activities (forstatutory audit, for
example). This isclearly anomission intheresponses, andpotentially animportant one, even ifwe
cannot measure it.
2. Licensing requirements forfirms
23. Aquarter oftheMembers which responded indicate thatthelicensing ofprofessional firms
isnotpossible either because professional firms arenotregulated (asopposed totheindividuals inthe
firm) orbecause thepractice ofregulated activities isrestricted exclusively toindividual professionals,
i.e.practice isnotpossible through themedium ofafirm. Inthese cases, theabsence oflicensing or
regulation forfirms does notprevent professionals from creating firms inmany instances: thefirm
isavery popular form ofpractice within thesector. Thefollowing comments analyse thesituation
inthose responding Members where professional accountancy firms canbelicensed. (The standard
requirements imposed onallcompanies, including accountancy firms byeach Member 'scompany law,
have notbeen addressed bythequestionnaire.)
A. Registration
24. Asforindividuals, themost frequent requirement imposed onprofessional firms istoregister
with some sortoflicensing authority. Over 90% oftheresponses indicate thisisarequirement, which
maystillunderstate reality butisalready much higher thantherateofregistration requirements indicated
forindividual professionals (75%: see1(A) above). The registration ofaprofessional firm is
independent oftheregistration ofitspartners andoftheprofessionals working onitsbehalf: even when
theprofessional firm isregistered partners, managers andprofessionals working inthefirm canstill
bepersonally registered. Conversely, professionals may wish tobepersonally registered even when
thefirm they areworking forisalready registered. Theregistration ofafirm andtheregistration of
professionals working inthefirm should beseen ascomplementary steps intheestablishment ofa
professional practice. More thanthree quarters oftheresponses (which maystillbeunder-representing
reality) indicate thattheregistration ofthepartners intheprofessional firm, oratleast some ofthem,
isarequirement forthefirm tobelicensed. Generally speaking, responses show thatallprofessionals
practising onbehalf ofthefirm, bethey partners inthefirm ormere employees, have themselves to
belicensed asifthey were practising ontheir own behalf. What ismeant bypersons practising on
behalf ofthefirm covers only thepersons who have final responsibility forthework orwho have the
power toengage thefirm inprofessional matters. Allpersons (including qualified professionals) who
contribute tothework asmembers ofateam, butdonotshare anypersonal responsibility ordonotS/WPPS/W/11
Page 10
engage theresponsibility ofthefirm aretherefore excluded from thatcategory. This constitutes a
guarantee oftheprofessionalism ofthework done inthefirm.
B. Ownership offirms
25. Almostasfrequentasthepreviousrequirementsaretheconstraintsimposedintermsofownership
ofaprofessional firm. 70% oftheresponses indicate thatthefirm needs tobecontrolled orowned
byprofessionals. Tobeconsidered as"professionals" forthatpurpose, individuals willneed tobe
personally licensed bytheauthorities oftheMember (asdiscussed above). From theresponses, itseems
thatcontrol isnow rather expressed interms ofvoting rights inthefirm. Itshows anevolution ofthe
regulation insome Members where sucharequirement hadinitially been conceived interms ofownership
ofthecapital. Theshare thatneeds tobecontrolled bylocally licensed professionals varies according
tocountries. Theminimum is51% (also defined as"atleast amajority" inmany cases) inathird of
thecases, andthemaximum 100% inanother third ofthecases. Theremaining third isspread somewhere
between these twoextremes (2/3, 3/4,etc.). These results seem toindicate thataprofessional firm
canbeowned andcontrolled bysomeone who isneither licensed, norqualified norofgood repute in
approximately 30% oftheMember countries which license firms. Moreover, none ofthese countries
seems toimpose other conditions onprofessional firms (onmanagement, orontheconduct ofand
responsibility forprofessional work) tocompensate theabsence ofcontrol overthefirmbyprofessionals.
Onthefaceofit,thisissurprising andsuggests theexistence ofsome inaccuracies insome responses.
C. Management
26. Justover 60% oftheresponses indicate thatthemanagement ofaprofessional firm needs to
respect certain requirements. Inthose cases, alldirectors ofthefirm oratleast amajority ofthem in
asmall number ofcountries (orthose holding thecorresponding position, according tothelegal form
ofthefirm) willneed tobepersonally licensed bythelocal authorities (asdiscussed earlier). The
licensing requirement imposed onthemanagers ofthefirm isindependent ofthelicensing ofthose
professionals responsible forprofessional work done bythefirm. Even when themanagers ofthefirm
arerequired tobelicensed, regulated services willinprinciple only beprovided bythefirm under the
authority andresponsibility ofalicensed professional (who may notbeamanager inthefirm). One
ofthemain purposes ofrequiring thedirectors tobepersonally licensed istoguarantee thatthefirm
willrespect directly andmake surethatallthose working foritrespect thelaws andregulations ofthe
sector, andinparticular theethical rules governing thepractice ofregulated activities (independence,
professional secrecy, etc.). Inthepercentage given above, ithasbeen assumed thatallfirms which
have tobe100% owned andcontrolled bylocally-licensed professionals alsohave tobemanaged by
such professionals, even ifthisisnotindicated intheresponse. Here again, wesuspect thatthenumber
ofcountries where thatkind ofrequirement isimposed isslightly higher than shown intheresponses.
