Latin American Capital Markets

ACCOUNTING AND AUDITING STANDARDS 217Figure 7-1 I Accounting, Corporate Governance, and Capital Markets:I Players and Linksand assess the fair value of the firm.Timely disclosure has substantial merit regardlessof whether the market is efficientTimely disclosure links the relevance of accurate accountingand standards to governance and ultimately to investors' confidence, whichis essential for capital market development Figure 7-1 shows how accounting, corporategovernance, and capital markets interact and how accounting and auditing standardsare instrumental to the functioning of corporate governance and to the determinationof price and fair market value, which is the task of capital markets.Given the relevance of generally accepted accounting and auditing standardsand practices, should there be a uniform set of global accounting standards or diversity?Should the standards be developed internationally, or should the long-tested U.S.Generally Accepted Accounting Principles (GAAP) be the standards? Should standardsbe different across nations, given their cultural, political, and legal differences?How can countries incorporate into their legal systems the harmonization of standards?How should they deal with their existing legal national accounting rules? Howwould different levels of efficiency of domestic capital markets affect the nature of internationalstandards? Who would be responsible for (and finance) the introductionof accounting standards in emerging countries?The responses to these questions need to be tackled because accountingconstitutes a mechanism for the public good of financial stability and development.The responses should also address the progress and advances made and steps underCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub