There is need for greater transparency and accountability in state affairs.

Some argue that accounting developed purely in response to the needs of the time brought about by changes in the environment and societal demands. Others claim that the development of the science of accounting has itself driven the evolution of commerce since it was only through the use of more precise accounting methods that modern business was able to grow, flourish and respond to the needs of its owners and the public.
Either way, the history of accounting throws a light on economic and business history generally, and may help us predict better what is on the horizon as the pace of global business evolution escalates.
With the growth of corporate activity in the 20th century, the field of accounting increased greatly in importance and has seen many improvements in theory and techniques. The chief causes of changes in accounting methods have been more complex tax laws and regulations and the need to keep uniform accounts for possible government or public scrutiny.
Contemporary accounting firms also have taken on managerial functions and are no longer concerned simply with ascertaining and reporting financial conditions but also with advising a client on how to act on this information; they also consult on information-technology systems and other services. This has greatly increased the potential for conflicts of interest, because the services provided to clients by accounting firms must be evaluated in their audits and because the fees paid by a client for such services may be more important to the accounting firm than that paid for an audit, potentially undermining the independence of the audit.

Legislation
A series of revelations concerning accounting firms’ failure to detect or publicly challenge irregularities or fraud when auditing the finances of a number of corporations, led many governments to pass laws to register and regulate accountants and firms that act as auditors and set standards for audits.
An accountant evaluates records drawn up by the bookkeeper and shows the results of this investigation as losses and gains, leakages, and changes in value, so as to reveal the progress or failure of the business and also its future limitations and possibilities.
Accountants must also be able to draw up a set of financial records and prescribe the system of accounts that will most easily give the desired information; they must be capable of arriving at a comprehensive view of the economic and the legal aspects of a business, envisaging the effect of every sort of transaction on the profit-and-loss statement; and they must recognize and classify all other factors that determine the true condition of the business (e.g., statistics or memoranda relating to production; properties and financial records representing investments, expenditures, receipts, fiscal changes, and present standing).
Cost accounting shows the actual cost, over a certain period of time, of particular services rendered or of articles produced. This system exposes unprofitable ventures and services.

Domestic Auditing
Following the Islamic Revolution in 1979 and according to a bill ratified by the Revolutionary Council, many enterprises were confiscated or came under direct supervision of the government. To audit and perform statutory examination of these enterprises, three audit firms were established in the public sector, i.e., Nationalized Industries and Plan Organization Audit Firm (1980), Mostazafan Foundation Audit Firm (1981), Shahed Audit Firm (1983).
In 1983 parliament ratified an act to merge and embody the three audit firms together with Audit Company (established in 1971 to audit government corporations) and to establish the Audit Organization.
The Audit Organization’s by-laws were also approved by parliament in 1987 and the organization was established as a legal entity, with financial independence. It was affiliated to the Ministry of Economy and Finance to follow the audit firms’ functions and pursue the activities legislated in the Organization’s Act and by-laws.
The Audit Organization’s by-laws were revised and approved by the Council of Ministers in 2003 to comply with Article 4 of the Third Economic, Social and Cultural Development Plan and the organization’s legal status changed to State-Owned Limited Company.
In the last two decades, the Audit Organization has taken various measures to enhance the accounting profession in Iran and harmonize it with global practices by translation of International Accounting Standards, preparation and publication of a number of text books complying with developed countries’ accounting and auditing standards, issuing sets of accounting and auditing manuals for special topics and accounting and auditing guidelines, which are published at large.
In continuation of the above efforts, the organization has prepared and issued the following accounting and auditing standards and code of ethics:
Following the issuance of different accounting guidelines during 1994-96, a complete set of accounting guidelines were prepared, approved by the Board of Governors and issued in 1999 to be complied with for a two-year trial period. Comments received coupled with further studies resulted in the issuance of 22 accounting standards in line with International Accounting Standards, effective from March 20, 2001.
During 2002, three more accounting standards were prepared, approved and issued. Thus, there are 25 binding accounting standards till date, 20 of which are completely in line with International Accounting Standards.
After the issuance of auditing guidelines in 1997, expert comments were received and thoroughly studied. Thirty auditing standards in total harmony with International Standards on Auditing were issued in 1998 and effective as of March 20, 1999. Further more, revision of these standards together with seven new auditing standards are currently in progress.
It is simple to state that we need more transparency and accountability. Prospering in the 21st century will require multi-lateral dexterity in coordinating the activities of the players, both the workers and the owners, and balancing the needs of different stakeholders, the government and regulators. These players must also develop a timely report card that is understandable to all in both financial and non-financial measures of effectiveness.

Ratification of the Capital Market Law could be a turning point in the Iranian economy.

It is wrong to assume that by ratifying a new law, such as the Capital Market Law, it would be possible to improve the stock market indices overnight. This could only happen if the government has a specific economic plan and implements it properly and also when public trust in the capital market is restored.
Stating the above to ISNA, Abbas Hashi, chief auditor of Tehran Stock Exchange (TSE), elaborated on the ratification of the Capital Market Law. He also drew attention to the huge changes in the economic, financial and trade sectors during the past 40 years.
“In 1968, with the introduction of privatization schemes the capital market started its work. In 1995, because of the absence of proper regulations, the stock market collapsed for the first time. In addition, lack of proper supervision and auditing methods led to abuse of sensitive information about the stock market two years later, after which the government decided to make certain changes in its overall structure.“
He said devising the new law topped the agenda of the former Khatami administration, adding, “In view of the existing problems in the market, every body was in favor of the capital market law. But economic grounds had to be set before people could participate. For this specific reason, it is necessary to have economic stability and rules in place. Therefore, it is necessary to have laws pertaining to taxation, absorbing foreign investment and the capital market.“
Regarding public trust in the TSE he said, “The ratification of taxation and capital market laws greatly helped economic development during 1997-2002, so much so that the value of capital market indices from three billion dollars in 1997 reached $17 and $30 billion in 2001 and 2003 respectively. Therefore, it could be argued that public trust in the capital market stabilized the rules and restored the much needed confidence in the officials. Because, the government tried not to allow political decisions influence the economic activities in the capital market throughout the period.“
After 2004 the disagreements between government and parliament as well as changes in the ratifications and the nuclear dossier had huge impacts on the capital market and economic activities, and therefore, “index prices are still down“, Hashi said. In times of economic or market recession, the first place impacted is the capital market. This means whenever the index values are stable, people have more confidence in the economic system and are encouraged to invest. But when the economy is affected by political decisions, people tend to have deep mistrust and suspicion about financial matters and invest their money abroad.“
He further said the ratification of the Capital Market Law could be a turning point in the Iranian economy. “One thing that gives hope to the general public is a prosperous economy. The law could regulate the capital market and the government will be in charge of supervising it.“
Hashi said the new law will boost economic activities, adding, “Everyone is of the opinion that the ratification could solve the problems. But then again, as long as there is no specific economic plan, people will not feel assured about economic stability.“
He said the ratification had adopted the system of monitoring or government supervision. In addition, disciplinary punishment for auditors had also been established.
Another issue mentioned in the ratification is the company bylaw. Hashi said in addition to this bylaw, activities of marketers, investment consultants and executives have been taken into consideration. For this purpose, supervisory and disciplinary regulations will be used to implement all the measures.