RESTRICTED
WORLD TRADE S/WPPS/W/15
20June1997
ORGANIZATION(97-2560)
Original: English Working Party onProfessional Services
ELEMENTS TOBEADDRESSED INDEVELOPING DISCIPLINES
FOR PROFESSIONAL SERVICES: ACCOUNTANCY SECTOR
Implementing GATS Article VI:4
UNITED STATES
TheWorking Party onProfessional Services (WPPS) wasestablished tocarry outthework
program foreseen inparagraph 4ofGATS Article VIonDomestic Regulation. Specifically, theWPPS
istodevelop recommendations “onthedisciplines necessary toensure thatmeasures relating to
qualification requirements andprocedures, technical standards andlicensing requirements inthefield
ofprofessional services donotconstitute unnecessary barriers totrade. ”Inaccordance withthe
Singapore Ministerial Declaration, WPPS istoaimatcompleting thework ontheaccountancy sector
bytheendof1997 andtocontinue todevelop multilateral disciplines andguidelines.
Tostimulatediscussionthatwouldexaminepossibledisciplines,thispapersetsforththeelements
thatneed tobeaddressed. During thediscussion ofthese elements, WPPS willgainimproved
understanding ofthesignificance ofthedisciplines andhowtheywould relate tothevarious domestic
regulatory systems worldwide. Itcontains norecommendation astolegalobligations ofArticle VI:4.
Inkeeping withthework ofWPPS todate,thepaper gives priority attention totheaccountancy
sector, butagreat majority oftheelements could havebroader applicability. Disciplines eventually
could apply toallprofessional services.
Theorganization ofthepaper follows theorder ofprovisions ofArticle VI:4, beginning with
objective andtransparent criteria andending withrestrictive procedures. Inthesection onoverly
burdensome regulations ,thepaper issubdivided according toissues identified atearlier sessions of
WPPS. Initially, these issues canbeusedtoframe thediscussion. Regulation inthese areas needs
tobereviewed inthelightoftheobjectives ofArticle VI:4. Additional areas canbeincorporated into
thediscussion asthematters areraised. Specifically, WPPS needs to:
- elaborate further onwhatisobjective andtransparent;
- findways todetermine ingeneral terms whatregulations aretobeconsidered more
burdensome thannecessary; and
- identify types ofprocedures thatarerestrictive inthemselves.S/WPPS/W/15
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GATS Article VI:4
Following istheprovision ofGATS Article VI:4
“Withaviewtoensuring thatmeasures relating toqualification requirements andprocedures,
technical standards andlicensing requirements donotconstitute unnecessary barriers totradeinservices,
theCouncil forTrade inServices shall, through appropriate bodies itmayestablish, develop any
necessary disciplines. Such disciplines shallaimtoensure thatsuchrequirements are,interalia:
(a) based onobjective andtransparent criteria, suchascompetence andtheability tosupply
theservice;
(b) notmore burdensome thannecessary toensure thequality oftheservice;
(c) inthecaseoflicensing procedures, notinthemselves arestriction onthesupply of
theservice. ”
I. OBJECTIVE AND TRANSPARENT CRITERIA
Objective Criteria. Article VI:4cites“competence andtheability tosupply theservice ”as
examples ofobjective andtransparent criteria. Generally, characteristics suchaseducation, experience,
examination andethics areusedasindicators ofcompetence, asintheNorth American FreeTrade
Agreement (Chapter 12). Forthemost part, these canbeconsidered objective criteria, although
discrimination could occur ineachofthese characteristics (e.g., required locations foreducation and
experience, more difficult examinations forforeigners). Citizenship andmost aspects ofresidency
requirements aregenerally notregarded asobjective. Therationale fortheserequirements andpossible
alternatives forachieving thesame objectives needtobediscussed intheWPPS.
Transparency. TheWPPS needs toaddress themeans bywhich information ismade available
tocandidates foraccountancy licenses orcertifications ,bothdomestically andinternationally, andthe
process forhandling inquiries andapplications from individuals interested inbecoming licensed.
Prospective candidates needtoknow thelicensing requirements andprocedures forsubmission of
applications, including eligibility ofpersons andfirms tomake suchapplications, andtheadministrative
body tobeapproached. Theamount ofinformation, dissemination oftheinformation, thedegree of
clarity inexpression, and,insome instances, thetiming ofrelease ofcertain information (e.g.when
andwhere examinations aretobegiven) arefactors toconsider inreviewing transparency.
