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2 Report No. : MV MALDIVES PUBLIC SECTOR ACCOUNTING AND AUDITING A Comparison to International Standards Country Report South Asia Region Financial Management Unit June, 2007 Government of Maldives

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4 A C O M P A R I S O N T O I N T E R N A T I O N A L S T A N D A R D S ABBREVIATIONS AND ACRONYMS AG CFO CIPFA GoM IAASB IAS IDF IES IFAC IFRS INTOSAI IPSAS IPSASB ISA MoFT NAO PAS PEFA PFM PSC PSTI SAI SOE Auditor General Chief Financial Offi cer Chartered Institute of Public Finance and Accountancy, United Kingdom Government of Maldives International Auditing and Assurance Standards Board International Accounting Standard Institutional Development Fund International Education Standards for Professional Accountants International Federation of Accountants International Financial Reporting Standard International Organization of Supreme Audit Institutions International Public Sector Accounting Standards (of IFAC) International Public Sector Accounting Standards Board International Standard for Auditing Ministry of Finance & Treasury UK National Audit Offi ce Public Accounting System Public Expenditure and Financial Accountability Public Financial Management Public Service Commission Public Service Training Institute Supreme Audit Institution State-Owned Enterprise PAGE iii

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6 A C O M P A R I S O N T O I N T E R N A T I O N A L S T A N D A R D S ACKNOWLEDGMENTS This assessment of accounting and auditing standards and practices in the public sector was carried out in active collaboration with the Government and various stakeholders, particularly the Auditor General and his staff; and the Ministry of Finance and Treasury. The review was conducted through a participatory process that involved these stakeholders whose responses to issues raised in the diagnostic questionnaires were especially useful. The team of advisors and development partners also contributed greatly to the early stages of the concept note and framework development, as well as drafting of earlier reports for this study which ultimately covers the countries of the South Asia Region: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. The following World Bank Task Team was responsible for this report with general guidance from the advisors on this review program and the development partners who collaborated in this program. The Maldives report benefi ted from the comments of its peer reviewers, M. Mozammal Hoque, Senior Financial Management Specialist and Christian Eigen-Zucchi, Economist in the World Bank. The fi nal report was developed after a consultative workshop held in Male on January 14, 2007 and was provided to the Government for comment. Subsequent to the workshop, the Audit Bill (2002) has also recently been enacted as an Audit Act on March 13, 2007 and accordingly, revisions have been made in the report. Task Team P. K. Subramanian, Lead Financial Management Specialist Manoj Jain, Senior Financial Management Specialist Ronald Points, Lead Consultant, Accounting Michael Jacobs, Lead Consultant, Auditing Review Program Advisors Simon Bradbury, Loans Department, World Bank David Goldsworthy, International Technical Cooperation Program, UK National Audit Offi ce Noel Hepworth, Chartered Institute of Public Finance and Accountancy, London Abdul Mudabbir Khan, Fiscal Affairs Department, International Monetary Fund Ian Mackintosh, Chairman, UK Accounting Standards Board Paul Sutcliffe, International Public Sector Accounting Standards Board, International Federation of Accountants Development Partner Collaborators on the Review Program David Biggs, Financial Management Advisor, UK Department for International Development Kathleen Moktan, Asian Development Bank PAGE v

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8 A C O M P A R I S O N T O I N T E R N A T I O N A L S T A N D A R D S CONTENTS Executive Summary ix I. INTRODUCTION 1 II. PUBLIC SECTOR ACCOUNTING 2 A. Institutional Framework for Public Sector Accounting 2 (1) Accounting Laws and Regulations 2 (2) Education and Training 2 (3) Code of Ethics 3 (4) Public Sector Accountant Arrangements 3 B. Accounting Standards as Practiced 4 (1) Setting Public Sector Accounting Standards 4 (2) Presenting Financial Reports 4 III. PUBLIC SECTOR AUDITING 6 A. Institutional Framework for Public Sector Auditing 6 (1) Institutional Framework 6 (2) Setting Auditing Standards 7 (3) Code of Ethics 7 (4) Accountability in the Supreme Audit Institution 8 (5) Independence 8 (6) Qualifi cations and Skills for the Auditors 8 (7) Training 8 (8) Audit Competence 9 (9) Quality Assurance 9 B. Auditing Standards as Practiced 9 (1) Audit Planning 9 (2) Audit Supervision 9 (3) Reviewing Internal Controls 10 (4) Reviewing Compliance 10 (5) Analyzing the Financial Statements 10 IV. Action Plans 11 PAGE vii

