Adolf J.H. Enthoven
Objectives of Training Program in Accounting and Auditing for Ministry of Taxation
Early in the 1990s, the Government of the Russian Federation, recognized that with the transition of economic and financial activities towards a more market oriented economy, the demands upon the tax administrative system would become considerably heavier. This was impacted by the privatization activities pursued, the establishment of joint ventures between Russian and foreign enterprises, the rise of newly private operated enterprises plus the redirection of the Russian accounting system, which all required greater knowledge and skills from the tax administration in Russia. In addition tax evasion had become rampant, while tax legislation was deficient, as yet.
Notwithstanding that an extensive Tax Reform Project was being carried out with the assistance from the IMF, OECD, USAID/US Treasury, World Bank and by-lateral agencies, it was also clearly recognized that updating and upgrading the existing tax inspectors qualifications was badly needed. Furthermore the Russian State Tax Service, since 1999 the Russian Ministry of Taxes and Collections (MT), intended to recruit and train an additional 150,000 tax employees throughout Russia. The challenge was vast and the Russian Ministry of Finance and its tax service sought the assistance of USAID / US Treasury and the Soros Business and Management Foundation (now East-West Management Institute, EWMI) in helping evaluate and develop a coherent set of training programs for tax inspectors. It became apparent to the parties concerned that computer based training programs (CBT) would be the most effective and efficient way for enhancing such training in Russia. A Cooperative Agreement (CA) between the Russian State Tax Service, the East-West Management Institute and US Treasury / USAID was signed in 1995. The existing and future training programs were also to be linked with the tax reform activities in process.
In the Cooperative Agreement (CA) the purpose of the program was being referred as: to develop and implement a project for training of the skills and knowledge identified as priority learning needs by the Ministry of Taxes and Collections (MT). This training project called SMART, is a computer based training delivered via personal computers. SMART courses are developed as interactive, CD-ROM based courses, in text or multimedia format, and each course is supported by reference works, texts and work booklets. SMART courses incorporate existing relevant Russian-specific training materials and are being delivered in Russian as well as English/Russian versions.
Three computer-based interactive training programs are being finalized for the Russian Ministry for Taxes and Collections. The three programs are based on an extensive needs evaluation that was conducted in 1995 by the Russian Federation Ministry for Taxes and Collections («MT»), EWMI, Financial Management Services («FMS») of the US Department of Treasury, OECD, IMF, and the USAID-funded fiscal reform program. Based on the needs assessment, the three programs to be developed were: SMART I – Basic Financial Accounting; SMART II – Financial Auditing; and SMART III – Tax Auditing. The course contents were developed based on various international accounting and auditing training programs, and materials provided by the MT. The content for each course was approved by the MT prior to programming.
Under the Cooperative Agreement («CA») six training centers were set up for the SMART programs: two in Moscow, and one each in St. Petersburg, Nizhny Novgorod, Novosibirsk and Sochi. Each center is equipped with fifteen networked computers, two printers and additional equipment needed to run SMART. As of December 1999 over 5,500 employees of the MT have completed the SMART training program; for 2000 an additional 7,000 employees completed the training. Beyond that each center will train approximately 1,000 employees per year. Russian participants enjoyed taking the computer-based course and were quick to learn how to use the program, though the majority had little computer experience. Pilot programs of SMART have demonstrated that the course has achieved its objectives of increasing the participants’ interest in the subject and improving their accounting and auditing knowledge and skills.
Content of SMART Programs
The SMART self-paced tutorial software enhances learning by engaging learners’ interaction with the subject matter, rather than presenting an electronic version of a textbook. SMART concentrates on those concepts that lend themselves to computer-based interactive learning, and deploys instructional strategies appropriate to the intended students. It helps learners visualize concepts, enables them to manipulate and transform data representations, and anticipates and immediately remediates individual learner misconceptions.
Each course is organized into a series of units, or modules. Each module is divided into one or more sections, which contain learning objectives, the lesson content presented as a tutorial, a summary, and a comprehensive quiz. New concepts and principles are introduced in the context of real-world situations. Each concept is illustrated with simple, concrete examples followed by a practice exercise that provides immediate feedback to reinforce and solidify students’ understanding. The software tracks each student’s progress, monitoring the modules and sections that have been completed and maintaining a record of the student’s performance for each section quiz. Built-in tools on the icon toolbar such as an on-line calculator, Excel spreadsheet, and accounting glossary make SMART a convenient, all-in-one learning tool. The program content is complemented by an on-line workbook that can easily be printed. A unique feature of the software is that students may easily switch between Russian or English at any point.