II. "MORE BURDENSOME THAN NECESSARY ”
A. Qualification requirements
1. Requirements forauthorization topractice. Asdiscussed above, education, experience,
examinations andethics generally areconsidered asobjective criteria forlicensing ofindividuals as
accountants andauditors. However, theamount andcontent ofeducation andexperience varies in
different jurisdictions andhasbeenamatter ofcontroversy among theexperts-- regulators, educators
andprofessionals.Differencesinrequirementsmayindicatethatsomerequirementsaremoreburdensome
thanothers, butdonotnecessarily indicate thattheyaremoreburdensome thannecessary .Itisdoubtful
thatabright linecanbedrawn todistinguish between what isnecessary andunnecessary. Infact,
itmaybereasonable toexpect thatrequirements willvaryfrom country tocountry andthatthe
differences maybemarginal.S/WPPS/W/15
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Regarding thecriteria themselves, anumber ofquestions arise:
- Should regulators inallcountries berequired tofollow theeducation standards for
accounting developed byinternational bodies?
- How should regulators determine equivalence orcomparability ofeducation and
experience obtained inanother jurisdiction?
- Canapplicants begranted atleastpartial credit forpasteducation andexperience
obtained inanother jurisdiction?
- How canregulatory authorities ensure thatexaminations willbefairandnotoverly
burdensome?
Abasicquestion tobeconsidered iswhether theWPPS itselfcanmake judgements onmeasures
thatareunnecessarily burdensome, orwhether aprocess should beestablished forconsultations by
technical experts tomake specific determinations inspecific cases.
2. Scope ofpractice andscope oflicensing. Therange ofregulated services-- auditing, tax
preparation, management consultancy, investment advice-- needtobesetforthclearly inregulations.
WPPS doesnotneedtodefine theprecise activities thatshould becovered byprofessional titlesfor
accountants ortheactivities thatshould beregulated ineachcountry. Informulating disciplines,
however, itisnecessary torecognize thatsuchdifferences existandtotrytodetermine whatisoverly
burdensome. Forexample:
- When some countries require alicense formore activities thanother countries, isthat
tobeconsidered overly burdensome?
- Should allMembers beencouraged toregulate thesame activity oractivities?
- Ifso,whoshould determine theactivities torequire licensing?
- Isitoverly burdensome orrestrictive tolimittheactivities orcombinations ofservices
thatcanbeperformed bycompanies?
- What, ifany,problems arisewhen considering countries thatdonotregulate these
activities?
B. Licensing requirements (other thanqualification requirements)
Regulatory authorities seek toprotect consumers against non-performance, malpractice,
incompetence andbreach ofconfidentiality. Theessence ofprofessional practice inaccounting and
auditing istoprovide independent, objective opinions totheusers offinancial statements, avoiding
anyconflict ofinterests. Various mechanisms areusedbyregulators toassure independence and
accountability. Examples include:
- ethicalcodes,penaltiesordisciplinarymeasuresforunethicalorincompetentprofessional
conduct (e.g., suspension orrevocation oflicense);
- bonding, liability insurance andother means ofestablishing financial responsibility;
- residency requirements;S/WPPS/W/15
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- membership inaparticular professional organization;
- evidence ofgood character andfinancial standing;
- mandatory audits bygovernment agencies.
Insome cases, these measures mayberegarded asoverly burdensome orrestrictive. Itraises
thequestion ofwhether these objectives canbeaccomplished inlessburdensome ways. Should the
Disciplines encourage regulatory authorities toexamine alternatives? Should regulators berequired
toexplain whytheexisting regulations areconsidered tobelessburdensome thanandmore effective
thanalternative measures?
C. Restrictions onbusiness structures/forms ofassociation
Ownership andforms ofbusiness organization. Similar totheabove, lawsandregulations
alsolimitownership orforms ofbusiness organization toprotect consumers ofaccounting services.
Thus, theDisciplines needtoaddress whether suchlimitations aremore burdensome thannecessary
andhowtodealwiththem. Such measures include:
- restrictions onownership byunlicensed individuals orthose notlocally licensed;
- prohibitions oncorporate practice;
- citizenship requirements formembers ofboards ofdirectors;
- requirements toform partnerships withlocalindividuals orfirms; and
- prohibition oftheuseofinternational firmnames.