9 P U B L I C S E C T O R A C C O U N T I N G A N D A U D I T I N G Annex A: Methodology of the Assessment 14 Annex B: Accounting And Auditing Standards 16 International Public Sector Accounting and Education Standards 17 International Financial Reporting Standards and International Accounting Standards 18 INTOSAI Code of Ethics and Auditing Standards 19 International Standards on Auditing 22 Annex C: National Accounting Legislation 23 Annex D: National Audit Legislation 25 Annex E: Benefi ts of Accrual Basis of Accounting 32 Supplemental Table of Standards and Gaps 35 PAGE viii

10 EXECUTIVE SUMMARY 1. This assessment of public sector accounting and auditing standards is generally meant to assist with the implementation of more effective public fi nancial management (PFM) through better quality accounting and public audit processes in Maldives. It is intended to provide greater stimulus for more cost-effective outcomes of government spending. The specifi c objectives are (a) to provide the country s accounting and audit authorities and other interested stakeholders with a common well-based knowledge as to where local practices stand in comparison with internationally developed standards of fi nancial reporting and audit; (b) to assess the causes of the prevailing variances; (c) to chart paths to reduce the variances; and (d) to provide a continuing basis for measuring improvements. The World Bank is supporting initiatives to develop local systems so that donors can increase their use of country systems for their own grants and loans. Other donors are cooperating with the Bank in this approach. 2. Adoption of international standards for accounting and auditing provides the basis for competent fi nancial reporting and transparency. The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has developed a core set of International Public Sector Accounting Standards (IPSAS) for accrual-based systems, as well as one for cash basis of accounting. These establish an authoritative set of independent international fi nancial reporting standards for governments and others in public sector organizations. Application of IPSAS will support developments in public sector fi nancial reporting directed at improving decision-making, fi nancial management, and accountability; and it will be an integral element of reforms meant for promoting social and economic development. The IPSASB has also developed guidelines for the migration from cash basis to accrual-based fi nancial reporting. 1 The traditional emphasis on cash basis of accounting has been found inadequate because of its failure to recognize true costs, and all assets and liabilities. Cash basis of accounting can too easily neglect asset management, accumulating arrears, future liabilities (e.g., pensions), and contingent liabilities (e.g., guarantees). 3. The International Organization of Supreme Audit Institutions (INTOSAI) supports the development of auditing standards developed by the International Auditing and Assurance Standards Board (IAASB). The INTOSAI Auditing Standards, which are supported by the detailed IAASB International Standards on Auditing (ISA) underpin a modern audit process. The IAASB is progressively rolling out international auditing standards in order to appropriately refl ect the interests of the international public sector audit community. 1 Transition to the Accrual Basis of Accounting: Guidance for Governments and Government Entities, Study 14, IFAC Public Sector Committee, December PAGE ix

11 P U B L I C S E C T O R A C C O U N T I N G A N D A U D I T I N G 4. Annex A explains the methodology used for the study. Annex B provides a summary of international accounting and auditing standards referred to in this study. Annex C and D provide country accounting and auditing legislation, respectively. Lastly, Annex E includes a description of the benefi ts of accrual accounting. The desired actions indicated by this assessment are summarized below. 5. Build on the current cash basis of financial reporting under the Cash Basis IPSAS and chart a path to subsequent implementation of the Accrual Basis of Accounting. The IPSASB encourages governments to progress to the Accrual Basis of accounting and to harmonize national requirements with the IPSAS. Immediate reporting in the format of the Cash Basis IPSAS, and then progressive adoption of Accrual Basis reporting is needed to meet the requirement of the Public Finance Act. 6. A Supplementary Table of Standards and Gaps of this report provides a matrix detailing the accounting standards, the present position, and options for improvement. A summary of these accounting issues is shown in Table ES1. 7. Adopt the IFAC-issued International Standards on Auditing to the more specific INTOSAI Auditing Standards, as well as to existing audit manuals and procedures. The new, amended Audit Act mandates the adoption of international standards. The Auditor General currently uses an Audit Manual which follows the prescriptions of the INTOSAI Auditing Standards but they have not been formally adopted. The implementation of the new Audit Act and the implementation of an Institutional Development Plan for the Offi ce of the Auditor General should introduce modern audit reporting and a modern audit organization. 2 Audit recommendations and observations should be made public. TABLE ES1. SUMMARY OF ACCOUNTING STANDARDS ISSUES IN THE MALDIVES Standard Current status Action to move towards international standards 1. Does the Public Sector Accounting Law adopt IPSAS? 2. Does education and training of accountants accord with IES? 3. Does the Code of Ethics match international standards? 4. Is there a body to prescribe public sector accounting standards? No No No The Auditor General has this responsibility under the proposed Audit Act. The Auditor General would prescribe the adoption of IPSAS for Maldives (to be confi rmed and communicated by GoM by March, 2007). Distance learning education arrangements are needed. A proposal is required to be drafted jointly by Ministry of Higher Education, Public Service Training Institute (PSTI), Public Service Commission (PSC), Ministry of Finance and Treasury (MoFT) and the AG by June, 2007 (led by MoFT) There is a need to develop a Code. The MoFT is to develop a Code of Ethics for public sector accountants by December, MoFT will be issuing implementation guidelines as per the principles and standards prescribed by the AG. 2 This is proposed to be completed under an IDF grant fi nanced by the World Bank for institutional development and capacity building of the audit offi ce of Maldives. PAGE x

