The Development o f accounting Systems and Accounting Education in High Income Oil Exporting Countries: An Overview

The Development o f accounting Systems and Accounting

Education in High Income Oil Exporting Countries: An Overview

Scnarath Yapa

D e p a r t m e n t o f M a n a g e m e n t St u d i e s U n i v e r s i t y o f Br u n e i D a r u s s a l a m Br u n e i D a r u s s a l a m

Hema YVijewardena

D e p a r t m e n t o f A c c o u n t i n g an d Fi n a n c e University of Wollongong Australia

Abstract

Fo r a co n si d er ab l e len g t h o f t im e, t he d evel o p m en t o f acco u n t i n g in T h i r d Wo r l d co u n t r i es ( T W C s ) has b een i d en t i f i ed b y m an y w r i t er s on t he b asis

o f v i e w i n g t h ese co u n t r i es as a si n g l e eco n o m i c g r o u p . A s a r esu lt o f t he r ap i d eco n o m i c ch an g es t ak en p l ace af t er t he o i l b o o m t he d evel o p m en t o f

acco u n t i n g syst em s an d acco u n t i n g ed u cat i o n in h ig h in co m e o i l ex p o r t i n g co u n t r i es ( H I O EC s ) has b een s i g n i f i ca n t l y d i f f er en t f r o m t hat o f o t h er T W C s . T h er ef o r e, t he u n i f i ed v i ew o f T h i r d W'o r l d acco u n t i n g is n o lo n g er ap p r o p r i at e an d t he eco n o m i c d i f f er en t i at i o n n eed s to be t ak en in t o acco u n t

in an y r eal i st i c cl assi f i cat i o n o f acco u n t i n g in t h is p art o f t he w o r d . Fu r t h er , t h e 'sp h er e o f In f l u en ce ' m et h o d o l o g y u sed b y Fn t h o v en (1 9 7 7 ) f o r

c l a s si f y i n g acco u n t i n g syst em s in t he T h i r d Wo r l d is not ap p l i cab l e to

I I I O F C s b ecau se, u n l i k e in o t h er T W'Cs . t he d evel o p m en t o f acco u n t i n g an d acco u n t i n g ed u cat i o n in t h is p ar t i cu l ar g r o u p o f co u n t r i es is not an o u t co m e o f su ch h i st o r i cal f act o r as c o l o n i al ex p er i en ce an d o r c o l o n i al affinity.

1. Introduction

M a n y w r i t e r s f o r a l o n g t i m e h a v e r e c o g n i z e d T h i r d W 'o r l d c o u n t r i e s ( T W C s ) as a s i n g l e u n i t a r y g r o u p w h e n d e a l i n g w i t h a c c o u n t i n g s y s t e m s an d

a c c o u n t i n g e d u c a t i o n in d i f f e r e n t p ar t o f t h e w o r l d . N e v e r t h e l e s s , b y t h e e i g h t i e s it

b e c a m e a p p a r e n t t h at t h e T h i r d W o r l d w a s n o l o n g e r a s i n g l e e c o n o m i c u n i t b e c a u s e of the vast

d i s p a r i t i e s in e c o n o m i c p e r f o r m a n c e s o f t h e se c o u n t r i e s . H o w e v e r , n o s e r i o u s a t t e m p t h as b een m a d e in t h e a c c o u n t i n g l i t e r a t u r e t o i n v e s t i g a t e w h e t h e r o r n o t t h e d e v e l o p m e n t o f a c c o u n t i n g s y s t e m s an d a c c o u n t i n g e d u c a t i o n o f T W C s

c o u l d b e e x p l a i n e d in a c c o r d a n c e w i t h t h e i r e c o n o m i c d i s p a r i t i e s . A h a l f h ea r t e d

V o l . 4 . N o . I. M a r c h l ‘M G C e n t r e f o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

I h e 1 )c \ e l o p m e n t o f A c c o u n t i n g S\ st em s an d A c c o u n t i n g I 'd u c a t i o n ... 41

a t t e m p t t o b r e a k t h i s t r a d i t i o n a l w a s m a d e b y Sh o e n t h a l , K a n t o r an d N e e d l e s ( 1 9 () | ) w h e n f o u r t e e n c o u n t r i e s o f t h e A s i a n - Pa c i f i c r e g i o n w e r e g r o u p e d a c c o r d i n g t o t h e different levels of their economic performances with a view to vending out professional

a c c o u n t i n g e d u c a t i o n an d t r a i n i n g s t a n d a r d s o f t h o se c o u n t r i e s .

A l t h o u g h i n f o r m a t i o n r e l a t i n g t o p r o f e s s i o n a l t r a i n i n g a n d s t a n d a r d s w e r e p r es e n t ed

a c c o r d i n g t o t h e e c o n o m i c g r o u p i n g o f t h e se c o u n t r i e s , l i t t l e a t t e m p t w a s m a d e t o relate or analyze the influence of economic factors on professional accounting

A c c o u n t a n t s ( C A P A ) . So u t h A s i a n Fe d e r a t i o n o f A c c o u n t a n t s ( S A F A ) , an d A r a b So c i e t y o f C e r t i f i e d A c c o u n t a n t s ( A S C A ) e m p h a s i z e t h e e c o n o m i c an d s o c i a l similarities among their member countries they have also not made any serious

a c c o u n t i n g s y s t e m s an d w h e t h e r su c h s i m i l a r i t i e s in t h e i r a c c o u n t i n g s y s t e m s an d w h e t h e r s u c h s i m i l a r i t i e s a r e a r es u l t o f t h e i r e c o n o m i c p e r f o r m a n c e s . I f su c h a s i t u a t i o n e x i s t s , t h en it m i g h t s t r e n g t h e n t h e p e r c e i v e d a s s u m p t i o n o f ' a c l o s e r e l a t i o n s h i p b e t w e e n e c o n o m i c f a c t o r s an d a c c o u n t i n g . O u r p a p e r is an a t t e m p t in this direction.

a c h i e v e m e n t s . T h e r e m a i n d e r o f t h e p ap er s o r g a n i z e d as f o l l o w s : T o p r o v i d e a perspective for the subsequent discussion.