The software is available in multimedia CD-ROM versions for Windows 95.
SMART I essentially deals with fundamentals of financial accounting, and some basic cost accounting, inherent in financial accounting. It takes into account the basic concepts and standards generally applied and accepted internationally.
SMART II covers financial auditing, i.e. the audits of financial statements and related reports as also practiced under international guidelines. It deals with the respective international auditing standards (ISA) as developed by the International Federation of Accountants (IFAC).
SMART III, «Tax Audit,» puts the learners in the position of tax auditors whose primary concern is underreporting of taxable profits. It helps learners understand the role of the tax auditor in promoting voluntary compliance with tax rules, and making decisions that lead to effective use of audit resources. Learners perform a pre-audit analysis on returns selected for audit and identify areas of audit concern, then interview the taxpayer, develop and audit plan, and implement the plan through application of appropriate audit practices. A variety of settings are used to give learners practical exposure to realistic audit situations.
SMART Program Development
The course content was extensively based on materials already in use in the accounting and auditing training programs that EWMI had been running in Russia in the early 1990s. The course materials were modified with the assistance of consultants and MT officers familiar with the particularities of the Russian tax system and with the help of various international organizations, including OECD, FMS / US Treasury, International Tax Training Center («ITTC») and IMF who all provided comments and additional training materials. One of the most useful features of SMART I, II and III is that the course content can be modified and updated as needed without reprogramming the software because the text is contained in a separate text database linked to the main program. Testing and delivery is conducted in New York, and in Moscow. In addition, the SMART programs are tested by the Russian tax training centers, to guarantee ease of installation and use.
EWMI, and Open Society Institute / Soros Foundations in Moscow, have developed a working relationship with the Moscow Training Center, in order to continue implementing the SMART program within the MT once this cooperative agreement has expired. The Moscow City Tax Inspectorate Training Center had expressed a great interest in serving as the focal point for SMART training at the MT. This Center had the most extensive training program of all centers and instructors who possess many of the skills necessary to maintain and develop computer-based training.
Future Outlook
While the long term benefits of Computer Based Training (CBT) for the Russian Ministry of Taxation have generally been well recognized, some resistance exists due to: 1) the content of the materials which as yet are somewhat alien to many Russian tax inspectors/auditors and 2) the computer based orientation. It is expected that these resistance forces gradually will be overcome. But the program requires continued attention and stimulations from the top levels at the Ministry of Taxation.
It should be pointed out here too, that Tax Auditors / Inspectors in most Western countries tend to be recruited from accounting and auditing programs at universities / colleges whereafter they enter the tax service by taking a series of courses / programs at the tax / treasury service upon joining. Such a pattern also gradually may be executed in Russia in the years to come, however, at this point Russia is faced with the sudden training of a large number of tax auditors / inspectors to cater to the structural economic and financial changes that have taken place in Russia (and also in other former Soviet Republics). The CBTs also are expected to be of value for other former Soviet Republics and other «transition economies.»
Although the CBTs were, in the first instance, designed for the Russian Ministry of Taxation and the needs of tax inspectors, the first two SMARTs (financial accounting and financial auditing) have generic use and can be applied for training programs at governmental, semi-governmental and private enterprise levels, for both public and private entities. It also enables extensive distance learning for all sorts of accounting and auditing training in Russia. Furthermore, SMART I & II have also proven to be of benefit for persons preparing themselves for international oriented accounting certifications (diplomas) and for the Russian professional accounting training requirements, as the materials developed, and set forth in the Study Guides and CBTs, cover the essences of financial accounting and financial auditing as internationally practiced. The materials are also of use at academic and institutional programs to cover the international orientation of financial accounting and auditing.
Adolf J.H. Enthoven is Director of Accounting Education, East-West Management Institute Professor & Director, The Center for International Accounting Development, The University of Texas at Dallas. He can be contacted by e-mail enthoven@utdallas.edu.