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Lexus and the Olive Tree

Posted by on 13. February 2009

I came to remember a book I had to read during my Financial Engineering class in graduate school about the comparison of a robotics-manned Lexus facility in Japan (representing progress) and the Olive Tree (representing roots and traditions). The book was called “Lexus and the Olive Tree.”

Progress or tradition???

This came to mind on the recent events that have rocked the core of the audit profession and it did make so much noise already. Too noisy perhaps that even alumni like me have been in the loop since there was so much information out in the open. It’s a simple battle on globalization – Is it a go for integration or keep on being traditional and core to the rules of accountancy profession?

My take, an alliance or an affiliation is really necessary. After all, the world is structured in such a way that multinational corporations (MNCs) exist and in such manner, local specialization meets global standards to service these requirements. How about integration? In such a way that MNCs are organized, is the practice of the CPA profession going towards the direction of having global head office controlling regional operations and regional head office controlling specific country operations?

I’d say YES and NO. Yes, admit it or not that the CPA profession is going global, there being the shift towards uniform accounting standards and this has opened the door for Filipino CPAs to the world and No, unfortunately despite the global standards, there’s no such thing as a global CPA license. A CPA license is earned and regulated locally, especially under the Philippine setting. So, my final answer is YES but not yet at this time. Once, a global CPA license is available then it makes business sense.

Of course, there’s always the other side of the coin and yes, there are advantages to integration – shared resources, shared knowledge and shared profits and what a wonderful world with all the sharing involved. It’s really a topic that covers so much aspects to discuss and not just personalities.

We can factor in the timing. The world is practically in recession and in this case and time, it’s the local industries that thrive. So does a solid local entity compromise its local name to be part of a global brand? In recent years, SGV survived the fall of Arthur Andersen and was able to attract Ernst & Young and even in the distant past, SGV pioneered and spearheaded regional cooperation and the list could go on. So does SGV need EY or does EY need SGV? That’s another case for a long argument.

Then of course, there’s the legal factor which does have much weight in this issue. In a world of black and white, it may be unconstitutional as they say. I do see that there may be some structures that may do away with the unconstitutionality though I don’t think, I’d be a legal authority on this matter. There’s always a gray area somewhere and sometimes even clear cut distinctions may even provide different interpretation. Executive Privilege, anyone?

Come to think of it, the integration is a normal issue and I think the problem was that the shift was not made in a proper manner and time. It became a game of personalities and has dragged on to many more issues that were just lingering around.

Of course, I do have my personal conviction that goes with those who opposed the integration. Not because, I worked with some of them but I am more in touch with tradition and I think a local mindset is more appealing at this time. The profession is open for global cooperation but as far as global integration, that is the CPA profession at some other time.

On a conciliatory note, I hope the issue doesn’t grow on further cause it’s busy season in the audit world and there’s a lot of clients waiting wearily for their valued financial statements. After all, Accountancy profession is still a service activity.

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