Foreign firms operating in Russia usually audit their books to two sets of standards — Russian and international — and Russian firms hoping to attract foreign investment generally do the same. Eugeny Kaluzhny takes a look at the problem.

The business of accounting may look boring and conservative to the uninitiated, but to those in the know it’s a dynamic sector undergoing dramatic change.

Like many other facets of economic life, accounting is increasingly immune to international borders. As corporations become multinational, so do their accounting firms, and while each country still has its own canon of standard accounting practices, there is a growing trend toward international accounting rules.

Over the past few years, Russia has been trying to implement accounting standards complying with the ones developed by international accounting bodies such as the International Federation Of Accountants (IFAC), the International Accounting Standards Committee (IASC) and the Institute of Social and Ethical Accountability (ISEA).

The International Committee is working hard to develop a distinctive certification system similar to those implemented by individual countries. This is a complex process that involves not only developing an accounting certification system, but ensuring that it will be recognized by countries that work according to IAS accounting standards. Reform of accounting standards in Russia is also far from completion and current certification for practicing auditors does not meet today’s market needs.

The recent growth in the Russian economy has produced a significant need for professionals with internationally recognized certification. One reason is that multinationals have to prepare at least two sets of financial statements, one for Russian authorities and another to meet their head offices’ requirements — either the IAS standards or U.S. Generally Accepted Accounting Principles (GAAP) accounting standards.

Russian companies also have to prepare their financial statements according to internationally recognized accounting rules in order to attract foreign investors.

The two most important Western accounting certifications available to Russian nationals are the U.S. CPA, the highest designation in the United States, and the ACCA (Association of Chartered Certified Accountants) designation of the U.K.

The ACCA is a three-year educational program that enables a candidate without an economics background to become familiar with Western accounting as opposed to the Russian Statutory Accounting System. ACCA has been widely used by Big Five Firms and multinational companies as an educational and training tool for their national staff.

The fact that ACCA exams can be taken without leaving Russia made this certification attractive enough for companies to enroll hundreds of employees on the first section, the "papers" part, of the program. Also, because this program starts from the basics of accounting, all entry-level staff can take it.

In contrast, the CPA examination can be taken only in the United States, where it is offered twice a year and consist of four parts: Financial Accounting and Reporting, Governmental Accounting and Federal Taxation, Auditing and Business Law. A large slice of the material tested by this exam requires candidates to have a deep knowledge of the various areas of the U.S. business, legal and taxation systems. The fact that only 10 percent of average CPA candidates in America pass the exam at their first attempt shows how difficult the test is.

Meanwhile, a new trend has emerged regarding the professional development of accountants and finance specialists. Firms are reluctant to allow as much time as they used to for completion of a certification program.

Many say the ACCA examination’s flexibility does not justify the length of the program. Considering the number of billable hours lost and the discouraging pass rate among students, multinationals have been seeking a respected program with a predictable success rate.

With the increasing influence of the U.S. capital market, large Russian companies are increasingly choosing to have their financials prepared according to international standards, and this has had a significant impact on the accounting and auditing business. Top Russian companies demand that their financial statements be prepared by auditors according to U.S. accounting standards. With that, firms are facing a new challenge — how to swiftly develop CPA programs for their national staff.

There is open debate among accounting professionals about which foreign certification suits Russian professionals the best. While there are a number of options available for Russian nationals, the CPA has gained in popularity among accountants and financial professionals.

Since 1997, more than 200 Russians have pursued U.S. CPA certification. In spite of formal movement toward the IAS standards, the number of Russian professionals that pursue the CPA designation is almost doubling every year.