12 A C O M P A R I S O N T O I N T E R N A T I O N A L S T A N D A R D S Standard Current status Action to move towards international standards 5. Are the fi nancial statements in accord with international standards? 6. Is the statement of Cash Receipts and Payments in IPSAS form? 7. Are accounting policies and explanatory notes required? 8. Are other disclosures in accord with IPSAS? 9. Does the government issue a consolidated fi nancial statement which consolidates all controlled entities? No No No No No By June, 2007, MoFT would form a Committee to defi ne the reporting entity. IPSAS format will be used as part of the roll out of the Public Accounting System (PAS) project by January, The IPSAS formats for statements, explanatory notes and disclosures will be used as part of the roll out of the PAS project by January, A Supplementary Table of Standards and Gaps of this report provides a matrix detailing the current standards, present position, and options for improvement. A summary of these auditing issues are shown in Table ES2. TABLE ES2. SUMMARY OF AUDITING STANDARDS ISSUES IN THE MALDIVES Standard Current status Action to move towards international standards 1. Is the SAI statutory framework in accord with the needs of the INTOSAI Auditing Standards? Yes 3 The Republic of Maldives has recently enacted the Audit Act (included in Annex D) following the workshop in January 2007, which provides an adequate statutory framework. The effectiveness of the implementation of the new Audit Act is yet to be seen 2. Is there a body to prescribe public sector auditing standards? 3. Have INTOSAI and IFAC audit standards been adopted? Yes 4 The Audit Manual is based on them. The Audit Act needs to prescribe the AG as the responsible body and S. 5 of the recently enacted Audit Act (included in Annex D) provides this. The AG could work jointly with the proposed professional body to develop implementation guidelines. 3 Current status has recently changed due to enactment of the Audit Act on March 13, Current status has recently changed due to enactment of the Audit Act on March 13, 2007 PAGE xi

13 P U B L I C S E C T O R A C C O U N T I N G A N D A U D I T I N G Standard Current status Action to move towards international standards 4. Has a code of ethics equivalent to the INTOSAI standards been adopted? 5. Is the accountability process in the SAI in accord with INTOSAI Auditing Standards? No A code will be developed as part of the ongoing IDF grant and it needs to be adopted by the AG. (by Jan.2008) No An annual report is required by Does the SAI legal framework meet the INTOSAI standards for independence and powers? 7. Does education and training of auditors accord with INTOSAI and IES standards? 8. Is the SAI equipped with the audit methods and technologies to meet the INTOSAI Auditing Standards? 9. Does the SAI have the quality assurance programs to meet international standards? 10. Does the process to plan the audits meet international standards? 11. Does the process to supervise the audits meet international standards? 12. Does the process to evaluate the reliability of internal controls meet international standards? No No No No Yes Yes Yes The new Audit Act at Annex D provides for these and satisfactorily adopts the recommendations made by the UK National Audit Offi ce (NAO) team and the Task Team (World Bank)) on the draft Audit Bill examined during this study. A needs analysis is being carried out by the NAO institutional strengthening team. Formation of the proposed professional body and opportunities like overseas practical experience or secondment and joint audits with other SAIs and/or professional fi rms could help. A proposal is to be drafted jointly by Ministry of Higher Education, PSTI, PSC, MoFT and the AG by June, 2007 (led by MoFT) for creating institutional education and training facilities in Maldives supported, if need be, by distance learning syllabi from academic and professional bodies overseas. The ongoing IDF grant will give assistance for developing this, but additional computer software and hardware are needed by 2008 for certifi cation auditing. The ongoing technical assistance through IDF will introduce this program by Sep PAGE xii

