Enhance Corporate Financial Reporting
The World Bank Representative
Excellencies, ladies and gentlemen. It is a great pleasure to be here today.
Joseph Stiglitz, Noble Prize Winner, once said “Capitalism - and the modern corporation
- could not have arisen without a reliable accounting industry able to provide a
reasonably accurate picture of a company’s net worth and profits.”
High quality financial reporting not only improves financial transparency and
accountability, but also plays a crucial role in ensuring good governance and
underpinning the growth of market economic system;
The importance of growth in commerce and industry for bolstering market economic
system and reducing poverty cannot be overstated. Poor people benefit from expanded
business activities in various ways including having access to newly created employment
Worldwide experience during the last twenty-five years has demonstrated that the
development of business enterprises on the basis of market economic principles is critical
to the sustainable economic development needed to reduce poverty. This experience has
inspired various multilateral and bilateral institutions and mainly the World Bank to
adopt a new strategy to refocus and energize their work for strengthening member
country’s market economic system in general, and financial and private sector
development in particular.
The soundness of financial reporting and the degree of financial transparency of the
corporate sector in a country depends on the strength of accounting and auditing practices.
From this perspective, accountancy development is an important ingredient of economic
Accounting, auditing and financial reporting play a crucial role in providing necessary
information for effective economic management at both micro and macro levels; from
this perspective there is a linkage between accountancy development and economic
Accounting information feed into the decision process of key players in the economy and
thus facilitates a smooth running of business and national affairs geared towards
advancement in socio-economic living conditions.
To achieve sustainable economic growth in any economy, there must be a stable financial
system. Weaknesses in domestic regimes for accounting and auditing undermine
financial stability, financial intermediation and the investment climate, and thus impede
economic growth and poverty alleviation. Strengthening such regimes has a positive
development impact, and therefore in the recent years the Bank has been a vocal advocate
as-well-as active partner for accountancy development and reform in its member
High quality financial reporting contributes to:
- Strengthening the financial discipline of Government Business
- Improving the assessment and collection of taxes on corporate profits.
- Developing active capital markets which is an important engine of
economic growth in developing countries.
- Facilitating Banking supervision which is essential for preserving
- Increasing foreign investment—foreign direct investment as-well-as
foreign portfolio investment— which makes important contributions to
the process of economic development and poverty eradication.
- Fighting money laundering. Money laundering can have devastating
impacts, particularly on emerging financial markets and developing
economies, thus undermining financial stability worldwide.
Over the long run, this translates into long-term prosperity and the improvement of living
standards for the population.
On a global level, the World Bank plays a leading role in assisting and advising countries
on accounting and audit regulation. The World Bank is not just a lending bank, but also a
knowledge Bank, and we are in the privileged position of being able to draw on the
extensive knowledge of colleagues who have experience from around the world. For the
accounting and auditing profession the Bank Accounting and Auditing ROSC initiative
has been the catalysts towards better financial reporting in a number of countries.
For Lebanon the ROSC report has identified that the Government made efforts to align
corporate financial reporting requirements with International Accounting Standards (IAS).
However, despite the overall commendable progress in implementing international
standards, there are still compliance gaps of varying degrees in both accounting and
auditing practices. There is less gap in listed companies and banks; a greater gap appears
in other companies with determinants based on size and who is performing the audit.
The World Bank stands ready to continue working with country authorities, standard-
setters, regulators, private sector stakeholders, and the relevant international
organizations to better support Lebanon and other developing countries in enhancing
their corporate financial reporting.