The Current State of Financial and Accounting Education in Latin America

1. The Current State of Financial and Accounting Education in Latin America Taiki Hirashima Independent Consultant CReCER Regional Conference Mexico D.F., June 2007 THE WORLD BANK

2. Disclaimer The findings, interpretations, and conclusions expressed in this presentation are entirely those of the presenter. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent.

3. Background Challenges in accounting education in Latin America • Lack of other filters for entering the profession: undergraduate degree is often the only prerequisite for entering the profession • Most countries do not require professional experience or passing of professional qualification examination prior to registration as a public accountant (except Mexico and Brazil). • Demographics • Trends in education: lack of convergence (different policies, models, institutions, quality approaches across countries and even within the same country).

4. Background About this study • Research paper under construction. • This presentation summarizes our preliminary findings.

5. Methodology Sources of information • Primary data: survey sent to 43 universities throughout Central/South America and Mexico • Secondary sources • World Bank ROSC program • IFAC compliance assessment • Brazil case study through papers, thesis and other accounting educations diagnosis This is a first attempt aiming to analyze such a complex matter across Latin America, which inherently contains overwhelming challenges and difficulties.

6. Outline Presentation of preliminary results • Today’s presentation will cover the following topics, always trying to analyze strengths and opportunities of Latin America countries towards global accounting convergence: • Accounting curricula • Accounting faculty • Accounting students • Summary and tentative conclusions • Next steps

7. Preliminary results Curricula • Low adherence to the International Education Standards (IES). • Heterogeneity among universities (most countries do not have minimum requirements). • Relatively low insertion of International Financial Reporting Standards (IFRS), International Standards of Auditing (ISA) and ethics disciplines. • Very low coverage of topics in economics, business and corporate governance. • However, survey suggests a positive and recent trend regarding international convergence: • Almost 70% of respondents declared having plans for improving or implementing IFRS disciplines • Existing IFRS disciplines are offered on average for the past 4 years. • But lack of financial resources for convergence and low faculty qualification are a constraint.

8. Preliminary results Preliminary survey results on curricula Includes topics in IFRS adoption

9. Case study - BRAZIL Curricula – Case Study Brazil National Average Source: Weffort (2003)

10. Preliminary results Faculty • Age of faculty members – seems that we have the “perfect” balance between experience and sustainable efforts to face convergence challenges. • Low wages: less than US$1,200 per month for full-time positions in average. • Most of faculty members are part-time (65% on survey). • Low level of international certification and exchange. • Research, despite positive trend, still needs significant improvements, to prepare talented and updated faculty. • English language skills are a constraint.

11. Preliminary results Faculty age: promising human capital for future challenges Includes topics in IFRS adoption Balance between experience and remaining working time Source: Survey

12. Preliminary results Faculty: hard to retain and even harder to attract members Includes topics in IFRS adoption Source: Survey

13. Preliminary results Research as knowledge bank for quality education – perspectives must be improved • Survey so far has shown that accounting research is incipient: • Low engagement in research, since 65% of faculty, in average, are part-time. • Less than 50% of faculty is engaged in publishing accounting papers or books. • Only 10% of faculty engages in international academic exchange. • Brazilian case also shows need for improvements in preparing qualified faculty: Includes topics in IFRS adoption Source: CAPES

14. Preliminary results Attracting high-caliber students • Low ratio of applications / admissions (ranging from 1.2 to 2.5 so far in survey). • Steady growth in actual admissions (Brazil case). Survey indicates stable demand (last 10 years) for more than 50% of respondents. • Survey indicates that pass rate is lower compared to “hard sciences” (e.g. engineering) and around the same compared to other social sciences. However, rates are decreasing in time (slightly).

15. Preliminary results Attracting high-caliber students • Survey suggests an overall adequacy of infrastructure: • 67% declared to have enough relevant textbooks available. • 69% declared that university library is updated. • 71% declared that their students have access to materials from other libraries. • 63% declared to have enough PC’s and internet access for accounting students in the university. • However, availability of translated IFRS, ISA and Code of Ethics seems to be a constraint.

16. Preliminary results Environment for attracting high-caliber students needs improvements Source: Survey

17. Case study - BRAZIL Brazil case Oversupply Source: MEC/INEP

18. Case study - BRAZIL Brazil case: failure in certification exam Failure in Certification Exam Heterogeneous Curricula Low Quality Education = + Source: Conselho Federal de Contabilidade (Federal Accounting Council)

19. Summary Summary and tentative conclusions • Trends in accounting academic education are generally positive. • Average age of faculty members is balanced for future challenges. • IFRS is becoming more present in accounting curricula across Latin America. • Research is growing – the knowledge bank for quality faculty. • Demand for accounting degrees seems to be stable, which is consistent with other social sciences. • Academia seems to be relatively well connected and committed with audit firms, companies, professional bodies and government.

20. Summary Summary and tentative conclusions • However, qualification (including English language) of both students and faculty are a currentlyconstraint for global convergence. • In general terms, accounting in companies is not a profession to be “proud of” (low wages, low competition in application processes, low level of full-time faculty, high concentration of hires by audit firms). • Part-time faculty • Faculty position as a complementary job. Research still incipient. • Accounting Curricula • Heterogeneity in an increasing sophistication environment. • Low adherence to IES. • Low presence of IFRS and ISA. • Governments should stand more actively regarding surveillance of accounting education (e.g. prevent oversupply, monitor quality, examine before practice), probably with assistance of qualified bodies.

21. Summary Next steps • Survey enrichment through a more representative sample is a major goal: • Questionnaires sent to 43 universities. • Replies so far - 12 universities. • Conclusion of the study expected to happen in the upcoming months. • Research paper will be included in the World Bank publication based on CReCER Conference (to be issued late 2007/early 2008).