D. Other
27. Apart from themembership ofaprofessional body, which isrequired inabout 60% ofthecases
(which ismarginally lessthan forindividuals, surprisingly), other requirements forprofessional firms
areimposed inaminority ofMembers only. Some require thatthefirm beinsured; orthatthepurpose
ofthefirm betheexclusive practice oftheaccountancy profession orofcertain regulated activities
(statutory audit inparticular); orlimit thenumber ofpartners thatthefirm canhave (maximum or
minimum); orlimit thenumber ofpersons whocanwork inthefirm orforeach partner orprofessional
ofthefirm. Even lessfrequent aretheresponses indicating therequirement tohave acertain minimum
level ofcapital (this level may actually depend onthelegal form ofthefirm, andmay bedefined by
lawforallsuch companies, irrespective oftheir activity), toadopt aparticular legal form, ortochose
thename ofthefirm according tocertain rules. Even ifitcanbeassumed thattheresponses understate
certain ofthese requirements -do,forexample, professional firms have acomplete freedom tochoseS/WPPS/W/11
Page 11
their legal purpose inalltheMembers which didnotindicate theexistence ofanyrequirement inthat
domain (85% ofthecases) -they donotappear tobevery common practices.
3. Licensing procedures
28. Thelevel ofdetail available intheresponses about thelicensing procedures ofMembers for
accountants (individuals orfirms) remains limited.
A. Licensing peractivity
29. Very fewcountries distinguish between activities interms oflicensing: asingle licence gives
access tothepractice ofallregulated activities inamajority ofcountries. Anumber ofresponses indicate,
however, thatthelicence only covers thepractice ofstatutory audit. This occurs incountries where
statutory audit istheonly regulated activity inthesector. Hence, nolicence isneeded topractise other
activities inthose countries. These responses cannot beconsidered asthesignofalicensing-by-activity
system. Asaresult, those countries where more than onesingle licence isneeded topractise thefull
range ofaccountancy services arenotvery numerous.
B. Timing
30. Three quarters oftheresponses indicate thatanapplication foralicence canbesubmitted at
anytime during thecourse oftheyear. Intheother cases, thiscanbedone once ayearbefore aspecific
date. Theprocedures may not,however, beasflexible asthey appear, asthetiming ofthesubmission
ofanapplication willfrequently influence therapidity with which theapplication willbeprocessed.
Inanumber ofcases, theapplication hastobereviewed byaspecific committee orboard which only
meets alimited number oftimes every year. When thisisthecase, anapplication submitted justafter
such ameeting willtake longer toprocess than onesubmitted justahead ofameeting.
C. Duration
31. Inamajority ofcases (60%) theresponses indicate thatanapplication willtake amonth or
lesstobeprocessed. Another quarter oftheresponses estimates thatthree months maximum will
generally elapse between thesubmission ofanapplication andtheissuance ofthecorresponding licence.
Thenumber ofcases where thistakes longer istherefore rather small. These figures areonly estimates
andcanbesubject toacertain degree ofvariation. Inparticular, theyassume thatthedossier submitted
fortheapplication iscomplete andthatalllicensing requirements aremet. Ifeither ofthese two
conditions were notrespected, theprocess could obviously lastmuch longer.
D. Documentation
32. Aminority ofresponses provide details onthedocumentation necessary tosubmit anapplication.
Thelistofdocuments andinformation tobeprovided generally looks straightforward andcaninclude
astandardisedapplicationformwithpersonaldetails,documentsprovingcompliancewithallqualification
andlicensing requirements (studies, experience, exams, diplomas, proof ofhonesty, ofprofessional
indemnity insurance, etc.), fees(although thisisonly mentioned inaminority ofresponses, itwould
besurprising ifthiswere notanalmost standard practice). Thelistofdocuments tobeprovided by
professional firms isnecessarily longer, astherequirements theyhave tocomply witharemore numerous
andsophisticated. They generally include thestatute ofthefirm, thelistofitspartners andallrelevant
data onthem, information onthemanagement ofthefirm where relevant, etc. Inafewinstances
responses refer toadditional information likelistsofclients, pending lawsuits, financial statements of
thelastthree years. Itisnotclear how such procedures could berespected bynewly created firms;
they may simply apply incase ofrenewal ofthelicence, although theresponses donotindicate this.S/WPPS/W/11
Page 12
Intheabsence ofarecognition agreement orofreciprocity oftreatment, very fewresponses indicate
thatdocuments issued inforeign countries (diplomas, qualification ortraining certificates, etc.) could
beaccepted tosupport theapplication foralicence.
E. Other
33. None oftheMember countries where professional firms canbelicensed indicate thatany
difference exists between theprocedure applicable forthelicensing ofindividuals andfirms. Afew
ofthem, however, show thatthetime necessary tocomplete theprocedure islonger forfirms than for
individuals, astheverification process ofcompliance with therequirements ismuch more complex
fortheformer than forthelatter.
34. Finally, itseems thatlicences aregenerally issued foranindefinite period oftime. There is
therefore noneed toperiodically repeat thelicensing procedure. However, allMember countries have
inplace aprocedure towithdraw thelicence ofanindividual orafirm thatnolonger complies with
allthelicensing requirements. Theimplementation ofthisprocedure istheresponsibility ofthesame
authority which grants thelicences. Inathird ofthecases, thewithdrawal ofthelicence canbe
accompanied byadisciplinary orcriminal action against thedefaulting professional orfirm, asthenon-
compliance with therequirements isconsidered asprofessional misconduct oreven abreach ofthe
lawequivalent toacriminal offence.
35. Thequestionnaire didnotaddress thepossibility forprofessionals toappeal when their licence
iswithdrawn orrefused inthefirstplace.
III. REGULATIONS GOVERNING THE ESTABLISHMENT OF ACOMMERCIAL
PRESENCE
36. This partofthesynthesis isbased ontheresponses toquestions 29to33inthequestionnaire,
aswell asanyrelevant material provided totheWorking Party onProfessional Services bytheOECD
(S/WPPS/W/4/Add.2) andIFAC.
37. Theestablishment ofacommercial presence constitutes thethird mode ofsupply ofservices,
asdefined inArticle IoftheGATS. Thelawsandregulations affecting itaresubject toseveral provisions
oftheGATS. Inparticular, theywillbesubject tothedisciplines ofArticle VI.4 (when theydealwith
qualificationorlicensingrequirements)and,totheextentacommitmenthasbeenscheduledbyaMember,
thedisciplines ofArticle XVI (market access) andXVII (national treatment). Article XVI would apply
toameasure ifitcorresponds tooneofthesixcategories oflimitations tomarket access specified in
paragraph 2ofArticle XVI; Article XVII would apply ifameasure discriminates against foreign service
suppliers infavour oftheir counterparts ofnational origin; thedisciplines ofArticle VI.4, therefore,
would normally apply only tothose measures which would notfallwithin thescope oftheother two
articles. Thefollowing comments willtakeintoaccount therelevance ofthese articles toeach ofthe
measures.
38. There isadegree ofinconsistency insome cases between theresponses given inthispartof
thequestionnaire andthose elsewhere, particularly inthepartonlicensing. Theconditions listed to
obtain alicence inchapter IIhave notalways been repeated herealthough there isnoreason why they
should notapply equally. Conversely, some responses have been more specific interms ofrequirements
imposed onforeign professionals andfirms wishing toestablish acommercial presence thanthey have
been onlicensing requirements ingeneral, although these requirements seem toapply equally tolocals
andforeigners.S/WPPS/W/11
Page 13
1. Form ofestablishment
39. Measures which restrict orrequire specific types oflegal entity orjoint venture through which
aservice supplier may supply aservice arecovered byArticle XVI.2(e) oftheGATS. Traditionally,
such measures have been important inthesector, topreserve either thecivil (non-commercial) character
ofthepractice ofaccountancy, orthepersonal responsibility ofprofessionals among other things. This
is,however, adomain inwhich theevolution oftheregulation hasbeen most visible overthelastdecade.
many oftheheaviest restrictions have been removed inanumber ofcountries toallow professionals
toadapt their practices tothenew realities ofthesector. Theresponses show thatonly oneMember
country stillmakes itimpossible forprofessionals tocreate aprofessional firm topractise regulated
activities, whilst another Member requires thatbanks, pension funds andother financial institutions
beaudited exclusively byauditing firms specifically licensed. Allother responses leave toprofessionals
acertain degree offreedom asfarastheform under which they wish topractise isconcerned.
40. Traditionally(inparticularintheAnglo-Saxonworld),partnershiphasbeenthelegalformmostly
used byprofessional firms. Inanumber ofcases thiswasactually theonly form available tothose
whodidnotwant tobesolepractitioners because incorporation wasprohibited. Thegreater flexibility
which exists now incertain countries hasreduced to40% those countries inthesample where
incorporation isstillforbidden andwhere partnership istheonly collective form ofpractice allowed.
With afewexceptions, most ofthese Members arepresent orformer members oftheCommonwealth.
Therestoftheresponses indicate either thatnorestriction exists ontheform under which onecanpractise
(athird oftheresponses) orthatsome form ofincorporation isavailable although professionals donot
enjoy total freedom ofchoice between allexisting forms ofcompanies (theuseofcertain particular
forms ofcompanies isstillforbidden) intherestofthecases (26%).
2. Restrictions oninvestment andownership
41. The question onthissubject covered twodifferent aspects which pertain totwodifferent
provisions oftheGATS. Theownership ofafirm canbedetermined according toeither thenationality
oftheowner (individuals orprofessional firms according tothedefinitions ofwhat constitutes a"natural
person ofanother Member" anda"juridical person ofanother Member" inArticle XXVIII(k), (m)and
(n)), oronthebasis oftheorigin ofthelicence held byhim(i.e.aforeigner holding alocal licence
would notcount asforeign). When theforeign/domestic distinction ismade onthebasis ofnationality,
andonthisonly, investment andownership isanArticle XVI.2(f) issue. When thedistinction ismade
onthebasis ofalocal qualification orlicence oftheowner (individual orprofessional firm), itisan
Article VI.4 issue. According towhich criteria isused byMembers, theGATS rules applicable will
consequently bedifferent.
42. Less thanatenth oftheresponses indicate thatneither kind ofrestriction exists intheMember,
which means thatinvestment andownership byforeigners (whether professional ornot)orbyunqualified
orunlicensed people (whether national orforeign) iscompletely free. Thefollowing comments analyse
thesituation inthose responding Members where thisisnotthecaseasoneortheother form ofrestriction
exists.
A. Restriction based onnationality (Article XVI.2(f))
43. Only 17% oftheresponses indicate thatthepartners intheprofessional firm, oratleast the
majority ofthem have tobenationals oftheMembers. This majority ismeasured interms ofvoting
rights inthefirm. Therelative lownumber ofMembers having anationality condition toown a
controlling share inaprofessional firm shows how critical thesecond category ofrestriction (based
onlicensing) isforthedevelopment oftrade inaccountancy services under mode 3.S/WPPS/W/11
Page 14
B. Restriction based onqualification orlicensing (Article VI.4)
44. Allother responses (83%) show thatMembers require thepartners, oratleast amajority of
them, tohold alocal qualification andlicence. Inthose cases, responses listsome ofthelicensing
requirements toberespected byfirms andwhich have already been discussed earlier inchapter IIof
thispaper. Forthecompliance with these requirements, holders ofaforeign qualification orlicence
areconsidered asunqualified persons ornon-professionals. Very fewcountries actually distinguish
intheirregulationofthesectorbetweenholdersofaforeignqualificationorlicenceandnon-professionals
asneither ofthetwoholds alocal qualification orlicence (asamatter offact, thisiseven notdiscussed
intheresponses).
45. The responses provide some additional information oncertain licensing requirements for
professional firms which have notbeen mentioned before. Athird oftheresponses explain that
shareholding inprofessional firms isrestricted toindividuals which makes itimpossible todevelop
groups ofprofessional firms inthose countries through theclassical parent-subsidiary relationship, even
ifallfirms potentially involved were tobelocally licensed. Less than 10% ofresponses specify that
thepartners ofthefirm need tobeactually working inthefirm, which makes itimpossible formere
providers ofcapital totake ashare inaprofessional firm, even ifthey arelocally licensed.
3. Restrictions onmanagement
46. Asforinvestment andownership, thisquestion addressed twodifferent types ofmeasures
pertaining each toaspecific article oftheGATS. When adistinction ismade onthebasis ofnationality,
Article XVII isrelevant, while Article VI.4 applies toregulations which distinguish according tothe
qualification orlicence ofmanagers.
47. Around atenth oftheresponses show thatneither type ofrestriction applies tomanagers of
professional firms. Inthose cases, foreigners asnon-professionals caninprinciple bemanagers (or
directors, according tothelegal form ofthefirm). Theresponses didnotspecify whether inthose cases
theregulated services provided bythefirm have tobeproduced under thedirection andresponsibility
ofalocally qualified andlicensed professional ornot. Thefollowing comments analyse thesituation
inthose responding Members where atleast oneofthetwoforms ofrestrictions exists.
A. Restriction based onnationality
48. 10% oftheresponses show thatthemanagers ofaprofessional firm, oratleast amajority of
them, have tobenationals oftheMember.
B. Restriction based onqualification orlicensing
49. Almost allother responses indicate thatMembers require themanagers, oratleast amajority
ofthem tobelocally qualified andlicensed. Inthose cases, therequirements toberespected have already
been discussed earlier inthispaper. Here again, foreign licensed professionals areassimilated tonon-
professionals forcompliance with these rules.
50. Two responses simply require managers ofaprofessional firm toberesident inthecountry
anddonotmake reference totheholding ofalocal licence; thisseems rather tobeanomission, however.S/WPPS/W/11
Page 15
4. Employment oflocal professionals byaforeign professional orfirm
51. Thepossibility foraforeign professional orforeign professional firmtoemploy locally licensed
professionals alsobelongs toamode-3 type ofsituation insofarastheresponse tothatquestion will
condition thewayinwhich aforeign orprofessional firm establishing acommercial presence inahost
country willbeallowed toemploy locally qualified labour forthepurpose ofsupplying regulated
accountancy services intheterritory ofthatMember.
52. Before analysing theresponses, oneneeds tokeep inmind that, according totherequirements
imposed inmost Members forthelicensing ofindividuals (seechapter II.1above) orprofessional firms
(seechapter II.2above), very fewforeign professionals orprofessional firms willhave thepossibility
ofholding alocal licence. Therulewillrather bethataprofessional orprofessional firm licensed in
another Member willnotqualify foralocal licence inthehostMember, onthebasis oftheir domestic
credentials (e.g. licence, qualification, etc.). Foreign professionals would only beallowed topractise
regulated activities ifthey become partofthelocal profession, which generally entails apartial or
complete requalification, obtaining alocal licence, etc. Similarly, foreign professional firms would
need tobecome owned, controlled andsometimes managed bylocally licensed professionals tobe
authorised topractise.
53. Most Members donothave special requirements forthehiring oflocal professionals byforeign
professionals andprofessional firms notholding alocal licence (86% ofthecases). Theothers either
impose some conditions oreven forbid thehiring altogether (5% ofthecases). When thehiring is
subject tocertain conditions, Members either require thelocally licensed professional tohave final
responsibility forprofessional work, orthattheforeign professional orprofessional firm hasalocal
licence,orevenrespectsinhiscountryoforiginrequirementscorrespondingsubstantiallytothoseimposed
ontheprofessionals orprofessional firms ofthehostcounty. Onthefaceofit,these conditions pertain
toArticle VI.4 oftheGATS asthey always involve some sortoflicensing condition, either inthehost
orforeign country.
54. Thenumber ofcountries which donothave anyrestriction inplace issurprisingly high asthe
ethical requirements frequently impose that, when practising regulated activities, accountants beeither
self-employed oremployed byanother licensed professional orprofessional firm. Such restrictions
areimposed tosafeguard theindependence oftheprofessional, inparticular when practising statutory
audit. This could only mean thatforeign professional firms arenottreated differently from locals in
thatrespect. Itcannot mean thatforeign firms willbeexempted from thebasic requirement tohold
alocal licence. Thisrequirement ispotentially quite onerous forforeign professional firms which would
notnormally have alocal licence (asseen inchapter II),astheir home country licence willnotbe
recognised inthehostcountry most ofthetime. Therequirement tobelocally licensed toemploy local
professionals pertains toArticle VI.4.
5. International relationships oflocal professional firms
55. With only onesingle exception, none oftheresponding Members restricts thedevelopment
ofinternational relationships byprofessional firms provided, however, thatitdoesnotinvolve anycapital
linkinmost cases (restrictions discussed above about investment andownership would then apply).
What isgenerally understood byinternational relations isthekind ofrelations developed sofaramong
thebiginternational networks ofaccountancy firms. They more orlesswork likefranchise: independent
local firms exploit incommon asingle commercial name andvoluntarily agree toapply thesame
methodology andstandards, tosubmit themselves tomutual scrutiny andquality control, tocontribute
(financially andtechnically) tothedevelopment andimplementation ofthese tools, etc.Profit sharing
canalsoexist butremains theexception rather than therule. Restrictions imposed oninvestment andS/WPPS/W/11
Page 16
ownership (seesection 2above) have shown thatnothing going beyond these limited relations ispossible
inalarge number ofcountries, which iswhy mode 3remains unused inmost cases intheaccountancy
sector.
56. Theresponses provide some further insight ontheuseofinternational names, which isgenerally
themost visible feature ofanyinternational relationship. 80% oftheMembers inthesample donot
impose anyrestriction ontheuseofinternational orforeign names byprofessionals orprofessional
firms. Theremaining Members either impose theuseofthepartners 'names (orofacombination of
these names) in7%ofthecases, orrather require anauthorisation ofthefirm'sname bythelicensing
authorities oraprofessional body. Responses donotspecify, however, onwhich basis theauthorisation
isgiven. Finally, twoMembers have indicated thattheuseofforeign orinternational names isforbidden.
Inthose cases, professional firms aredeprived from using oneofthemajor elements inthekind of
international relations which have existed sofarintheaccountancy sector.
IV. NATIONALITY/CITIZENSHIP/RESIDENCY REQUIREMENTS
57. This partofthesynthesis isbased ontheresponses toquestions 37and38oftheQuestionnaire
ontheAccountancy Sector andonother material provided totheWorking Party onProfessional Services
bytheOECD (S/WPPS/W/4 andAddenda) andUNCTAD (S/WPPS/W/8).
1. Nationality andcitizenship requirements
58. There isnouniform definition ofnationality andcitizenship.1This situation isreflected in
theresponses totheQuestionnaire, where countries have referred toeither nationality orcitizenship
conditions onthebasis ofdefinitions ofdomestic law, butmeaning substantially thesame thing, that
istosaya"state 'smembership". Inthispaper therefore nodistinction ismade between theconcepts
ofcitizenship andnationality.
59. Nationality andcitizenship requirements would normally come under thescope ofArticle XVI
oftheGATS. They affect Market Access (XVI), astheyrepresent "zero quotas" onforeign professionals.
Itshould alsobenoted thatthose arerestrictions thatapply only toforeign services andservice suppliers
andtherefore could beconsidered discriminatory inthemeaning ofArticle XVII.
60. TheOECD hasnoted thatnationality andcitizenship requirements areontheretreat intheOECD
area. Some countries have eliminated them over thelastfewyears. This data isconfirmed bythe
responses totheQuestionnaire ontheAccountancy Sector andbythesurvey conducted byUNCTAD,
according towhich about 30% ofthecountries surveyed stillhave nationality orcitizenship requirements.
Inonecountry among those who have responded totheQuestionnaire, membership ofaprofessional
association isreserved fornationals orforfirms whose board ofdirectors hasamajority ofnationals:
membership ofthisassociation, however, isnotimposed bylawinorder topractice asanaccountant.
1Inmostjurisdiction nationality isusedtorefer totheexternal aspect ofstatemembership (relations between
thenational ofonestateandother states andtheir nationals), while citizenship isused torefer totheinternal
aspect, thatistosaytherights andobligations ofmembership vis-à-vis thestate andthefellow citizens. This
situation isreflected ininternational law,where theInternational Court ofJustice intheNottebohm case has
endorsed adefinition ofnationality asexternal aspect ofstatemembership. Insome jurisdictions, however, this
distinction doesnotapply, asnationality andcitizenship areusedinterchangeably torefertothesame thing (state
membership), regardless ofwhether itaffects theexternal ortheinternal sphere.S/WPPS/W/11
Page 17
2. Condition ofresidence orestablishment
61. Amore complex picture results from thequestion concerning residency andestablishment
requirements. Asfornationality andcitizenship, there isnouniform definition ofresidency and
establishment. However, with respect toresidency andestablishment itisimportant toprovide some
independent definitions, given thesubstantial differences among national lawdefinitions emerging from
theQuestionnaire. Inprinciple, each individual only hasonesingle residency intheworld. Residency
cantherefore bedistinguished from domicile, foranindividual canhave hasmany domiciles, inthe
same country ornot,ashewishes. Forprofessional firm, asimilar distinction canbedrawn between
theregistered office (forpartnerships) orplace ofincorporation (forcorporations) ontheonehand,
andtheestablishment(s)ofthefirmontheother.Arequirementtoberesidentinacountryisconsequently
more demanding than arequirement tohave adomicile there, asaforeign resident willbeforced to
give upresidency elsewhere intheformer casebutnotinthelatter. Itshould benoted, however, that
with respect tofirms aclear-cut distinction between requirements ofregistration andincorporation on
onehand andofestablishment ontheother hand does notemerge from theQuestionnaire.
62. Under theGATS itcould beargued thatestablishment anddomicile requirements come under
thescope ofArticle VI:4, astheywould generally notdiscriminate between nationals andnon-nationals
andnotpose quantitative limits totheentrance offoreign professionals. Residency andprior residency
requirements ontheother hand could pertain toArticle XVII iftheymodify conditions ofcompetition
infavour ofnationals, butcould alternatively pertain toArticle VI.4 iftheytreatnationals andforeigners
identically (defacto anddejure).
