Criterios para calificar el Abuso

In this section I present the change I perceived in the development of the accounting profession in Sri Lanka. This is relevant because the changes I noted in the accounting profession influenced the accounting practices at Sri Lanka Telecom. My knowledge about the developments of the accounting profession in Sri Lanka is constructed using documentary sources (such as Ukwatte et al., 2011; Wijewardena and Yapa, 1998; Yapa, 2010) as listed in Appendix 1.

Accounting in Sri Lanka was heavily influenced by British accounting traditions, in particular, being organised through and as a profession. The profession was dominated by British people at first, and then by an English-educated Sri Lankan business class, particularly after independence in 1948. Thus, the accounting practices

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of Sri Lanka Telecom were influenced by British accounting practices and this continued even after independence.

Table 6 depicts some important events that I perceived in the accounting profession in Sri Lanka.

Table 6: Perceived Changes in Accounting Profession in Sri Lanka Year Changes in Accounting Profession

1861 Provisions in the Joint Stock Companies Ordinance

1938 Provisions in the Companies Ordinance No 51 of 1938

1941 Ceylon Accountancy Board established

1959 The Institute of Chartered Accountants replaced the Accountancy Board

1960 Bachelor’s degree programmes in Business Administration and Public Administration at the

general and honours levels introduced which included some accounting subjects

1992 Separate academic department for accounting set up for the first time and a special bachelor’s

degree programme introduced at the University of Sri Jayewardenepura

During the British colonial period, the British made a series of changes to legislation and to political administrative systems to suit the changing and growing commercial environment. Growth in the plantation sector and in the number of business organisations in the country increased the need for a uniform administrative structure for control purposes. The Joint Stock Companies Ordinance No. 4 of 1861 was the first of considerable British company legislation enacted in Sri Lanka. British-style practices with regard to business organisations in Sri Lanka, including accounting and auditing of those business organisations, have been influential in all legislation. According to Yapa (2010), amendments to this legislation in Sri Lanka generally followed statutory changes in the United Kingdom (UK). For example, the Companies Ordinance of 1938 in Sri Lanka was based on the provisions and principles of the UK Companies Act of 1929. As mentioned in Section 5.1.2, during the colonial period, Britain owned most of the country’s businesses. Yapa claims that the origin of an accounting profession in Sri Lanka can be attributed to the need to provide financial information about British investments in Sri Lanka. Thus, application of regulations similar to British company regulations to manage these companies was not only administratively convenient for the colonisers, it was needed to satisfy capital markets (Wijewardena & Yapa, 1998).

The Companies Ordinance of 1938 required auditors of company accounts to be registered. This created a need for a regulatory body for the accounting profession. Accordingly, the Ceylon Accountancy Board was established in 1941 as a part of the

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Colonial Government. It consisted of officers nominated by the Colonial Government although the only public official on the Board was the Chairman (the permanent secretary to the Ministry of Commerce). All other nominees were leading businessmen in the plantation sector because at that time this was the most important and influential sector in the economy of the country. Thus, the Ceylon Accountancy Board was under British influence (Ukwatte et al., 2011). According to the regulations of the Ceylon Accountancy Board, members of established professional societies in Britain, persons registered under company legislation of India and those who had practised as accountants for a sufficient period even without a professional qualification could register to audit the accounts of companies.

The Ceylon Accountancy Board issued formal accounting qualifications but the people with these were mainly ones who could not afford a foreign education. The economic and social transformation which started in the colonial period created a situation where wealthy Sri Lankan entrepreneurs sent their children to English medium schools. Some were sent abroad, especially to the UK, to obtain professional qualifications. According to Ukwatte et al. (2011), 98% of Sri Lankan accountants in the late 1940s were qualified from UK-based professional bodies, such as the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Incorporated Accountants, and the Association of Chartered Certified Accountants. The British-owned business organisations preferred British accountancy qualifications in order to serve the British interest (Ukwatte et al., 2011).

Since independence in 1948, Sri Lanka has still followed British practices in accounting education and membership of the profession. Yapa (2010) claims that the peaceful nature of transition from a British colony to an independent country ensured that Sri Lanka embraced British practices in many areas including accounting.

By the end of 1949, the accounting profession in Sri Lanka had three tiers, namely: Chartered Accountants, Incorporated Accountants and Ceylon Registered Accountants, each tier carrying different levels of social status (Ukwatte et al., 2011). Those who provisionally registered under the Companies Regulations 1941 (e.g., holders of book-keeping and accountancy certificates of the Ceylon Technical College, or holders of certificates of membership of an accountancy institute of the UK) could become a Registered Accountant. However, Registered Accountants who

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did not have British qualifications were only allowed to provide audit or accounting services in small business organisations. Further, any person, whether he was qualified or otherwise, could render his services to members of the public as an accountant. Membership of the ICAEW was considered the most prestigious, whereas Incorporated Accountants and Ceylon Registered Accountants ranked second and third respectively, which was a similar stratification to that in the UK accounting profession. This is another indication that the British colonial influence on the accounting profession in Sri Lanka continued even after independence.

