Most third world countries have nearly nonexistent accounting
standards and lack the education to inaugurate a movement towards
achieving their needs to at least sustain their positions towards global
developments. Among these third world countries most of them have
similar characteristics such as their low living standard for the vast
majority of their populations, high levels of unemployment, and the
governments tend to be more authoritarian opposed to a democratic
approach. By the eighties it was well accepted that the Third World was
no longer a single economic unit and at least four groups were
distinguishable - OPEC member countries, Newly Industrialized Countries
(NICs), Middle Developing Countries (MDCs) and Least Developing
Countries (LDCs). These are evident from the literature dealing with
third world countries (Zakari, M. 2013). The third world countries were
placed in these four categories depending on their population density,
per capita income, natural resources, economic development, exports, and
economic dependency versus economic diversification. Characteristics of
LDCs have a negative effect on their economic integrity; therefore,
they are forced to alter their financial policies related to accounting
practice that may impose certain constraints and restrictions towards
specific opportunities.
It was found that the high-income oil
exporting third world countries are able to maintain a fairly modernized
accounting system due to their ease of affordability for modern
computers, foreign exports, and other elements needed for a quick
conversion. All oil dependent third world countries are directly
involved and jointly owned by various multinational enterprises and
governments of foreign countries such as the USA, UK, France, and the
Netherlands. These companies virtually control the entire oil industry
as well as pioneering organizations and they ultimately introduce new
modern accounting systems in these third world countries. Due to these
large enterprises, international accounting firms dominate accounting in
auditing practices in the high-income oil export countries.
Businesses
and enterprises located within the private sector of these least
developed countries need areas of financial accounting and reporting,
cost accounting, management accounting, tax accounting, and auditing.
These countries need people who show sophistication, and be able to show
how much profit their interest in the business will be worth now and in
the future. In most third world countries their major export is
normally internationally distributed, which allows natives of the third
world county to work with accountants from large sustainable countries.
Third world countries have been successfully using oil to teach their
natives foreign accounting standards. Since oil is an international need
and an international enterprise, third world countries learn accounting
techniques while interacting with economically stable countries. This,
in turn, also has influenced other business enterprises (non-oil
companies) as employees move in and out of the oil sector
In recent years, many Middle Eastern countries are
dramatically changing their economy. These countries are attempting to
denationalize the public sector and encourage foreign investment and
establish Arab Stock Markets. According to Al-Qahtani (2005) and
Marashdeh and Shrestha (2010) these systematic challenges have been
aimed at: Removing official barriers that have blocked the market due to
monopolistic or oligopolistic power. Liberating economic activities and
allowing the forces of the market to take control based on the laws of
demand and supply in production, commerce, and service. Reducing the
government role in the national economy by giving the private sector
more influence. Creating the appropriate judicial and institutional
settings as incentives for both local and foreign investments. Since the
stock markets have been in place most companies have had to adopt the
IAS's and ISA's for preparing and auditing their financial statements.
Hassan
(2008) concludes that the economic development of accounting in
emerging economies depends mainly on the cultural and political motives
rather than on economic changes. In addition, Hassan argues that both
types of motives are interchangeable as cultural and political ones are
hidden under the promoted economic benefits. Some third world countries
recognize religion as the dominant law. Islamic Law bans transactions
that involve uncertainties such as margin trading and Islam also
requires business activities to be conducted in compliance with
principles enshrined in the Sharia. According to Kamla et al. (2006),
the Quran and Sunnah are the material sources of Islamic Law. Together,
they are referred to as the Islamic principles or Sharia. This tradition
positions ethical or social activity ahead of individual profit
maximization.
Although the stride towards accounting advancement
in third world countries varies from country to country, accounting and
auditing professions are inconsistent in a market economy. In developing
countries there seems to be a clear-cut difference between legislation
and enforcement. When we sum up all of the information above, third
world countries lack the wherewithal when it comes to accounting
education, lack of computer hardware and software, inadequate
facilities, and not to mention the culture and political boundaries.
Despite from a few emerging countries the Middle East is not up to par
with the required accounting standards and still have a long way to go
before intertwining with other international accounting practices that
meet the needs of the market economy.