63. Afirst distinction should bedrawn between those countries which always require residency
onapermanent basis andthose which also allow foreign professionals topractise onthebasis of
temporary residency oroftheadoption ofadomicile. There areseveral countries which stillrequire
permanent residency toqualify, tobecome amember ofaprofessional association ortostartpractising
asaprofessional. Inonecountry residency isnotacondition tobeamember ofaprofessional
association, butaccountants must beresident inorder topractise. Insome other countries residence
isacondition alsotobecome amember ofaprofessional association ortostart education. Insome
cases establishment offirms andresidency ofnatural persons arerequired forsome areas such asaudit
andstatutory audit, butnotforother activities oftheaccountancy profession. Inonecountry twoyears
ofprior residency arerequired ofnon-national holders ofaforeign degree, inorder toobtain a
"revalidation" ofatheir diploma; fornationals who areinthesame position itisenough tohave a
permanent resident status. Another country does nothave conditions ofresidency, butrequires a
professional tobeavailable, tohave anoffice andtoplace hisservices atthedisposal ofthecommunity.
Even ifacondition ofresidency isnotimposed onindividual professionals, several countries require
accountancy firms tobeestablished inthenational territory inorder topractise. Only asmall number
ofcountries hasnoestablishment orresidency requirements.
3. Establishment inmore than onecountry
64. Itcould beargued thatmeasures requiring firms tohave professional establishments only in
onecountry would come under thescope ofArticles XVIandXVII oftheGATS, astheyprevent market
access forfirms established inanother country anddefacto discriminate among nationals andnon-
nationals.
65. Most countries allow individuals andfirms tohave professional establishment inmore than
onecountry. Some countries, especially those having nationality requirements, have answered "yes"
onlywithrespect totheir nationals, meaning thatnational firms andprofessionals canalsobeestablished
inother countries. Those countries who have nonationality orcitizenship requirements, have onthe
other hand answered thequestion indicating expressly orimplying thatforeign professional andfirmsS/WPPS/W/11
Page 18
established abroad canpractise intheir country, without having torenounce their previous establishment.
Inonecountry, however, themembers ofaprofessional association (including nationals) areprevented
from having separate accounting practices inmore thanonecountry. Only onecountry prevents auditors
form being established inmore than onecountry, including foreign auditors seeking establishment in
itsterritory aswell asnational auditors going abroad.
V. ETHICS
66. This part ofthesynthesis isbased ontheresponses toquestions 15,16,17and18ofthe
Questionnaire ontheAccountancy Sector andonother material provided totheWorking Party on
Professional Services byUNCTAD (S/WPPS/W/8) andIFAC.
1. Regulation ofprofessional ethics
A. Rules andcoverage
67. Almost allcountries whohave responded totheQuestionnaire ontheAccountancy Sector have
ethical codes orrules. According totheUNCTAD Communication (S/WPPS/W/8), almost twothirds
ofdeveloping countries andcountries intransition surveyed byUNCTAD have established orarein
theprocess ofdeveloping codes ofprofessional ethics. Most countries have "codes ofethics" specifically
devoted totheaccountancy profession, while others donothave comprehensive anddevoted codes but
different setsofrules andprinciples, contained inthestatutes ofprofessional bodies, incodes ofpractice
shared with other professions orderived from legislative instruments. Insome cases adevoted code
ofethics exists forauditors, while other professionals areeither notregulated oraresubject torules
derived from separate instruments.
68. Most countries have ethical rules covering allaspects oftheaccountancy profession. Some
countries limit regulation toauditing, accounting andother activities such asmanagement consultancy.
Inafewcases only"professional accountants" aresubject toacode ofethical conduct, while "accounting
technicians" or"book-keepers" arenot. Inthose countries, where there ismore than oneprofessional
association, there isoften adistinct ethical code foreach association. Therules areoften comparable,
butinsome cases there aredifferences inthesubjects covered bythecodes ofeach association. This
isduetothefactthateach association might cover different areas oftheaccountancy profession.
However, insome countries professional associations have developed orareintheprocess ofdeveloping
joint-ethical codes, applicable toallprofessional accountants. Inonecountry, where there aresix
professional associations, three bodies have developed ajoint-professional code, while theremaining
three have their own separate codes. Inanother country there isasetofcommon ethical rules forthe
accountancy profession andthelegal profession.
B. Policy objectives
69. Most countries have replied bylisting afewfundamental policy objectives such as:protection
ofthebroad public interest, protection ofinvestors andfinancial markets, public confidence inthe
profession andtheresponsibility oftheprofessional towards society. Among other frequent policy
objectives listed are:integrity, independence orobjectivity andcompetence oftheprofessional, prestige
oftheprofession, quality andreliability ofservices andachievement ofhigh professional standards.
Ifthelarge majority ofcountries have limited their responses totheactual policy objective underlying
theethical rules, afewcountries have included together withthepolicy objectives reference tosubstantive
ethical rules. One country hasactually annexed thecode ofethics toitsresponse.S/WPPS/W/11
Page 19
C. Professional bodies andinstitutions
70. Theinstitutions which develop andmonitor theimplementation ofethical rules areinthelarge
majority ofcases professional bodies. Inafewcases, especially infederal states, there issome shared
competence between regional orprovincial professional bodies andnational professional bodies: for
example anethical code developed atnational level andadministered bydifferent regional bodies.
Inonecountry ethical rules aredeveloped, monitored andimplemented locally, buttheyareharmonized
atthenational level. Ethical codes andrules areinasmall number ofcases developed byparliaments,
governments orinco-operation between those andtheprofessional body. However, even inthose cases
where theparliament orthegovernment isinvolved inthedrafting ofethical rules, monitoring and
implementation islefttotheprofessional bodies. With respect toimplementation, professional bodies
aregenerally competent todealwith complaints bymembers oftheprofession andbyinterested third
parties. When local professional bodies aswell asnational ones exist, thesecond canbecompetent
tohear appeals against thedecision ofthefirst. Insome cases there aredisciplinary bodies composed
ofprofessional andmagistrates orjudges sitting together. Afewcountries indicated intheir responses
thattheylinkadministrative complaints before professional bodies tothejudicial system, byconferring
competence upon theCourts tohear appeals against decisions ofprofessional bodies. Disciplinary
proceedings generally donotprevent other actions under commercial, civil orcriminal lawagainst
professionals.