14 A C O M P A R I S O N T O I N T E R N A T I O N A L S T A N D A R D S Standard Current status Action to move towards international standards 13. Does the process used in audits to assess compliance with laws meet international standards? 14. Does the audit process used to obtain evidence to support conclusions meet international standards? 15. Does the audit analyze the fi nancial statements to establish whether acceptable accounting standards for fi nancial reporting and disclosure are complied with? 16. Does the auditor prepare an audit opinion on the fi nancial statements in a form that accords with international standards? 17. Does the consideration of fraud and error in an audit of fi nancial statements accord with international standards? 18. Is the process for taking action on audit recommendations suffi ciently effective to meet international standards? 19. Is the process for taking action on audit recommendations suffi ciently effective to meet international standards? 9. Improve public financial management through a more effective chief financial officer arrangement. 5 The Public Finance Act relies on a comprehensive and timely accounting and fi nancial reporting system that is supported by competent assurance from a professional audit function that the 5 A fi nancial controller for the Government was appointed in March 2006, as required under the recently enacted Public Finance Act Yes Yes No Yes for the SOEs Yes No, because the audit reports are not made public No Certifi cation audits from 2009 will need this capacity and the technical assistance will provide it. Certifi cation audits from 2009 will need this capacity and the technical assistance will provide it. The recently enacted Audit Act allows public reporting. Its implementation and effectiveness needs to be examined The IDF grant TA will cover the preparation of recommendations for this. PAGE xiii

15 P U B L I C S E C T O R A C C O U N T I N G A N D A U D I T I N G system is working properly and that the information is reliable. The accountable offi cers required for the new public fi nance system should undertake the functions of maintaining systems of internal fi nancial controls that manage risks, and for preparing the accounts for signature. There should be a requirement for all government bodies including state-owned enterprises to make their audited accounts public. 10. Improve accounting and auditing skills. Improved compliance with international standards requires properly trained staff. Basic accounting and auditing skills need to be enhanced. Distance learning education arrangements with foreign accounting institutions could be used to strengthen public sector accounting and auditing skills. 11. Improve audit impact. Prepare a PFM indicators survey to provide the basis for monitoring progress in adopting and applying international standards. Improvement of audit impact should be monitored through the progress of the Institutional Development Plan proposed to strengthen the Offi ce of the Auditor General over the next few years. PAGE xiv

16 INTRODUCTION 1. This assessment of public sector accounting and auditing is to facilitate more effi cient implementation of Public Financial Management (PFM) in Maldives through better quality accounting and public audit processes. It is intended to provide greater stimulus for more cost-effective outcomes of government spending. The specifi c objectives are (a) to provide the country s accounting and audit authorities and other interested stakeholders with a common well-founded knowledge as to where local practices stand in comparison with internationally developed standards of fi nancial reporting and audit; (b) to assess the prevailing variances; (c) to chart paths to reduce the variances; and (d) to provide a continuing basis for measuring improvements. 2. In conducting this assessment of the Maldives, information on national standards and practices for accounting, financial reporting, and auditing in the government budget sector and in the state-owned enterprise sector were collected from diagnostic questionnaires that were completed in cooperation with country authorities. The diagnostic questionnaires incorporated the principles contained in the public sector accounting and auditing standards promulgated by International Organization of Supreme Audit Institutions (INTOSAI) and International Federation of Accountants (IFAC). The responses to these questionnaires were further explored through discussions conducted by a World Bank team with the country authorities. These discussions included examination of accounts and audit reports and working papers, to explore the quality of the processes and the products. Annex A further explains the methodology used for the assessment. 3. The analysis in this report has been conducted in the light of PFM reform plans that the Government of the Maldives has been implementing. A Public Finance Act was enacted in In response to the Act, the Ministry of Finance and Treasury is engaged in implementing an accounting system to support annual accounts for each ministry and for the State. The legislature is in the process of approving a new National Audit Act. The Auditor General has been invited to form a committee that will provide comments on the proposed law. The legislation of a new National Audit Act and the implementation of an Institutional Development Plan for the Offi ce of the Auditor General should introduce modern audit reporting and a modern audit organization. A program for provision of technical assistance to the Offi ce of the Auditor General is under implementation through an Institutional Development Fund (IDF) grant provided by the World Bank. 4. Annex B provides a summary of international accounting and auditing standards referred to in this study. Annex C and D provide country accounting and auditing legislation, respectively. Annex E includes a description of the benefi ts of accrual basis of accounting. The report is accompanied by a Supplemental Table of Standards and Gaps, which summarizes for each component of current accounting and auditing standards, the present position, and the options for improvements that would bring Maldives into closer conformance with the international standards. PAGE 1