II. The Need For Recognizing Different Groups Within The Third

World

T h e r e h as b ee n a c o n s i d e r a b l e a m o u n t o f a c a d e m i c d i s c u s s i o n , p a r t i c u l a r ! ) in t h e p ast t w o d e c a d e s , o n t h e i m p o r t a n c e o f d e v e l o p i n g e f f e c t i v e a c c o u n t i n g

V o l . 4 . N o . I. M a r c h 1 9 % © C e n t r e l o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h V o l . 4 . N o . I. M a r c h 1 9 % © C e n t r e l o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

e x p e r i e n c e an d / o r c o l o n i a l a f f i n i t y . T h e v a l i d i t y o f t h i s d e p e n d e n c y t h e o r y , h o w e v e r , depends partly on whether the lines of division between the five classes of

h y p o t h e s i s s e e m s t o s u f f e r f r o m m e t h o d o l o g i c a l p r o b l e m s as p o i n t e d o u t b y Wallace:

The inadequacies of the ‘spheres of influence' methodology for classifying accounting systems of the world include (i) the difficulty o f c l a s s i f y i n g , w h i c h h as e x p e r i e n c e d s i g n i f i c a n t f o r e i g n i n f l u e n c e

f r o m m o r e t h a n o n e c o u n t r y , i n t o a s p h e r e an d ( i i ) t h e i n a b i l i t y o f the methodology to capture all countries of the word since many of t h e m c a n n o t b e s a i d t o h a v e b een o n c e c o l o n i z e d . I f c o l o n i a l experience cannot provide a basis for classifying the accounting s y s t e m s o f t h e w o r l d s c h o l a r s m u s t t u r n t o o t h e r m o d e l s (1 9 9 0 , 3 6 ).

In s e v e r a l o t h e r s t u d i e s , t h e w r i t e r s e m p h a s i z e d t h e i m p o r t a n c e o f e c o n o m i c

f a c t o r s in t h e d e v e l o p m e n t o f a c c o u n t i n g s y s t e m s an d e d u c a t i o n in T W C s ( M u e l l e r ,

1 9 6 8 ; Sc o t t , 1 9 7 0 ; En t h o v e n , 1 9 8 1 b ; Sa m u e l s an d O l i g a , 1 9 8 2 ; ). En t h o v e n (1 9 8 1 a ) in his study on accounting education systems of TWCs identified a number of

b y C a r m o n y (1 9 8 7 ) i d e n t i f i e d m a j o r e n v i r o n m e n t a l f a c t o r s i n f l u e n c i n g t h e e n t e r p r i s e accounting system in TWCs with special reference to Uruguay.

V o l . 4 . N o . 1. M a r c h 1 9 9 6 © C e n t r e f o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

Ex p o r t i n g C o u n t r i e s . Organization

C o u n t r i e s ( N I C s ) o r N e w l y In d u s t r i a l i z e d Ec o n o m i e s ( N I E s ) . T h e y a l l s h a r e t h e common characteristics of a high level of manufacturing exports, a rising share of

i n d u s t r i a l e m p l o y m e n t an d a r a p i d i n c r e a s e in t h e r e a l G r o s s D o m e s t i c Pr o d u c t (GNP) per capita relative to the more advanced industrial countries.

B y t h e e i g h t i e s it w a s w e l l a c c e p t e d t h at t h e T h i r d W o r l d w a s n o l o n g e r a s i n g l e e c o n o m i c u n i t an d at l east f o u r g r o u p s w e r e d i s t i n g u i s h a b l e - O PEC m e m b e r

c o u n t r i e s . N e w l y In d u s t r i a l i z e d C o u n t r i e s ( N I C s ) . T h e s e a r e e v i d e n t f r o m t h e l i t e r a t u r e d e a l i n g w i t h T W C S (K u r i a n , 1 9 8 2 ; H o o g v e l t , 1 9 8 2 ; W o r l d Ba n k , 1 9 8 9 ).

A s s u c h , t h e r e is c e r t a i n l y a n eed f o r r e c o g n i z i n g d i f f e r e n t g r o u p s a m o n g t h e T W C s from the point of view of their economic differentiation.