D. Sanctions
71. Some oftheresponses tothequestionnaire give avery detailed description ofthetypes of
sanctions available forthebreach ofethical rules, while other aremore succinct andeither indicate
aminimum sanction (warning) andamaximum (expulsion) orsimply inform thatthere aresanctions
forbreaches.Themoredetailedresponseslistaseriesofsanctions,includinginorderofgravity:warning,
private andpublic disciplinary measures, suspension foraperiod oftime (uptooneyear) andrevocation
ofthelicence orexpulsion. Some lessfrequent types ofsanctions include: therequirement tocomplete
courses andexaminations, toundertake supervised periods ofpractice andtopaypecuniary fines. Some
countries specify thatdisciplinary actions canbetaken against individual members aswell asagainst
firms, while other restrict such actions only toindividuals. Inonecase members oftheprofessional
body must present adeclaration each year stating thattherequirements setoutinethical rules have
been met. Most ofthecountries which have ethical codes developed byprofessional associations specify
thattheenforcement ofthecode canonly take place with respect tomembers oftheprofessional
association. This, however, isnotalways stated. Inthose countries where thecodes aredeveloped
byother institutions orincollaboration with other institutions, theapplicability oftherules ofconduct
normally extend toother professionals.
2. Restrictions oncompetitive behaviour
A. Restrictions onadvertising, marketing andsolicitation
72. Restrictions onadvertising, marketing andsolicitation ofnew clients byprofessionals have
traditionally been imposed bythecodes ofethics. Each ofthese restrictions iscovered inthecode
ofethicsforprofessionalaccountantsofIFAC,forexample.Theobjectiveofsuchrestrictionsisgenerally
toavoid creating false, deceptive orunjustified impressions andexpectations, andtoavoid making
comparisons with other professionals forthiswould beconsidered asanunethical behaviour onthe
partofafellow member. Itdoes notleadnecessarily toaprohibition ofsuch behaviour, butmost of
thetime toadetailed regulation onhow toadvertise, market services orsolicit newclients according
totheethics oftheprofession. Alllicensed professionals aresupposed toprovide services respecting
theminimum standards andrequirements imposed bytheregulation, which isanother reason whythey
have been prevented topretend thatthey hold anycompetitive advantage inthese respects. None ofS/WPPS/W/11
Page 20
these restrictions limit theaccess tothemarket ordiscriminate against foreign professionals andfirms.
They simply limit thecompetitive behaviour onthemarket. They consequently belong toArticle VI.4
oftheGATS.
73. According totheIFAC survey, 19professional bodies, representing 16countries have no
restrictions onauthorized firms concerning advertisement andother forms ofseeking new work. 16
professional bodies (12countries) require advertising tobe"truthful andingood taste", while 4
professional bodies (3countries) require advertising tocomply with thecode ofethics. Onthebasis
oftheresponses tothequestionnaire ontheaccountancy sector, itappears thatthislastrequirement
normally entails some restrictions related tothedignity oftheprofession, butnotaprohibition. In3
oftheanswers totheIFAC survey (3professional bodies representing 3countries) advertising and
marketing aresubject torestrictions imposed bylegislation.
74. Inmost ofthecountries which have responded tothequestionnaire ontheaccountancy sector
therearenoprohibitionsonadvertising,marketingandsolicitation,buttherearesomelimitedrestrictions.
Those restrictions aretoensure thatadvertising, marketing andsolicitation aredone inaway thatis
appropriate fortheaccountancy profession. Some restrictions require those activities tokeep with the
dignity oftheprofession, nottocause disrepute toit,nottomake unfavourable reflections onother
members oftheprofession (nonegative advertising), andnottoengage inunfair competition with other
professionals. Several countries have limitations onfalse andmisleading advertising, while only afew
listprohibition on"cold calling"2.Some countries have norestrictions onadvertising, marketing and
solicitation, because such activities areprotected bythelawwithrespect toallareas ofeconomic activity,
including professional services. Direct solicitation ofother professionals 'clients isoften prohibited
andinsome cases onthegrounds thatitisanunfriendly attitude towards aprofessional colleague.
Only onecountry prohibits allforms ofadvertising andsolicitation. Animportant distinction concerns
thenature ofrestrictions andprohibition: several countries specify thatalthough there aresome
restrictions, which areinherent inthenature oftheprofessional activity, they arenotgeneral legal
restrictions, butarecontained intheethical codes oftherelevant professional associations. These
restrictions take theform ofethical rules andguidelines. Insome cases they arederived from other
ethical principles stated inthecode. Asmall number ofcountries hasgeneral legal restrictions or
prohibitions.
B. Restrictions onfee-setting
75. According totheIFAC survey 37professional bodies (31countries), outof48surveyed, allow
professional tosettheir own feesfreely. Only 11(9countries) have some restrictions. Among those
5have feeguidelines ofsome sort, and5have imposed feelevels. Professional bodies which have
feeguidelines specify in3cases thatthey affect only theminimum level. Imposed feelevels arenot
allofthesame type anddonotnecessarily affect allsectors oftheaccountancy profession. Intwo
countries there arefeerules affecting allsectors oftheprofession, while inother countries feesare
setforspecific sectors, including: Court instituted insolvency work, statutory auditing andpublic sector
auditing. One professional body imposes maximum feesforstatutory audit.
