Background

Improved corporate financial reporting and auditing practices in Honduras are important components of an overall strategy to support the Government's efforts to (a) improve the business environment and make it more attractive for domestic and foreign direct investment; (b) enhance financial transparency and governance in the corporate sector; and (c) foster economic integration within the Latin America and Caribbean Region (LCR). This project is based on the recommendations of the World Bank's Accounting and Auditing ROSC for Honduras, which was completed in April 2007 and published in January 2008. The executing agency is the Technical Board on Accounting and Auditing Standards of the Government of Honduras. The project addresses most of the recommendations set forth in the Honduras Accounting and Auditing ROSC. The rationale for the choice of activities to be included under the project and their sequencing is a combination of (a) urgency of reform, (b) complementarities with actions already in progress and (c) opportunity to utilize and build upon the outputs of similar projects.

Project

The GOAL of this project is to improve the domestic business environment, enhancing financial transparency and governance, and fostering economic integration with the US, the EU and partners in the Latin America and Caribbean Region, through strengthened financial reporting and auditing practices in Honduras.

The PURPOSE is to support the implementation of the recommendations of the ROSC Accounting and Auditing report for Honduras, published in January 2008. It will focus efforts to: (a) build the capacity of the Technical Board and strengthen the Honduran accounting profession overall; (b) update and consolidate the legal and regulatory framework pertaining to corporate sector accounting and auditing; (c) strengthen financial sector stability, through the application of a robust financial reporting standard for insurance companies and strengthened auditor qualifications for large corporate borrowers; and (d) strengthen accountability and corporate governance in SOEs, with a view to improve their operating efficiency.

OUTPUTS:  The key outputs of the project are: (i) a detailed Country Action Plan aimed at building the capacity of the Technical Board and strengthening the Honduran accounting profession; (ii) technical assistance to relevant authorities for the drafting of amendments to relevant parts of the legal framework, particularly the Accounting and Auditing Law of 2005 and Code of Commerce; (iii) an updated set of regulations for the insurance sector; (iv) a set of revised accounting standards applicable to SMEs; and (v) action plan to improve financial management in SOEs.

ACTIVITIES: The main activities of the project are: (i) meeting with counterparts and key stakeholder groups to take stock of recent changes since the publication of the ROSC A (ii) preparation of a detailed Country Strategy and Action Plan (CSAP) to build the institutional capacity of the Technical Board and develop the technical capacity and professional competence of Honduran accounting and audit practitioners; (iii) updating and consolidation of the legal and regulatory framework; (iv) modernizing insurance accounting and procedures to qualify external auditors in the financial sector; and (v) strengthening financial accountability and corporate governance in state-owned enterprises (SOEs).

Project LIFE TIME is 13 months from July 2008 till August 2009.

Project BUDGET is $478,200

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