PAOD

Summary and the base for PAO establishment in Afghanistan and its operation:

The World Bank Observance of Standards and Codes (ROSC) reports - Accounting & Auditing in
Afghanistan carried on February 2009, identified the urgent need in Afghanistan for an accounting and
auditing framework in order to facilitate additional private investment and stimulate sustainable
economic growth, and increase Investor confidence which is the fundamental for effective operation of financial markets, infact Afghan  legislation  currently  does  not  prescribe requirement  of  an
Independent Statutory Audit, regulation for the accounting profession, curriculum  or  certification  process  for  professional  accountants  and  auditors, and thus a high demand and requirement deemed necessary  for the reform in accounting and auditing profession.

The ROSC, recommends, establishment of a National Steering Committee (NSC) & an Audit Oversight Board in the MOF for ensuring success of the reform objective, A Secretariat to the NSC, (PAOD) was established under the PFMRII project at the Ministry of Finance to maintain action plans developed/approved by the NSC, track achievement of measures identified in the action plans and amend the action plans as agreed by the NSC.

The  proposed  national  Auditing and Accounting  Strategy would  address  the  3  core  areas  of  necessary reform i.e. Legal, Regulation and Capacity:

Component I: Legal Reform - Introduce a New Law on Accounting and Auditing

The existing legislation in Afghanistan is deficient with respect to a legislated IFRS Financial Reporting Framework, an ISA Auditing Framework and a regulatory authority, Draft Law on Accounting and Auditing, coordinating with current legislation, A new Law on Accounting and Auditing should be enacted to harmonize Afghanistan’s legal environment with international norms with respect to financial reporting, audit, certification of accountants/auditors and regulation of the accounting/audit profession;

Component II: A A Regulation - Establish Institute of Accountants and Auditors

An  independent,  self-regulating  Institute  of  Accountants  and  Auditors  should  be established  with  the  legal  structure,  operating  policies  and  procedures  to  qualify  for membership  of  the  International  Federation  of  Accountants (IFAC).  The Institute would regulate the profession in a manner prescribed by the new Afghan Law on accounting and auditing;

Proposed model 1: The Institute should be established initially within the Ministry of Finance with private sector participation in the governing board. Once the Institute becomes efficiently functioning and populated with Afghan qualified Professional Accountants, it should become a self-regulating independent professional organization;

Proposed  model 2:  Establish  the  Institute  in  the  private  sector  as  a  self-regulating, independent Professional organization, but, under the coordination of the Ministry of Finance. This was the recommendation of the CDP and ROSC.

The  duties, responsibilities  and  governing  structure  of  the  Institute  of  Accountants  and Auditors, Afghanistan, would be prescribed in the law on accounting and auditing

Component III: Accounting and Auditing Capacity Building - Establish     Specialized School of Accounting:

A  specialized  School  of  Accounting  should  be  established  in  order  to  fast  track  the development of domestic accounting capacity; and the School of Accounting should assist curriculum reform at National Universities and deliver training to enhance education delivery at university and private colleges to contribute to professional accounting capacity development in the medium to long term. Examination of the Accounting & Auditing curriculum should be direct by the ACCA, with the exception of those curriculum subjects relating to Law and Taxation. These should be examined locally.