Latin American Capital Markets

228 PIETRO MASCI AND IVAN SOTOMAYORadopting IAS mainly due to the lack of consistency in the application of the standardsand leniency of local regulatory enforcement of the standards.Is a quality control system for firms in the practice of accounting and auditingnecessary in Latin America and the Caribbean? A properly designed quality controlsystem, which adapts to the culture and local practices of each country, is a requirementif the country wants to achieve the following:• Raise the professional level of its professionals• Improve the quality of audits• Ensure that financial information is transparent, timely, and relevant• Provide international and national investors with information that is useful inmaking business and economic decisions• Reduce the cost of capital, which in turn will promote economic progressand innovation.The adoption of a quality control system by the individual countries would enforceconsistency in the application of the standard, which, if coupled with local regulatoryenforcement, would permit the comparison of financial statements prepared forthose enterprises in the countries that have adopted (AS or U.S. GAARTo implement quality in the preparation of financial statements, a country'ssystem of quality control must first create the enabling conditions and controls to assureintegrity of the system through consistent application of the standards, mandatorycontinued education, and independent supervision and enforcement of the system(see figure 7-2).In Latin America and the Caribbean, the accounting and professional practicerules are enacted under a diverse set of mechanisms, which makes harmonization inthe region difficult, but not impossible. Some countries enact the rules through thelegislative process, while others have delegated the process to the country's regulatorsand professional accounting organizations. For example, a country in CentralAmerica adopted IAS as its accounting standard and enacted it into law by authoritydelegated to the government accounting regulator A small, interested group of accountantschallenged the enactment on grounds of a constitutional technicality in theform of the enactment, rather than in the substance of the law. In an around-theproblemsolution, the government opted for giving autonomy to its regulators, theSuperintendent of Banks, the Securities Exchange Commission, and the InsuranceCommission, which require and enforce the use of IAS for financial statements filedby the agencies under their jurisdictions and represent approximately 90 percent ofCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub