Finance Minister Pranab Mukherjee on Tuesday warned against window dressing' by accounting firms and underscored the need for stricter disclosure guidelines.

In his inaugural address at an international conference on Accountancy profession: Catalyst to sustained economic growth,' organised by the Institute of Chartered Accountants of India (ICAI), Mr. Mukherjee gave a lesson or two on the role expected from accountants and auditors.

India is globalising in every aspect, the way businesses are being conducted and resources are being mobilised. Here the accountancy profession has an added role to play in this context. The standards for accounting and auditing should be such so as to enable everyone to access the balance sheets in a comprehensible way that makes comparisons easy, he said.

Mr. Mukherjee pointed out that even as accounting seeks to mitigate the problem of information asymmetry between various parties, good financial reporting could not be achieved by a mere box ticking approach.

Managers have the incentive to be more forthcoming on good news about the company's performance and prospect, but may want to hold back bad news. If financial performance is volatile, the function of a sound accounting procedure is to report it, he said.

Noting that volatility in the market can be managed by financial instruments, he said: We should not tweak with accounting standards to fix that problem. Better risk management protocols are very critical to overall systemic stability. The accountants as information intermediaries between managers and shareholders require truthful reporting of gains and losses thereby mitigating information asymmetry.

The Finance Minister said there was a need for crafting credible and consistent rules and regulations for financial markets to prevent a race to the bottom where capital leaks out to the areas with the weakest regulation. We must encourage stronger disclosure standards for systemically important financial institutions as well as complex and sophisticated financial products.

At a time when financial frauds such as the recent Citibank's executive's Ponzi' scheme and other bank scams have been vitiating the environment and denting the faith of investors, Mr. Mukherjee said: There are enough laws in all countries to make it clear that business entities should maintain proper accounting books and that money trails should be transparent. Yet across the world financial scams do occur. This shows that there is no definite way to ensure that a business operates in an ethical manner. Governments and regulators can lay the rules and frameworks, but cannot mandate integrity and ethical conduct. The regulations can at best prevent certain people from joining the Board, but cannot guide their conscience.

However, he reminded accountants that as gatekeepers of financial propriety, they can play a major role in ensuring compliance with existing statutes both in letter and spirit. It is rightly said, corporate governance can only be demonstrated and not mandated, he said while pointing out that a look at the global corporate bankruptcies in the last two decades would show that many of those businesses failed not because of adverse market conditions, but due to lack of adequate corporate governance. A company that is transparent and follows standardised accounting practices and encourages free flow of information will find it easier to sail through bad times and secure the support of stakeholders in times of difficulties. Indeed, good corporate governance can easily command a premium, Mr. Mukherjee said.

Turning to the state of the economy, Mr. Mukherjee said the challenge before the country was to sustain high rate of economic expansion and cross the double-digit growth barrier. The challenge now is to sustain this high GDP growth over the extended period of time and find the means to cross the double digit growth barrier in the coming years, he said.