Economic Characteristics o f HIOECS and Their Impact on Accounting

Oil exporting countries attracted the interests of the Third World after the oil p r i c e h i k e in 1 9 7 3 an d w e r e p l a c e d as a s ep a r a t e g r o u p in t h e w o r l d e c o n o m y t o denote their enviable economic solvency compared to the fellow TWCs. The m e m b e r s h i p o f O P E C is w i d e l y u sed as a b as i s f o r i n c l u s i o n in t h i s g r o u p . H o w e v e r ,

c l a s s i f y i n g O P E C i n t o o n e g r o u p g a v e r i s e t o p r o b l e m s as t h i s g r o u p c o m p r i s e s

d i s s i m i l a r e c o n o m i e s w i t h K u w a i t h a v i n g o n e o f t h e h i g h e s t p e r c a p i t a i n c o m e s an d

V o l . 4 . N o . 1. M a r c h 1 9 9 6 © C e n t r e t o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

A l t h o u g h t h e H I O E C s ar e s o c i a l l y an d c u l t u r a l l y s i m i l a r , t o a g r ea t e x t en t , t o o t h e r T W C s . t h e i r e c o n o m i c c h a r a c t e r i s t i c s s u c h as h i g h p er c a p i t a i n c o m e , l o w density of population,

heavy dependence on

expatriate

l a b o u r an d superior

i n f r a s t r u c t u r e s ep a r a t e t h e m f r o m t h e r est o f t h e T h i r d W o r l d . A t t h e s a m e t i m e , t h e lack of a strong industrial

b ase an d t e c h n o l o g i c a l

know-how an d t h e h i g h

d e p e n d e n c e o n o n e s e c t o r (i . e . m i n i n g ) e x c l u d e t h em f r o m t h e i n d u s t r i a l i z e d w e st .

Table 1 Area, Population and GNP o f High Income Oil Exporting Countries-1987

Co u n t r y

Area Sq uq rc KIM

Populat ion

GN P per capit a ( CSS)

i n d u s t r i a l b ase, a d i v e r s i f i e d e c o n o m y an d a h i g h l e v e l o f t e c h n i c a l k n o w - h o w in

c o m p a r i s o n t o H I O E C s . T h e m a j o r e c o n o m i c d i f f e r e n c e s b e t w e e n t h e se t w o g r o u p s o f c o u n t r i e s in r e l a t i o n t o m o s t o f t h e T W C s a r e h i g h l i g h t e d in f a b l e 2:

V o l . 4 . N o I. M a r c h 1 9 % © C e n t r e f o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

I h e I )c \ e l o p m e n t o f A c c o u n t i n g S\ st em s an d A c c o u n t i n g K d u c a t i o n 45

Up to be beginning of the seventies, the economies of HIOFX's were

c h a r a c t e r i z e d b\ l o w p er c a p i t a i n c o m e , l o w a n n u a l sav i n g s an d l o w g r o w t h r at e. T h e h e a v y i n c r e a s e s o f o i l p r i c e s an d t h e h i g h d e m a n d f o r o i l in t h e i n t e r n a t i o n a l m a r k e t f r o m 1 9 7 3 r a p i d l y c h a n g e d t h e e c o n o m i c p e r f o r m a n c e o f t h e se c o u n t r i e s . Be i n g t h e m a i n e x p o r t e r s o f o i l t h ese c o u n t r i e s a c c u m u l a t e d h u g e l i q u i d asset s. T h i s

d e v e l o p m e n t an d an a m b i t i o u s s t a t e - i n i t i a t e d w e l f a r e s v st e m f o r t h e i r c i t i z e n s . T h e existing technological,

inflastructures were found to

i n a d e q u a t e t o c o p e w i t h su c h a r a p i d e c o n o m i c d e v e l o p m e n t . A s a r e s u l t , r a p i d importation of advanced

personnel was followed to overcome the problem

f o r e i g n t e c h n o l o g y an d

Table 2

Major Economic Differences Among High Income Oil Exporting Countries

(Hioecs), Newly Industrialized Countries (Nics) and Most o f The Third World

C ountries (Tvvcs)

H IO FX's

NICs

Most of the T WCs

Fo w p er c a p i t a i n c o m e income

Sl o w Fc o n o m i c development

Mainly densely p o p u l at e d

a g r i c u l t u r a l p r o d u ct s gas)

m a n u f a ct u r e d g o o d s

V o l . 4 . N o . I. M a r c h 1 9 9 6 © C e n t r e l o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

46 T h e In t e r n a t i o n a l Jo u r n a l o f A c c o u n t i n g an d Bu s i n e s s So c i et N

Speedy development o f accounting systems

s a m e p e r i o d ( A b d e e n an d Y a v a s , 1 9 8 5 ). Th e e m e r g e n c e o f l a r g e c o m p a n i e s w i t h separation of management from ownership necessitated the application of modern

e v e n b e f o r e t h e o i l p r i c e h i k e . In c o n t r a s t , t h e H I O E C s w h i c h h ad an a l m o s t p r i m i t i v e a c c o u n t i n g s y s t e m h ad t o c h a n g e o v e r t o a m o s t m o d e r n a c c o u n t i n g s y s t e m o v e r a v e r y sh o r t p e r i o d o f t i m e . T h i s w a s d i f f e r e n t f r o m t h e e x p e r i e n c e s o f o t h e r TWCs where accounting development was taking place gradually. The large

financial resources of HIOECs helped them to modernize their accounting systems q u i c k l y . T h e y c o u l d a f f o r d e x p e n s i v e m o d e r n c o m p u t e r , f o r e i g n e x p e r t s an d o t h e r

e s s e n t i a l i n g r e d i e n t s n ee d ed f o r t h i s q u i c k t r a n s f o r m a t i o n . Bu t m o s t o f t h e o t h e r T W C s c o u l d n o t a f f o r d su c h f a c i l i t i e s d u e t o r e s o u r c e c o n s t r a i n t s . Fo r e x a m p l e , Ju c h a u et . a l . ( 19 8 6 ) f o u n d t h at So u t h e a s t Pa c i f i c c o u n t r i e s s u c h as F i j i , T o n g a an d

So l o m o n Is l a n d s h a v e a g r ea t s c a r c i t y o f r e s o u r c e s t o d e v e l o p t h e i r a c c o u n t i n g s y s t e m s (Ju c h a u e t . a l . . 1 9 8 6 ). G h a r t e y (1 9 8 5 ) r ep o r t e d t h at p o v e r t y in t h e A f r i c a n s o c i e t y is o n e o f t h e m a j o r o b s t a c l e s t o d e v e l o p i n g e f f e c t i v e a c c o u n t i n g s y s t e m s in t h o s e c o u n t r i e s . T h i s is a l s o t r u e f o r m a n y o t h e r T W C s .