Following the recommendations of the L.M.D. De Silva Commission on Company Law in 1950, the Institute of Chartered Accountants of Ceylon was established as the national accounting body in 1959, replacing the Ceylon Accountancy Board. It was the only local professional body of accountants in Sri Lanka. Establishment of a national accounting body during this time can be linked with the nationalist political views of the government elected in 1956. However, as the majority of its founding members were British-qualified professionals, the Institute of Chartered Accountants of Ceylon supported the adoption of British accounting methods, even though those methods might not have matched local needs. Accordingly, the methods of education and training used for producing accountants by the Institute of Chartered Accountants of Ceylon were similar to the ICAEW. Changes made by the ICAEW were followed subsequently by the Ceylon Institute. Yapa (2010) claims that the English-educated elite class created barriers for people from local universities and non-elite groups to enter the accounting profession by adopting British training models; conducting examinations only in English, which resulted in high failure rates; and prescribing demanding practical training requirements.

The university system in Sri Lanka did not include a degree programme related to commerce until 1960. Even though Vidyodaya University (currently known as University of Sri Jayewardenepura) introduced two bachelor degrees, in Business Administration and Public Administration, both of which had a few accounting courses, there was no specialised bachelor degree programme in accounting. However, the dominance of the business class in the accounting profession in Sri Lanka was gradually challenged by nationalists during the 1970s for not meeting the local needs. Ukwatte et al. (2011) note that the 1974 report of a Cabinet Committee

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on Technically, Professionally and Academically Qualified Personnel Leaving Sri Lanka highlighted the continuing use of a British model of accounting practices and its inappropriateness for local needs. The commission made recommendations to introduce a professional accounting education and training model to meet Sri Lankan requirements.

The demand for management and accounting qualifications increased gradually after economic liberalisation in 1977. At the same time, the number of institutions and programmes that offered management and accounting professional qualifications increased, especially from the early 1990s. The University of Sri Jayewardenepura introduced a bachelor degree programme specialising in accounting in 1992. However, the Institute of Chartered Accountants of Sri Lanka still does not recognise this degree programme as a sufficient qualification for meeting the examination requirements of its membership, except for exemptions given for a few selected papers. As such, those with only the degree are unable to earn a professional qualification. Furthermore, most of the business organisations give preference to professional qualifications in accounting over the degree. Thus, we can see the influence of rich, business class people in the development of the accounting profession in Sri Lanka continuing well after independence even in the face of nationalistic challenges to their authority. Ukwatte et al. (2011) claim that currently UK professional bodies dominate professional accounting education in Sri Lanka. For example, Sri Lanka provides the largest student population of Chartered Institute of Management Accountants (CIMA) outside the UK, and CIMA was the fastest growing accounting professional body in Sri Lanka by 2010. However, Wijewardena and Yapa (1998) warn that the British professional accounting examinations are based on subject matter applicable to the British economy. As the Sri Lankan economy is considerably different from the British, a large amount of the subject matter covered in those examinations is not relevant to Sri Lanka. Therefore, they claim that accountants produced based on foreign examinations are unlikely to contribute effectively to the needs of Sri Lanka.

The above description demonstrates that the accounting profession of Sri Lanka was introduced to meet the requirements of the British colonial masters. The British

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accounting practices continued after independence and Sri Lankan accounting professional bodies replicated changes by the British accounting bodies.

There are some similarities between the accounting practices adopted by Sri Lanka Telecom since its inception and the development of the country’s accounting profession. For example, accounting information requirements in its early years, continuation of similar accounting practices for a long period, including after independence, and adoption of Western management accounting practices, even today, are some indicators of the British influence on accounting practices. Further, even though Sri Lanka Telecom recruits degree holders as engineers, the main criterion in recruiting accountants is a professional qualification. Sri Lanka Telecom does not consider accounting degrees offered from Sri Lankan universities as a sufficient qualification in recruiting accountants. This is a clear indication of the continuation of British practices, elitism, class division and Sri Lanka Telecom’s hesitation to change their rules in or through the accounting profession.

The increasing popularity and developments in professional accounting education in Sri Lanka resulted in new employees being recruited to Sri Lanka Telecom for accounting related positions already having knowledge of recent developments in accounting practices. I observed that these new employees are making attempts to practise what they have learnt, leading to small changes in the accounting practices of Sri Lanka Telecom. Moreover, global developments in the financial and management accounting disciplines have created a greater need for accounting practices. Training programmes and workshops have been arranged, even for engineers, on quality improvement and managerial skills. Even though some informants perceived changes in the educational level of new employees, they did not perceive it as an influential factor in changing accounting practices. This is in contrast to my knowledge about the influence of employees’ educational background on changing accounting practices.