D. Nationality/citizenship/residency requirements
Bytheirverynature, nationality andcitizenship requirements arediscriminatory. They are
notindicators oftheability tosupply aservice. Theyaresubject tomarket access andnational treatment
provisions inArticles XVIandXVII. Should thedisciplines address therestrictiveness ofthese
requirementsinsomeway,eventhoughremovaloftherequirementmayneedtobeaccomplishedthrough
negotiation? Residency requirements, ontheother hand, aremore complex inthattheycould beused
byregulatory authorities forlegitimate purposes (e.g., assuring thecollection oftaxes, assuring that
service providers arewithin thereach oflocallaw). WPPS could attempt todevelop disciplines on
residency thatwould indicate those means offulfilling theregulatory objectives inalessburdensome
way(e.g., localaddresses, agents forservice).
E. Professional liability/ethics
Same asB.above.
F. Regulations governing entryandtemporary stayofnatural persons forthepurpose ofsupplying
accountancy services
These regulations arebased onimmigration laws, which aresensitive forallmember countries.
Movement ofPersons hasbeensubject toseparate negotiations intheWTO. Itisunlikely thatWPPS
could agree ondisciplines tobeapplied inthisarea. How should thissubject beaddressed?S/WPPS/W/15
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III. RESTRICTIVE LICENSING PROCEDURES
DiscussionintheWPPSshouldseektoidentifylicensingproceduresthatareoverlyburdensome.
Itisnotunreasonable forlicensing authorities toseekdocumentation fromapplicants toverify content
andlength ofeducation andhistory ofemployment. However, torequire original documents orcopies
thatrequirecostlyortime-consumingauthenticationmightbeconsideredoverlyburdensome.Inaddition,
although itmaybepossible tojustify requirements thatforeign applicants follow different procedures
thandomestic applicants, oradditional procedures, insome casestheserequirements maybetantamount
toprohibition. Authorities should avoid establishing onerous conditions orpre-conditions thatwould
prevent successful completion ofapplications bycandidates forlicensure. Pre-conditions thatmust
bemettositforanexamination--citizenship, residency, longperiods ofin-country experience-- may
preclude anotherwise qualified candidate frombecoming licensed orcertified. Thelength anddegree
ofdifficulty oftheexamination canberestrictive, aswellasinfrequent scheduling oftheexamination.S/WPPS/W/15
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EXAMPLES OFDISCIPLINES TOASSURE AGAINST UNNECESSARY BARRIERS
TOTRADE INSERVICES: ACCOUNTANCY SECTOR
Introduction
Member countries andtheirsubnational authorities havetheright toregulate entry intothe
accountancy profession. Inaccordance withGATS Article VI:4, these regulations should be:
(a) based onobjective andtransparent criteria, suchascompetence andtheability tosupply
theservice;
(b) notmore burdensome thannecessary toensure thequality oftheservice;
(c) inthecaseoflicensing procedures, notinthemselves arestriction onthesupply of
theservice.
A. Objectivity andTransparency
1. Steps forlicensing authorities toachieve objectivity andtransparency, include:
- publish lawsandregulations;
- whenintroducingnewregulationsoramendmentstoexistingregulations,seekcomments
from interested parties, andprovide adequate timeforcomments;
- make information available internationally through theWTO oradesignated point of
contact;
- establish ormaintain amechanism torespond toinquiries ontheinformation;
- specify theregulated activities forwhich alicense isrequired;
- stateclearly thatunlicensed/uncertified accountants canperform unregulated activities
aslongastheydonotholdthemselves outtobelicensed/certified accountants.
2. Indicators of“competence andtheability tosupply theservice ”:
- education, experience, examinations, andethics aregenerally regarded asobjective
criteria, butthese criteria should notbeusedinadiscriminatory manner;
- citizenship ornationality, which areinherently discriminatory, arenotconsidered
objective criteria;
- residency, which could havediscriminatory effects, maybejustified toachieve certain
objectives (e.g., legalreach, taxcollection).
3. Unless already inscribed incountry commitment schedules, Member countries should inform
theSecretariat ofmeasures requiring citizenship andresidency forlicensing orcertification of
accountants.S/WPPS/W/15
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4. Where citizenship ornationality requirements exist, Member countries should takesteps to
eliminate therequirement andexplain toother Members thedomestic process necessary forremoval
oftherequirement.
5. Where residency requirements exist, theMember countries should seekalternative means to
achieve thepurposes forwhich these requirements were set.Asaprudential measure, orforlegal
reach within theterritory ofthelicensing authority, anaddress oranagent’saddress within that
jurisdiction should suffice.
