People: Greg Navarro

Good governance guiding public accountancy

Despite being a much-talked-about ideal that weighty organizations worldwide have looked to as their new polestar, good governance remains a hazy concept. Debate surrounds it – from the most basic issues such as what it is in the first place, to the more complex ones such as how exactly it will be implemented. Some have regarded it as an impossible dream. But not Greg Navarro.

As immediate past president of the Association of Certified Public Accountants (CPAs) in Public Practice (ACPAPP), Navarro has a very clear idea of what good governance is, and he has committed to making it a reality, one small practitioner at a time.

After large-scale corporate scandals broke out in the U.S. four years ago, the International Accounting Standards Board (IASB) was rudely awakened to the reality that accounting professionals around the globe weren’t speaking the same language. “The fallout from Enron made it clear that we were practicing in a world where it was possible for CPAs to just pick and choose those standards applicable to them and report only what they want,” admitted Navarro.

As a result, the IASB pushed countries to adopt International Accounting Standards (IAS) that would effectively place practitioners everywhere on the same page – from reporting financial statements to measuring accounting transactions – making it easier to compare and contrast reports regardless of where they originate from. The ambitious move meant this much for the Philippines: 40 new accounting standards, with 26 being adopted all in 2005.

“We were faced with issues such as the lengthy process of adopting IAS and when exactly to adopt it. Of course, there was also the financial cost of rolling out the new standards,” said Navarro, who is managing partner and COO of one of the biggest accounting firms in the country, Punongbayan & Araullo (P&A).

It was a huge challenge for the local giants of accounting, and even more so for the smaller practitioners.

It fell on ACPAPP as the local advocate of individual and institutional public practitioners to carry the smaller firms through the major transition, and Navarro was chosen to lead the efforts.

Working under the banner of Public Accounting Practice Redefined: Setting Standards for Good Governance, Navarro committed his 2005 term to making sure ACPAPP members, most of whom are very small practitioners, would not be left behind in the difficult but necessary move towards internationalization and, ultimately, good governance.

The association rallied support from almost all of the country’s large accounting firms, regulatory bodies, and institutions to deliver a series of workshop-seminars on the new accounting standards. For less than half the cost of what a large auditing firm would pay for training, ACPAPP offered its members a ten-module series of Philippine Accounting Standards/Philippine Financial Reporting Standards (PAS/PFRS) seminars that schooled the practitioners on the 26 new standards adopted in 2005.

ACPAPP also commissioned a group of academics to develop training materials and trainers’ guides on the preparation of financial statements that are PAS/PFRS compliant. The initiative will sustain the association’s efforts at rolling out the new standards, and will make it easier even for CPAs practicing outside Metro Manila to retrain under the new, principles-based standards.

Coupled with these efforts, ACPAPP also invited speakers to discuss the corollary changes taking place in auditing standards.

“We had to move fast in order to equip our members with the right tools for adopting IAS, the bulk of which were adopted locally in 2005,” said Navarro, recognizing the unique circumstances surrounding his ACPAPP presidency. And although his efforts are just the initial steps towards internationalization, Navarro is hopeful about the long-term consequences: &a mp;a mp;a mp;n bsp;“We wan t our members to understand the new standards so that they may, in turn, assist their clients in complying with the new standards. This is a start to creating legitimate, transparent and fully accountable organizations.”

As president of the ACPAPP Foundation in 2006, Navarro continues his advocacy for good governance and the development of training materials on the new accounting and auditing standards. The ACPAPP Foundation is raising funds for the training resources and library references for the use of ACPAPP members.

(Also published in BusinessWorld, March 17, 2006)