Impact o f multinational enterprises and international accounting firms

In HIOECs

accounting systems by

i m p o r t a t i o n o f e q u i p m e n t , o r g a n i z a t i o n s an d p e r s o n n e l e x p o s e d t h e m t o a v a r i e t y o f

e x t e r n a l i n f l u e n c e s . A s t h e se c o u n t r i e s d i d n o t e i t h e r h a v e an e s t a b l i s h e d a c c o u n t i n g s y s t e m o r a s u b s t a n t i a l r e g u l a t o r y f r a m e w o r k in t h e l e g a l s y s t e m f o r a c c o u n t i n g

V o l . 4 . N o . 1. M a r c h 1 9 9 6 © C e n t r e f o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

T h e D e v e l o p m e n t o f A c c o u n t i n g Sy s t e m s a n d A c c o u n t i n g Ed u c a t i o n 47

p r a c t i c e s t h e i m p o r t e d s y s t e m s h ad l i t t l e d i f f i c u l t y in p e n e t r a t i n g (Po m e r a n z a n d

H a q q i , 1 9 8 5 ; G r e s s , 1 9 8 5 ; H a s a n , 1 9 8 5 ). A c c o r d i n g l y , t h e m a i n a g e n t s o f i n f l u e n c e o n a c c o u n t i n g s y s t e m s an d e d u c a t i o n in t h e se c o u n t r i e s h a v e b een m u l t i n a t i o n a l enterprises, international accounting firms and expatriate accountants.

O i l c o m p a n i e s o f U S A . U K , Fr a n c e a n d t h e N e t h e r l a n d s w e r e d i r e c t l y involved in the exploration of oil in most of the HIOECs. For example, from the v e r y b e g i n n i n g A r a b i a n A m e r i c a n O i l C o m p a n y ( A R A M C O ) o f Sa u d i A r a b i a , K u w a i t O i l C o m p a n y ( K O C ) o f k u w a i t a n d Br u n e i Sh e l l Pe t r o l e u m ( B S P ) o f Br u n e i

h a v e o p e r a t e d as g i a n t c o r p o r a t i o n s j o i n t l y o w n e d by various multinational enterprises and governments of foreign countries. These companies which are enormously large

in t e r m s o f c a p i t a l e m p l o y e d , n u m b e r o f e m p l o y e e s a n d operational activities virtually control the entire oil industry in the respective countries. These are also the pioneering organizations which introduced modern

a c c o u n t i n g s y s t e m s i n t h e s e c o u n t r i e s . T h e i r a c t i v i t i e s h a v e n o t b ee n c o n f i n e d t o t h e introduction of modern accounting systems, but also include undertaking extensive t r a i n i n g p r o g r a m s f o r l o c a l a c c o u n t a n t s . In g e n e r a l , t h e y h a v e a c t i v e l y e n g a g e d t h e m s e l v e s in p r o m o t i n g a c c o u n t i n g e d u c a t i o n i n t h e s e c o u n t r i e s . Fo r e x a m p l e , in

Br u n e i , Br u n e i Sh e l l Pe t r o l e u m C o m p a n y p r o v i d e s s c h o l a r s h i p s , g r a n t s a n d o t h e r teaching aids to educational institutions to promote technical education which among other subjects includes accounting (BSGC,

1 9 9 0 ). A s a n o t h e r r e c e n t

d e v e l o p m e n t , Br u n e i Sh e l l Pe t r o l e u m h as o r g a n i z e d f o r it s e m p l o y e e s an i n - h o u s e course leading to the professional qualification of the Association of Accounting T e c h n i c i a n s ( A A T ) . In Sa u d i A r a b i a , K i n g Fa h d U n i v e r s i t y o f Pi • '• oleum an d M i n e r a l s o f f e r c o u r s e s , g r a n t s an d c o n s u l t i n g a s s i s t a n c e t o u p g r a d e t h e s k i l l s in t e c h n i c a l a n d p e t r o l e u m r e l a t e d a r e a s i n c l u d i n g o i l an d g a s a c c o u n t i n g .

In a d d i t i o n t o m u l t i n a t i o n a l o i l c o m p a n i e s , t h e o t h e r f o r e i g n c o m p a n i e s w h i c h h a v e b ee n u n d e r t a k i n g m a j o r d e v e l o p m e n t w o r k s s u c h as c o n s t r u c t i o n , communication and manufacturing exert considerable influence on the accounting s y s t e m s o f t h e s e c o u n t r i e s . Fo r e x a m p l e , Ei k h a r o u f (1 9 8 5 ) r e p o r t e d t h a i 'h e r e h as a significant amount of influence of such foreign companies on the development of

a c c o u n t i n g s y s t e m i n Sa u d i A r a b i a . H a s a n (1 9 8 5 ) a l s o f o u n d it t r u e f o r t h e G u l f state1

Along with multinational enterprises large international accounting firms

a l s o i n f l u e n c e t h e a c c o u n t i n g s y s t e m s in H I O E C s A s a m a t t e r o f f a c t , i n t e r n a t i o n a l

p r a c t i c e s in t h e se countries.

cs an d international

he sc cou:.u

oca' accounting

firms

is another

r e a ‘-.> • ;\ >r

, :'h \ s icfernn.’