17 PUBLIC SECTOR ACCOUNTING A. Institutional Framework for Public Sector Accounting 5. The institutional framework should include adherence to IFAC-issued International Accounting Standards. And it should support the groundwork for qualifi ed accounting staff to provide the timely, relevant, and reliable fi nancial information needed to support all fi scal and budget management, decisionmaking, and reporting processes. The diagnostic questionnaires that were used in this assessment collected information on the current arrangements and the apparent gaps in Maldives for accounting laws and regulations; education and training of public sector accountants; application of a code of conduct; and numbers and characteristics of public sector accountants. (1) Accounting Laws and Regulations 6. The Public Finance Act and the Financial Regulations are prescriptive about the maintenance and compilation of accounts but make no mention of International Accounting Standards. The Public Finance Act (see Annex C) should require conformance with International Public Sector Accounting Standards (IPSAS). However, under the Public Finance Act, there are proposed rules that would promulgate the allowance of IPSAS to be followed. The future accounts should be based on Cash Basis IPSAS with notes providing other information on assets, liabilities, and contingent liabilities as required by the Public Finance Act. Progression to accrual-based statements would occur as adequate computerized accounting systems are rolled out. 7. A modern financial reporting framework is required for better accountability. The accounting function has been located in the Treasury. However, this has not provided a good separation of duties among departments. As new computerized public accounting systems are implemented, more suitable accounting units must be established, preferably in the ministries. Producing annual audited accounts within each government department will hold senior departmental managers accountable for their operations and use of budget funds. Development of the computerized accounting system has a tight timeline requiring intensive efforts for meeting the targets. The World Bank will provide the Ministry of Finance and Treasury with technical advice on the progressive design and implementation of the computerized public accounting system. (2) Education and Training 8. Better opportunities for educating and training government accountants should be developed. Government accountants are recruited with limited accounting knowledge due to the lack PAGE 2

18 A C O M P A R I S O N T O I N T E R N A T I O N A L S T A N D A R D S of proper curricula in universities. Government accountants need exposure and training in international accounting standards from professional institutions. Many training institutions provide a foundation for public sector accountancy qualifi cations of international standards, on an outreach basis. There is no comprehensive local training institution in Maldives, but the professional certifi cation offered by the UK Association of Chartered Certifi ed Accountants is available locally up to Stage 2. These professional accounting outreach programs will provide the core competencies needed for public sector accounting and reporting. 9. A training program that meets the IFAC-issued International Education Standards (IES) for Professional Accountants is needed for the public sector accountants and auditors. Consideration should be given in due course to adopting the public sector program of institutes like the Chartered Institute of Public Finance and Accountancy (CIPFA) in United Kingdom. This course can be adapted for local conditions and would provide a path for sustained, improved training. The advantage of this is that the CIPFA learning materials take into account international audit and accounting standards as required for adoption by public sector organizations. Among the CIPFA learning materials are modules covering fi nancial reporting, accounting for decision-making, fi nancial management, law and taxation, and information systems management. 10. The Ministry of Finance and Treasury needs to develop training plans. There is a need for constant upgrading of training for government accountants in the requirements of the Public Finance Act and the Public Financial Regulations and in the standards for preparing fi nancial statements. (3) Code of Ethics 11. A code of ethics is needed to improve financial compliance and build the professionalism of the government accounting staff. The current code in practice is part of the government employment contract and relates to public service behaviour. It has little relevance to the IFAC Code of Ethics for Professional Accountants. A strongly directed code of ethics could help build public support that would aid in improving the state of public fi nancial management in the country. The IFAC Code of Ethics should be the model used in preparing the national code. 12. The training programs should include ethics training and how the code ensures proper behaviour. With certifi cation under the professional qualifi cations outreach programs, accounting staff will be required to follow a code of ethics and conduct. For example government accountants who are accepted into membership of professional institutes whether as affi liates (for the Diploma holders) or as qualifi ed accountants (for those who complete the full professional qualifi cation) would be required to abide by the code of ethical standards of the respective institute, which is based on the IFAC Code. (4) Public Sector Accountant Arrangements 13. The preparation of financial statements for each ministry requires a system of internal control. For each public sector body that prepares annual accounts, there should be a professionally qualifi ed chief fi nancial offi cer function. 6 The person in this position would be responsible for maintaining 6 A fi nancial controller for the Government was appointed in March 2006, as required under the recently enacted Public Finance Act PAGE 3