76. Itemerges from theresponses totheQuestionnaire ontheAccountancy Sector thatthelarge
majority ofcountries donotimpose minimum andmaximum fees. Moreover, many countries have
norestrictions atallonfee-setting. Inseveral countries ontheother hand there arefeeguidelines or
suggested fees. Feeguidelines canbecontained inanethical code orinaseparate instrument. Ina
fewcases guidelines suggest thatfeesbebased onparticular criteria such ascosts, work performed,
2"Cold calling" istheunsolicited calling ofperspective clients inorder toadvertise theprofessional services
offered.S/WPPS/W/11
Page 21
time spent onwork, technical difficulty involved anddegree ofresponsibility. Guidelines mayindicate
indicative feescales andminimum fees, buttheyhardly evercontain maximum ceilings. Inonecountry
minimum andmaximum feesareproposed bytheprofessional associations andapproved bytheMinistry
ofJustice. Inanother country thesetting ofminimum andmaximum feesisprohibited bythelaw.
Some countries have rules against predatory pricing, "low-balling" andcontingency fees. Those practices
aregenerally prohibited. There iscurrently adebate intheprofession on"low-balling" andpredatory
pricing, which seems nottohave yettranslated intotherules.
VI. REGULATIONS GOVERNING ENTRY AND TEMPORARY STAY OFNATURAL
PERSONS FOR THE PURPOSE OFSUPPLYING ACCOUNTANCY SERVICES
77. This partofthesynthesis isbased ontheresponses toquestions 34to36inthequestionnaire,
aswell asanyrelevant material provided totheWorking Party onProfessional Services bytheOECD
(S/WPPS/W/4/Add.2), andIFAC.
78. Theentryandtemporarystayofnaturalpersonsforthepurposeofsupplyingaccountancyservices
intheterritoryofanotherMemberconstitutesthefourthmodeofsupplyofservices,asdefinedinArticleI
oftheGATS. Thelaws andregulations relevant tothissection ofthequestionnaire generally pertain
toArticle XVI orXVII. Forthose Members which undertook specific commitments intheaccountancy
sector, thecorresponding entries willgenerally befound inboth thehorizontal aswell asthesector-
specific sections oftheir schedule.
79. Over 40% oftheresponding Members donothave inplace procedures tofacilitate thetemporary
entry andstayofforeign professionals tosupply accountancy services. This canmean twothings:
eitherprofessionalswillhaveinthosecountriestosubmitthemselvestothestandardproceduresapplicable
toanyforeigner wishing tocome andwork there, orthetemporary entry andstayofforeigners tosupply
accountancy services isnotpossible atall(when there isanationality condition forexample). Itis
notalways clear from theresponses which ofthese conditions obtain responses, anditcanonly be
tentatively assumed thatthelatter caserepresents asmall proportion oftheMembers where noprocedure
exists tofacilitate thetemporary entry andstayofforeign professionals.
80. Inthose Members which point intheir response totheexistence ofsuch procedures, very few
differences (ifany) seem toexist between them andthose designed fortheadmission offoreigners on
amore permanent basis. Applicants willgenerally have togothrough immigration procedures and
respect avariety ofrequirements (according tocountries: residency, quotas, employment contract with
alocal firm orequivalent, etc.). They willneed toobtain awork permit in40% ofthecases. Such
apermit could have avalidity limited toonetofiveyears (according tocountries) butcaninprinciple
berenewed without limit iftheconditions arestillmet. Less than 20% oftherespondents impose a
labour-market testfortheadmission offoreign professionals. Applicants willhave todemonstrate in
those cases theabsence orunavailability ofequivalent local skills, butresponses donotspecify how
such aproof canbeprovided.
81. Inaddition totheabove requirements, some oftheresponses have repeated thatprofessionals
need alocal licence orarevalidation oftheir foreign credentials inorder topractise regulated activities
inthehostcountry. Itcanbeassumed thatthisisalsothecaseinallcountries which showed similar
requirements inchapter IIofthispaper.S/WPPS/W/11
Page 22
ANNEX
Responses tothequestionnaire ontheaccountancy sector
Argentina S/WPPS/W/7/Add.7
Australia S/WPPS/W/7/Add.8
Barbados S/WPPS/W/7/Add.12
Brazil S/WPPS/W/7/Add.22
Canada S/WPPS/W/7/Add.5
Chile S/WPPS/W/7/Add.15
Cyprus S/WPPS/W/7/Add.27
European Communities andtheir Member States S/WPPS/W/7/Add.23
Hong Kong S/WPPS/W/7/Add.13
India S/WPPS/W/7/Add.17
Japan S/WPPS/W/7/Add.16
Korea S/WPPS/W/7/Add.3
Mexico S/WPPS/W/7/Add.20
Morocco S/WPPS/W/7/Add.14
New Zealand S/WPPS/W/7/Add.19
Norway S/WPPS/W/7/Add.4
Pakistan S/WPPS/W/7/Add.29
Peru S/WPPS/W/7/Add.26
Philippines S/WPPS/W/7/Add.11
Poland S/WPPS/W/7/Add.24
Singapore S/WPPS/W/7/Add.21
Slovenia S/WPPS/W/7/Add.9
+S/WPPS/W/7/Add.9/Corr.1* (English only)
South Africa S/WPPS/W/7/Add.2
Swaziland S/WPPS/W/7/Add.28
Switzerland S/WPPS/W/7/Add.18
Thailand S/WPPS/W/7/Add.1
+S/WPPS/W/7/Add.1/Corr.1
Turkey S/WPPS/W/7/Add.25
United States S/WPPS/W/7/Add.10
Uruguay S/WPPS/W/7/Add.6