6. Requirements forcitizenship, nationality andresidence should besubject toreview periodically
byanappropriate bodyoftheWTO onthebasisoflistsofmeasures developed bytheSecretariat from
information provided byMember countries.
B. More Burdensome Than Necessary
1. Using objective criteria tosetrequirements forentry intotheaccountancy profession, Member
countries arefreetoestablish theirownminimum levels ofeducation andexperience needed toensure
competence. Atthesame time, licensing authorities should consider theneeds offoreign applicants
andestablish ormaintain procedures forreviewing applications fromforeign candidates, incompliance
withGATS Article VI.Members alsoshould recognize thedesirability ofmoving toward acommon
setofminimum requirements, while maintaining thequality oftheservice. Onemeans ofmoving
toward thisobjective isthrough mutual recognition agreements based onguidelines developed bythe
Working Party.
2. Levels ofminimum requirements forentryintotheaccountancy profession inMember countries
should beestablished onthebasis ofcomparability ofeducation andexperience acquired inother
countriesintermsofcontentandamountandrelevanceoffunctionsperformed.Licensingorcertification
should notbedenied simply because education andexperience were acquired inaforeign country.
3. Representatives oftheprofession andtheregulatory authorities should beencouraged todevelop
internationally agreed minimum requirements forlicensing, consistent withtheobjective ofmaintaining
highquality ofservice intheprofession. Those requirements should beregarded asnorms toward
which Member countries should move.
4. International organizations orappropriate national bodies alsoshould establish examples of
whatconstitutes excessive requirements foreducation andexperience. Wherever possible, licensing
authoritiesshouldconsidersubstitutionofexperienceforeducationwhenimportantskillsmaybeacquired
through on-the-job training.
5. Tothemaximum extent possible, foreign candidates should besubject tothesameexaminations
asdomestic candidates. When different examinations areused, theoverall degree ofdifficulty should
notbegreater forforeign candidates thanfordomestic candidates.
6. Inpreparing examinations totestforcompetence, licensing authorities andtesting organizations
should strive forfairness andobjectivity. Thescope ofexaminations should belimited tosubjects
relevant totheprofession. Passing grades should bethesame forforeign candidates asfordomestic
candidates.
7. Examinations should bescheduled atreasonably frequent intervals andshould beopenforall
applicants. Licensing ortesting authorities arepermitted torecoup thecostofexaminations through
feescharged toapplicants.S/WPPS/W/15
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8. Experience inthecountry ofthelicensing authority canberequired, butthelength ofexperience
should notexceed thatrequired fornationals ofthecountry. Aperiod ofapprenticeship-- working
inaposition subordinate toalicensed professional-- canbeconsidered asameans ofcompensating
forlackoflocalexperience.
C. Restrictive Licensing Procedures
1. Membersshallensurethattheadministrativeproceduresusedtoreviewcandidatesinthelicensing
orcertification process areinconformity withprovisions oftheGATS, particularly Article VI:4, with
aviewtopreventing barriers totrade inservices thatmight arisethrough inappropriate operation of
those procedures.
2. Therules forlicensing procedures shallbeneutral inapplication andadministered inafair
andequitable manner.
3. Licensing authorities mayrequire additional procedures ordifferent procedures forforeign
applicants thanfordomestic applicants, butshould avoid establishing conditions orpre-conditions that
clearly cannot bemetbyforeigners soastopreclude successful completion ofapplications bycandidates
forlicensure.
4. Itisnotunreasonable forlicensing authorities toseekdocumentation fromapplicants toverify
content andlength ofeducation andhistory ofemployment. Authenticated copies should beacceptable
inplace oforiginal documents. Excessive requests fordocumentation should beavoided.
5. Citizenship andresidency should notberequired tositforexams. Foreign candidates with
extensive experience should notberequired toobtain longperiods ofin-country experience before
being permitted tositforexaminations.
6. Membership inaparticular professional organization orother group should notberequired
ofdomestic orforeign candidates.
7. Quantitative limits shallnotbeusedaspartofthelicensing process, unless Member countries
haveindicated theexistence ofsuchlimitations intheirschedule ofcommitments.
8. Applications shallbehandled bythelicensing authority withdueconfidentiality inrespect of
information provided bytheapplicant; thisshallnot,however, beinterpreted aspreventing thelicensing
authority from verifying information provided toitbyanapplicant.
9. Anindividual orafirmshallbefree(within reason) toresubmit applications forlicensing.