(G r e s s , 1 9 8 5 ). In Br u n e i , w h e r e i n t e r n a t i o n a l a c c o u n t i n g f i r m s d o m i n a t e m a i n l y in the area of public accounting, training programs are conducted by some of them for their clients to acquaint them whit the modern accounting techniques which among o t h e r t h i n g s i n c l u d e t h e u se o f c o m p u t e r s in a c c o u n t i n g . T h e f o r m a t i o n o f t h e Br u n e i

a s s o c i a t i o n o f C e r t i f i e d Pu b l i c A c c o u n t a n t s ( B A C P A ) in 1 9 8 7 w a s a l s o m a i n l y

i n i t i a t e d b y t h e i n t e r n a t i o n a l a c c o u n t i n g f i r m s . A l t h o u g h N e e d l e s (1 9 8 8 ) f o u n d similar influence of international accounting firms on the auditing standards of some

F a r Ea s t C o u n t r i e s l i k e In d o n e s i a , M a l a y s i a , Ph i l i p p i n e s , Si n g a p o r e a n d T h a i l a n d , It is d o u b t f u l w h e t h e r s u ch i n f l u e n c e in f a r Ea s t c o u n t r i e s is as g r e a t as t h a t in HIOECs.

In o t h e r T W C s , t h i s d o m i n a t i o n o f m u l t i n a t i o n a l a n d o t h e r f o r e i g n f i r m s in t h e e c o n o m y a n d c o n s e q u e n t l y in t h e a c c o u n t i n g s y s t e m i n a b s en t . Ev e n t in o t h e r o i l

e x p o r t i n g c o u n t r i e s l i k e M a l a y s i a . V e n e z u e l a . Ir a n a n d Ir a q , the presence of m u l t i n a t i o n a l f i r m s is n o t as v i v i d as in H I O E C s b e c a u s e t h o s e c o u n t r i e s h ad a r e a s o n a b l e i n d u s t r i a l b as e a n d t e c h n i c a l k n o w - h o w e v e n b e f o r e t h e o i l b o o m . M o r e o v e r , as Si n c l a i r (1 9 8 2 ) p o i n t e d o u t H I O E C s g e n e r a t e d m o r e s u r p l u s f r o m o i l r e v e n u e s t h a n o t h e r o i l e x p o r t i n g c o u n t r i e s w i t h w h i c h t h e y c o u l d a f f o r d t o s p en d o n various economic activities. As a result, the drastic economic changes introduced w i t h t h e h e l p o f m u l t i n a t i o n a l c o m p a n i e s a f t e r t h e o i l b o o m w e r e g r e a t e r in H I O E C s compared to other oil exporting countries.

Impact o f expatriate accountants

A s m e n t i o n e d e a r l i e r , H I O E C s a r e s p a r s e l y p o p u l a t e d . Pr i o r t o t h e o i l b o o m , t h e p o p u l a t i o n in a l l t h e s e c o u n t r i e s c o n s i s t e d s o l e l y o f a s m a l l i n d i g e n o u s community. Accordingly, they lacked human capital both in terms of quality and quantity. Therefore, the rapid economic programs introduced after the sudden advent of wealth from oil necessitated the importation of vast numbers of foreigners.

V o l . 4 , N o . 1. M a r c h 1 9 9 6 © C e n t r e f o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

c o u n t r i e s l i k e Ir a n , Ir a q , M a l a y s i a , an d N i g e r i a a l s o d o n o t s u f f e r f r o m t h e s h o r t a g e of local accountants.

Developm ent o f higher education in accounting

H I O E C s , w h e r e h i g h e r e d u c a t i o n in g e n e r a l a n d a c c o u n t i n g e d u c a t i o n i n p a r t i c u l a r are relatively resent phenomena, have a different sort of influence on their

a c c o u n t i n g e d u c a t i o n w h i c h c a n n o t b e c a l l e d ' c o l o n i a l ' , In a i l t h e se c o u n t r i e s t h e n ee d f o r h i g h e r e d u c a t i o n i n a c c o u n t i n g w a s s e r i o u s l y f e l t o n l y a f t e r t h e o i l b o o m in t h e e a r l y s e v e n t i e s . T o m e e t t h i s n ee d , m o s t o f t h e H I O E C s s t a r t e d e s t a b l i s h i n g

h i g h e r e d u c a t i o n a l i n s t i t u t e s f o r a c c o u n t i n g an d o t h e r b u s i n e s s d i s c i p l i n e s in t h e s e v e n t i e s a n d e i g h t i e s . T h i s is e v i d e n t f r o m t a b l e 3.

V o l . 4 . N o . 1. M a r c h 1 9 9 6 © C e n t r e f o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

50 T h e In t e r n a t i o n a l Jo u r n a l o f A c c o u n t i n g an d Bu s i n e s s So c i e t y

T a b le 3 Accounting Courses Available At Higher Educational Institutions In Hioecs

Co u n t r y Universit y/

Depart m ent / Facu lt y Inst it ut e

Year

ent ablish

where account ing courses are availab le

ed

Ba h r a i n University of

Br u n e i University of

D e p a r t m e n t o f Bu s i n e s s St u d i e s Tecnology Br u n e i

Kuwait Kuwait

of Commerce, Ec o n o m i c s an d University

College of

St u d i e s

Oman Su l t a n

D e p a r t m e n t o f Bu s i n e s s M a n a g e m e n t Qaboos University

Qatar University of

of Administrative Sc i e n c e an d Qatar

C e n t e r o f Bu s s i n e s s Administration an d Unversity

Ec o n o m i c s

of Administrative Sc i e n c e an d Unversity

C o l l e g e o f In d u s t r i a l M a n a g e m e n t Unversity of Pe t r o l e u m an d M i n e r a l s

King Abdui

. . o n o m i c s an d A d m i m s f a t k ' Aziz v . n i v cr -

,,r

haci.it.> .

So u r c e : In t e r n a t i o n a l H a n d b o o k o f U n i v e r s i t y . 1 9 9 1 . H i g h e r Ed u c a t i o n St a t i s t i c s f o r t h e ( i u l f St at es . 1988-1989

Theoretical basis for explaining the development o f accounting in H IO ECs

It is c l e a r f r o m t h e a b o v e d i s c u s s i o n t h a t t h e ' Sp h e r e s o f In f l u e n c e '

h y p o t h e s i s b as ed o n c o l o n i a l i s m d o e s n o t p r o v i d e a t h e o r e t i c a l b a s i s f o r e x p l a i n i n g t h e d e v e l o p m e n t o f a c c o u n t i n g s y s t e m s an d a c c o u n t i n g e d u c a t i o n in H I O E C s . T h e r e f o r e , as s u g g e s t e d b y W a l l a c e (1 9 9 0 ), it is n e c e s s a r y t o l o o k f o r o t h e r explanations.

Vol. 4. No. I. March 1996 © C e n t r e f o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

A n o t h e r e x p l a n a t i o n k n o w n as ' v o i d t h e o r y ' s u g g e s t s t h a t a c o u n t r y w i t h n o organized body of accounting principles would imitate the accounting system of

a n o t h e r c o u n t r y ( W i l k i n s o n , 1 9 6 5 ). T h i s t h e o r y a l s o p r o v i d e s p a r t i a l e x p l a n a t i o n t o t h e s i t u a t i o n in H I O E C s o n t h e g r o u n d s t h at as t h e r e w a s n o o r g a n i z e d a c c o u n t i n g profession before the oil boom they quickly adopted the American accounting s y s t e m . H o w e v e r , n o n e o f t h e ab o v e t h e o r i e s s e e m s t o b e c o m p r e h e n s i v e e n o u g h t o

e x p l a i n a l l a s p e c t s o f t h e d e v e l o p m e n t o f a c c o u n t i n g s y s t e m s an d a c c o u n t i n g

e d u c a t i o n in H I O E C s . T h e d e v e l o p m e n t o f a c c o u n t i n g i n t h i s g r o u p o f c o u n t r i e s is

e s s e n t i a l l y a r e s u l t o f t h e i n f l u e n c e o f s e v e r a l e c o n o m i c f a c t o r s s u ch as m u l t i n a t i o n a l enterprises,

financial institutions, expatriate accountants and foreign technology.

international

accounting firms,

international

Conclusions

O u r a n a l y s i s o f t h e r a p i d e c o n o m i c a c h i e v e m e n t s o f H I O E C s an d t h e corresponding effect on the development of their accounting systems and accounting

e d u c a t i o n s u g g e s t s t h at e c o n o m i c d i f f e r e n t i a t i o n n ee d s t o b e t a k e n i n t o a c c o u n t in

a n y r e a l i s t i c c l a s s i f i c a t i o n o f T h i r d W o r l d a c c o u n t i n g . It a l s o s h o w s t h a t b e c a u s e o f t h e e n o r m o u s i n f l u e n c e o f t h i s d i f f e r e n t i a t i o n o n t h e d e v e l o p m e n t o f a c c o u n t i n g in T W C s , t h e u n i f i e d v i e w o f T h i r d W o r l d a c c o u n t i n g is n o l o n g e r a p p r o p r i a t e a n d r e s e a r c h n e e d s t o b e d i r e c t e d t o w a r d s a c c o u n t i n g in d i f f e r e n t e c o n o m i c g r o u p s o f these countries.

It is s een t h a t as a r e s u l t o f t h e r a p i d e c o n o m i c c h a n g e s t a k i n g p l a c e a f t e r t h e o i l b o o m t h e d e v e l o p m e n t o f a c c o u n t i n g s y s t e m s an d a c c o u n t i n g e d u c a t i o n in

H I O E c s h as b e en c o n c e p t u a l l y d i f f e r e n t f r o m t h a t o f o t h e r T W C s . T h e r e f o r e , t h e 's p h e r e o f i n f l u e n c e ' m e t h o d o l o g y w h i c h h as b e en u sed b y s o m e w r i t e r s f o r

e x p l a i n i n g t h e d e v e l o p m e n t o f a c c o u n t i n g i n T W C s is n o t a p p l i c a b l e t o H I O E C s . Unlike other TWCs, the development of accounting systems and accounting

e d u c a t i o n in t h i s p a r t i c u l a r g r o u p o f c o u n t r i e s is n o t an o u t c o m e o f s u c h h i s t o r i c a l

f a c t o r s as c o l o n i a l e x p e r i e n c e a n d / o r c o l o n i a l a f f i n i t y . In s t e a d , it is a r e s u l t o f t h e

i n f l u e n c e o f a n u m b e r o f e c o n o m i c f a c t o r s s u c h as m u l t i n a t i o n a l e n t e r p r i s e s , international

institutions, expatriate accountants and foreign technology.

Vol. 4. No. I. March 1996 © C e n t r e f o r In d o n e s i a n A c c o u n t i n g an d M a n a g e m e n t Re s e a r c h

T h e D e v e l o p m e n t o f A c c o u n t i n g Sy s t e m s a n d A e c o u r t i n g Ed u c a t i o n ... 53

References:

A b d e e n , A . M . an d U . Y a v a s (1 9 8 5 ) " C u r r e n t St at u s o f A c c o u n t i n g Ed u c a t i o n m Sa u d i Arabia".

V o l . 2 0 . N o . 2. A i h s h i m , D . D . (1 9 8 5 ) " A c c o u n t i n g Fr a m e w o r k f o r t h e G u l f C o - o p e r a t i o n C o u n c i l " in V . K . Zimmerman (Fd.).

The In t er n at ion al Jo u r n al of Account ing,

The recent Account in g an d Econ o m ic Developm ent s in the Mid d le East , C e n t r e f o r In t e r n a t i o n a l Ed u c a t i o n an d r e sea r c h

Accounting. U n i v e r s i t y o f Il l i n o i s , p p . 1- 12.

American Accounting

1975-1976 Committee on In t e r n a t i o n a l A c c o u n t i n g O p e r a t i o n s an d Ed u c a t i o n :

The Account in g Review, 52

(Su p p l e m e n t ), p p . 6 5 - 1 3 2 . ....... — (1 9 8 0 ) Account in g Ed u cat ion an d the Third World, Sa r a s o t a, FI. : A A A Re p o r t o n t h e

C o m m i t t e e o n In t e r n a t i o n a l A c c o u n t i n g O p e r a t i o n s an d Ed u c a t i o n 1 9 7 5 - 1 9 7 8 . Br i s t o n , R . J. (1 9 7 8 ) " T h e Ev a l u a t i o n o f A c c o u n t i n g in

Tin In t er n at ion al Jo u r n al of account ing.

The In t er n at io n al Jo u r n al o f Account ing,

su b m i t t ed t o t h e D e p ar t m en t o f M a n a g e m e n t St u d i e s , U n i v e r s i t y Br u n e i . Ei k h o r u f . F . W . (1 9 8 5 ) " G e n e r a l A c c e p t e d A c c o u n t i n g Pr i n c i p l e s in Sa u d i A r a b i a " in Z i m m e r m a n , V . K . ( Ed . ) .

The Recent Account in g an d Econom ic Developm ent s in the Mid d le East ,

C e n t r e f o r In t e r n a t i o n a l Ed u c a t i o n an d Re s e a r c h i r A c c o u n t i n g , U n i v e r s i t y o f Il l i n o i s , p p . 127- 1 50. En t h o v e n , A . J. H . (1 9 7 7 ) Account ing Syst em in Third Wo r ld Econom ies, N ev . Y o : k : N o r t h

Holland En t h o v e n , A . J. H . ( 1 9 8 1 a )"A c c o u n t i n g in D e v e l o p i n g C o u n t r i e s " in C . W . N o b e l s an i R. H . Pa r k e r . ( Ed s . )

Com p ar at ive In t er n at ion al account ing. U . K . : Ph i l i p A l l a n , p p . 2 1 7 ­

237. En t h o v e n . A . J. H . ( 1981 by Account ing Ed u cat ion in Econom ic Managem ent , New York: North

H o i lan En t h o v e n , A . J. H . ( 1 9 8 3 ) " U . S. A c c o u n t i n g an d T h i r d W o r l d " ,

The Jo u r n al of Account an cy,

The In t er n at ion al Jo u r n al o f Account ing.

Vol.2i.No 1 Gr e s s .

Ea s t Countries: A 1 i i s t o n c a SPe r s p e c : i v e " in V X Z i m m e r m a n ( L£d ),

F . J. (! 985) " Pu b l i c

Accou.itir.g

The Recent Ae'- w n 'in g an d Econ o m ic De\ elopm ents in ;!■■> Mid d le East ,

C e n t r e f o r In t e r n a t i o n a l Ed u c a t i o n an d Re s e a r c : i..- A cco cn - r i n g ‘ J*'- .

- i t '- o f ! ! r n e :‘% p n . 1 6 7 - 1 7 6

H a s s a n , N . ( i 9 8 5 )Y : ; t e ; n a t i o n a l ,- .r

A t : d e s i r a b l e as a Sh o r t ?\ - n So l u t i o n in

t h e case o f t h e A r a b G u i f Sc .

The ■' . L\ . t m ut ing an d Econom ic Development ^ .

•. A Z : m r a e r m a n (Ed . ).

C e n t r e f o r In t e r n a t i o n a l Ed u c a t i o n an d Res e ai ch in A c c o u n i i r h . , . n i v v p. ;\ . , f

;i:.:iie Ea ■:(.

u s, p p .6 9 - 1 0 0 . H o o g v e l t . A . ’vi

; (! 982) The Third ;

c •/'>.><// ,0< .elopment , London Macmillan

Ib r a h i m . I G 9 8 i ) " T h e Im p a c t o f A i al- Uu.- .k.- o^- So c i a l an d Po l i t i c a l De>. c l o p Tien t in t h e G u l f St a t e s ” in A . B . Z a h l a n ( '

The Ai.ah Br u in Drain . U n i t e d N a t i o n s , p p . 71- 81

V o l . 4 . Y . t . J. M a r c h 1 9 9 6 © C e n t r e f o r In d o n e s i a n A ;'oou n t m < j an d M ai '.ai .'.ei n en i Re s e a r c h

54 T h e In t e r n a t i o n a l Jo u r n a l o f A c c o u n t i n g an d Bu s i n e s s So c i e t y

Ju c h a u , R. , M . W h i t e an d R. H o p k i n s (1 9 8 6 ) " T e r t i a r y Ed u c a t i o n St r a t e g i e s f o r A c c o u n t i n g in D e v e l o p i n g So c i e t i e s : T h e So u t h w e s t Pa c i f i c as a C a s e St u d y ” ,

The International

Journal o f Accounting, Vol. 21.No. 1

K u r i a n , C . T . (1 9 8 2 ) Encyclopedia o f the Third World , Lo n d o n : M a n s e l l Pu b l i s h i n g L i m i t e d M u e l l e r , G . G . (1 9 6 8 ) " A c c o u n t i n g Pr i n c i p l e s G e n e r a l l y A c c e p t e d in t h e U n i t e d St a t e s V e r s u s

T h o s e G e n e r a l l y A c c e p t e d El s e w h e r e " ,

The International Journal o f Accounting,

Sp r i n g , p p . 9 1 - 10 3 N e e d l e s , B . E. (1 9 8 8 ) " A u d i t i n g St an d a r d s in t h e Fa r Eas t : A n O v e r v i e w " in V . K . Z i m m e r m a n ( Ed . ) ,

The Recent Accounting and Economic Development in the Far East, Center

f o r In t e r n a t i o n a l Ed u c a t i o n an d Re s e a r c h in A c c o u n t i n g , U n i v e r s i t y o f Il l i n o i s , p p . 65-95 N i n s u v a n n a k u l , P. (1 9 8 8 ) " T h e d e v e l o p m e n t o f t h e A c c o u n t i n g Pr o f e s s i o n o f t h e A S E A N c o u n t r i e s : Past Pr es e n t an d t h e Fu t u r e " in V . K . Z i m m e r m a n ( Ed . /

The Resent Accounting and Economic Developments in the Far East. C e n t e r f o r In t e r n a t i o n a l

Ed u c a t i o n an d Re s e a r c h in A c c o u n t i n g . U n i v e r s i t y o f Il l i n o i s , p p . 1 1 5 - 148 Pa r k e r , L . D . (1 9 8 4 ) " A C o n t i n g e n c y M o d e l o f A c c o u n t i n g Pr a c t i c e in D e v e l o p i n g C o u n t r i e s " ,

Accounting Forum, pp. 145-160

Po m e r a n z , F an d A . W . H a g g i (1 9 8 5 ) " T h e C o l l a p s e o f So u k A l - M a n a k h : A C h r o n i c l e " in V . K . Z i m m e r m a n , ( Ed . ) ,

The Recent Accounting and Economic Development in the Middle £ a.v/ , Cen t er t o r In t e r n a t i o n a l Ed u c a t i o n an d Re s e a r c h in A c c o u n t i n g ,

U n i v e r s i t y o f Il l i n o i s , p p . 1 6 1 - 1 6 6 Sa m u e l s , J. M . an d J. C . O l i g a (1 9 8 2 ) " A c c o u n t i n g St a n d a r d s in D e v e l o p i n g C o u n t r i e s " , T h e

International Journal o f Accounting, V o l . 18, p p . 6 9 - 8 8

Sc o t t . G . M . (1 9 7 0 ) Accounting and Developing Nations, In t e r n a t i o n a l A c c o u n t i n g St u d i e s

In s t i t u t e. Se a t t l e , W a s h i n g t o n D . C . Sh o e n t h a l , E. R . , J. K a n t o r an d B . E. N e e d l e s (1 9 9 1 ) " C o m p l i a n c e w i t h In t e r n a t i o n a l A c c o u n t i n g Ed u c a t i o n G u i d e l i n e s in t h e A s i a n Pa c i f i c Re g i o n " in B. Ba n e r j e e ( Ed . ) ,

Contemporary ’ Issues in accounting Research , In d i a n A c c o u n t i n g A s s o c i a t i o n

Re s e a r c h Fo u n d a t i o n . Si n c l a i r , S. W . (1 9 8 2 ) Third World Economic Handbook , Lo n d o n : Eu r o m o n i t o r Pu b l i c a t i o n s T h a m b i p i l l a i , P. (1 9 9 2 ) Pu b l i c Po l i c y an d Pr i v a t e Se c t o r Em p l o y m e n t Br u n e i ' s Fo r e i g n L a b o r

Fo r c e , W o r k i n g Pa p e r , D e p a r t m e n t o f Pu b l i c Po l i c y an d A d m i n i s t r a t i o n , U n i v e r s i t y Br u n e i

Darussalam U N C T A D (1 9 7 0 ),

Document T D / B/ 2 8 8 , G e n e v a

W a l l a c e , R . S. O . (1 9 9 0 ) " A c c o u n t i n g in D e v e l o p i n g C o u n t r i e s : A r e v i e w o f t h e l i t e r a t u r e "

Research in Third World Accounting, V o l . 1, p p . 3 - 3 4

W i l k i n s o n , T . L . (1 9 6 5 ) " U n i t e d St a t e s a c c o u n t i n g as v i e w e d a c c o u n t a n t s o f o t h e r c o u n t r i e s " ,

The International Journal o f accounting, V o l . 1, p p 3 - 1 4

W o r l d Ba n k (1 9 8 8 / 8 9 ) World Development Report , Washington D.C.

Vo l. 4, No. 1, March 1996 © Centre for Indonesian Account ing and Managem ent Research