19 P U B L I C S E C T O R A C C O U N T I N G A N D A U D I T I N G systems of internal fi nancial controls that manage risks, and for preparing the accounts for signature by the chief accounting offi cer. The need to produce fi nancial statements for each ministry would require well-working systems of internal fi nancial controls. At the present time audit results are not being translated suffi ciently into remedial action. The Public Finance Act provides for an accountable offi cer (with the functions of a chief fi nancial offi cer) for each ministry. The duties of the accountable offi cer are yet to be defi ned in the Public Finance Instructions, but they should include the following functions: maintain systems of internal fi nancial controls that manage risks, ensure that accounting and fi nancial approval duties are properly carried out, ensure that the staff perform their duties in accordance with the Public Finance Instructions, prepare regular fi nancial accounts, maintain the chart of accounts, ensure the most appropriate technological support for fi nancial management practices, manage training and education needs for fi nancial management, report on key performance indicators, and assist program managers in developing an effective fi nancial approach to the delivery of expected outcomes. B. Accounting Standards as Practiced 14. The diagnostic questionnaires have collected information on the current arrangements and the apparent gaps for setting public sector accounting standards and for presenting fi nancial reports. Out of this exercise came recommended activities that will help bring local standards in line with international standards. (1) Setting Public Sector Accounting Standards 15. More formal administrative actions should be taken by the Auditor General to set public sector accounting standards. Under the Constitution, the accounts of the State are kept and maintained in such form and manner as prescribed by the Auditor General in consultation with the President of Maldives. The Public Finance Act sets the form of the annual accounts but does not specify the accounting standards required in preparing fi nancial statements. The Auditor General should advise the President that Cash Basis IPSAS should be used as the international accounting standard in preparing fi nancial statements with a road map to move to full accrual-based reporting over a period of time. (2) Presenting Financial Reports 16. Annual financial statements should be prepared in accordance with Cash Basis IPSAS, with some early planning for effecting a transition to adopt accrual-based IPSAS. The current annual reporting statements do not accord with the format of the Cash Basis IPSAS but steps should be taken that allow them to do so in the future. The Auditor General should hold discussions with the Ministry of Finance and Treasury to arrange for the setting of standards in a formal manner and to reach an agreement that future accounts be presented in the format of Cash Basis IPSAS. Also PAGE 4

20 A C O M P A R I S O N T O I N T E R N A T I O N A L S T A N D A R D S consolidation of controlled entities into the cash basis statements as per of the Cash Basis IPSAS (e.g. public enterprises) should be considered. 17. State-owned enterprises should comply with new governance requirements established by the Public Enterprise Monitoring Board. State-owned enterprises follow International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) which require that the fi nancial accounts should be produced annually within three months of the year-end, in accordance with good accounting practice, and should include the following: Profi t and loss accounts for the year. Cash fl ow statements for the year. Balance sheet showing the position at year end. Notes to support the fi nancial accounts that set out the company s accounting policies and the main components of the accounts as required by good practice. The fi nancial accounts should also be accompanied by a director s report that details fi nancial activities of the company in the past and future. 18. All government bodies should be required to make all audited accounts available to the public. At present few accounts are available publicly, and governance requirements about the public availability and transparency requirements for these annual accounts should be made clearer. 19. The Auditor General should arrange consultations with the accountancy professions in the neighboring countries to consider ways of establishing similar professional accountancy arrangements in the Maldives. The Public Enterprise Monitoring, which receives the audited accounts of state-owned enterprises, notes that in a few cases there have been audit qualifi cations to the accounts that have mainly been related to assets issues. This is one example of accounting problems that exist in the Maldives. The country does not have a professional accountancy body to help regulate and support the profession. Other countries in the Region have larger numbers of professionals and operate professional bodies to regulate and support the accountants. The level of professionalism in the Maldives may be improved by regional consultations and cooperation to develop similar arrangements in the country. PAGE 5