88. It would be useful for the CNBS to commission an evaluation of the differences between current accounting practices among Honduran banks and IFRS. As previously noted (Para.24), current CNBS regulations require banks to disclose the discrepancies between the CNBS accounting rules and IFRS. In practice, however, banks simply disclose a generic and incomplete description of the differences, without any mention of the amounts involved. To be able to evaluate properly the impact of a transition toward full IFRS, and be in a better position to manage the transition process, the CNBS, in cooperation with the Honduran banking association, should launch a detailed and comprehensive evaluation of these differences as of December 31, 2007 or June 30, 2008.
89. Similarly for the insurance sector, a study should be launched on the impact of adopting IFRS 4, Insurance Contracts. CNBS should adopt that standard and implement it after a two-to-three-year transition period [Responsibility: CNBS].
90. In order to facilitate the access by depositors and other third parties to banks’ and insurance companies’ financial statements, the law (or CNBS) should require the audited, annual financial statements (including balance sheet, income statement, cash flow statement, notes and audit report) be posted on the websites of the CNBS and on those of the respective institutions’ [Responsibility: CNBS]. The current requirement to publish the complete set of annual financial statements in newspapers only makes access to these statements burdensome for third parties. This would require amending the law that creates the CNBS.
91. CNBS should set more stringent conditions for audit firms to be registered under “Category D” which audit large corporate borrowers [Responsibility: CNBS].
The impact of the obligation for commercial banks to obtain audited financial statements from their larger corporate borrowers is somewhat hindered by the fact that virtually all persons applying for Category D are accepted, because the level of requirement for registration is minimal. In the long run, a credible professional certification (Para. 98) should be required, at least from the auditors of companies that meet the definition of a public interest entity. At a minimum, CNBS should only grant registration to audit to partners having a university degree or, as an acceptable alternative, can demonstrate sufficient professional experience in the field of auditing, after being interviewed by the staff of CNBS.
92. The responsibilities of comisarios should be reassessed and, at a minimum, their role under the Code of Commerce should be redefined so that there is no overlap with the function of independent auditor [Responsibility: Technical Board].
For those companies that are required to have their financial statements audited, the best solution would probably be either to combine the two functions, following the example of France, or to eliminate those functions that can impair the independence of the comisario.
Another scenario that should be contemplated is abolishing the comisario altogether.
93. Financial reporting and auditing within SOEs, particularly ENEE, should be strengthened [Responsibility: GoH, in collaboration with SOEs’ boards and managements]. Currently, some large SOEs, including ENEE, appear ill equipped and unprepared to prepare financial statements of an acceptable quality. Their information systems cannot support a financial reporting process consistent with the requirements of IFRS. In addition, their financial and accounting staff would need to be trained to be able to manage such a process. As a result, significant investments in information technology and training efforts are needed to bring SOE financial reporting up to an acceptable standard. In addition, the financial statements of SOEs should be required to be audited by an independent auditor in addition to, and in coordination with, the TSC, since TSC’s mandate with respect to SOEs is mainly oversight of over budget execution, and it does not have the capacity to conduct timely audits of SOEs. In the short run, as a preliminary
step to improve SOE financial accountability, action plan should be developed within each public enterprise to address the issues raised by the auditors in their reports.
94. Moreover, an ad-hoc structure could also be set up within the MoF to monitor SOE financial reporting, follow-up on all significant issues reported by external auditors and on their timely resolution [Responsibility: GoH]. Considering the current fragile condition of some large SOEs, particularly ENEE, the assistance of the Government of Honduras and the donor community seems necessary, as it does not seem that the company can sustain an effort to improve its financial reporting with its own resources.
95. In order to achieve real improvements in local accounting and audit practices, efforts should be made to raise awareness among local businesses of the benefits they could draw from enhanced corporate financial transparency and accountability [Responsibility: Technical Board and COHPUCP, in cooperation with COHEP]. The stakeholder workshops in San Pedro Sula and Tegucigalpa to discuss the conclusions of this ROSC will provide a unique opportunity to generate more interest among the business community for corporate financial reporting. Nevertheless, convincing local entrepreneurs that accounting and audit services can bring real value to them will require the Technical Board and COHPUCP to make additional efforts to reach out to local business entrepreneurs, in cooperation with COHEP.
96. Update and strengthen the UNAH’s accounting curriculum [Responsibility:
GoH and UNAH, in collaboration with the Techncial Board and COHPUCP].
Accounting and financial reporting have . Un the same manner, auditing approaches and techniques have changed drmatically. In order for future practitioners, especially would-be auditors, to have an adequate academic background in the field of accounting and auditing, the university curricula leading to the degree of contador público should be harmonized at national level. In that regard, the government agencies involved in the accreditation of university degrees should establish guidelines consistent with IFAC’s recently issued International Education Standards for Professional Accountants (IES) . Furthermore, professional accountants should be required to follow training programs to improve and update their knowledge of international standards and best practices in the field of accounting and auditing.
97. Similarly, strengthen secondary education for accounting technicians to meet changing business needs [Responsibility: GoH]. The bookkeeping and accounting professions have evolved significantly in recent years, relying increasingly on information technology, and thus requiring a very different skill set. Secondary education for accounting technicians must therefore keep pace with these changes, which in the case of Honduras will require overhauling the curriculum, training high school teachers, and updating teaching materials. Improving the quality of accounting education would provide accounting technicians with marketable skills to help them get better jobs; in addition, it would give them a more solid foundation for university studies, should they opt to continue their education. Since there are currently several donor-supported projects
to improve secondary education active in Honduras (IDB, European Union, USAID), accounting education reforms should leverage these existing efforts.