INTERVIEW: Kyriakos Iordanou, General Manager of the Institute of Certified Public Accountants of Cyprus (ICPAC), tells us how the accountancy profession has gone digital, analyses the institute’s views on tax reform and reveals how accountants and auditors have been faring since the upheaval from the war in Ukraine.
ICPAC is the only recognised body of accountants and auditors in Cyprus. Can you tell us more about when, and why, it was established?
The Institute of Certified Public Accountants of Cyprus was formed in 1961 by a handful of visionaries at the time, whose goal was to form a framework for professional accountants through which they could come closer together, promoting at the same time the new and promising profession in Cyprus.
Since then, ICPAC grew in size and significance, becoming a trusted economy stakeholder. More particularly, in the years that followed the Turkish invasion of Cyprus and the economic predicament of the country found the accounting profession at the forefront of the restructuring of the economic model for Cyprus. Particular emphasis was given to the attraction to Cyprus of international companies, enabling thus the notable inflow of foreign direct investments and corporate tax revenues.
An important milestone for ICPAC is the decision of the Council Ministers to recognise ICPAC as an Anti-money laundering authority in 2001 and as a Recognised Body of Accountants in early 2002.
These developments enhanced ICPAC’s role in the Republic, by attaining a self-regulatory status. In 2009, with the passing of the initial Auditors’ Law of 2009, ICPAC assumed by Law a more institutional role, leading to its recognition as a Recognised Body of Auditors by the current Auditors’ Law of 2017.
In the meantime, ICPAC has been designated by statute as a competent authority for the providers of administrative services (2012), for the Insolvency Practitioners (2015) and for the implementation of UN and EU sanctions and restrictive measures (2016).
ICPAC is also an active member in the wider international community of accountants, by being member of IFAC, the Accountancy Europe and the Federation of Mediterranean Accountants.
How does ICPAC ensure the smooth operation of the accounting and auditing sectors in Cyprus?
ICPAC’s management and operational team has grown in size and competence over the last few years, in order to match the increasing needs and demands of the members as well as of the profession per se. In addition, ICPAC operates via 25 specialised committees comprised of members, each one of those dealing with specific areas that are relevant to the accountancy profession.
The Institute places premium attention on ongoing and up-to-date training and education. So, there is extensive such activity through seminars, lectures, presentations, webinars, conferences and other activities. Simultaneously, ICPAC issues guidance, circulars, supporting material, directives and updates, whilst offering helpline and other supporting services.
Finally, ICPAC, via its regulatory responsibility, monitors and gauges the quality of the work performed and the adherence to the relevant legislation by its members through the monitoring functions.
How strongly has the sector been affected by the war in Ukraine and subsequent Russian sanctions?
It is true that when Russia invaded Ukraine and the first sanctions emerged, there was a lot of uncertainty and confusion in the whole market. Inevitably, and given the long-time relationship of Russian businesses with the local market and professionals, those who served designated sanctioned entities did face problems. These problems were two-fold, on the one side the restrictions on business with Russian entities and on the other, the counter-measures imposed by Russia especially on the payments towards Cypriot service providers.
As the measures escalated, the concern and restrictions also surged. One year down the road now, there is much more clarity and consequences have crystallised and may be easier to address.
What are the main challenges facing the sector currently? And the opportunities arising?
The accountancy profession faces the same challenges as the rest of the business environment does. Inflation, increased cost of capital, cost of employment, the energy cost, liquidity dire and other overheads do raise particular concerns.
At the same time, there appears to be demand for new recruits by the firms of the sector, something that may not look so promising for the time being.
Ease of doing business is another important factor for our profession, which is often obstructed by bureaucracy, banking restrictions, soared regulation, governmental and market inefficiencies.
Given the impact imposed from the sanctions against the traditional Russian business, our colleagues have been exploring other opportunities to keep them active, with the provision of other sorts of services.
The accountancy profession follows the path of the economy, so it will redefine its path, aligning with that of economic growth.
Audit and accounting firms are increasingly becoming consultancy firms. Will this trend remain and how will it affect the sector?
Audit and accounting services are required by law for all Cyprus registered companies. Accountancy firms have been providing consulting and advisory services for many years now, and they will continue to do so. Areas of tax and tax compliance, financial management, payroll, valuations, insolvency, trust and corporate services, mergers and acquisitions, specialised studies, IT and digitalised systems services will still be required by the business community, hence such services will continue to co-exist with the traditional ones.
What is important to mention here is that the provision of any type of service by professional accounts is bound by the relevant standards and the ethical code and principles governing the profession.
What should be the main ingredients of a tax reform in Cyprus?
The discussion around tax reform in Cyprus opened-up three-four years ago, when we identified the need to modernise the current tax regime. Our proposal is for a holistic and across the board examination of the current tax system, rethinking it with a view to the future needs of the economy and society, the global trends in international business, and the core drivers and objectives of the national long term growth strategy for the economy, as issued by the Council of Economy and Competitiveness.
The basic ingredients would be the cooperation of all stakeholders and the government for a national grand project, open and out of the box thinking, the use of international expertise by seeking the advice of specialists from abroad, coupled with the integration of digital technology. The tax framework is fundamental for economic activity, the attraction of FDI and the application of social policies.
How is technology disrupting the sector? What are the pros and cons?
Technology is a useful and integral constituent in the daily work of the accountancy profession. The traditional perception of accountants and how they work belongs in the past.
Accountancy firms use automated systems and applications, and technology in essence shapes the way the profession is conducted. It is therefore a facilitator, rather than a disruptive factor.
Hence, currently, one could safely claim that accountancy is a digital profession!