Deceit and greed. This is the only way to explain accounting scandals that rocked Enron and WorldCom, according to Sir David Tweedie, chairman of the International Accounting Standards Board.

"The accounting profession has got to get back to the basics and enforcement the accounting standards board has one chance to get it right," said Tweedie.

The next three years will prove to be critical for the board as it seeks to overhaul the profession globally and produce consistent international standards.

The board will also have to look at a common conceptual framework to remove future abuse by auditors.

In an exclusive interview with Business Day, Tweedie set out the many challenges that the board has to face.

The move for international standards arose in 1997 with the Asian crisis when companies in Korea collapsed. Economic growth stopped and the unemployment rate escalated.

Tweedie said the Asian countries realised that to attract foreign investment, they had to fix their international accounting standards.

A country that had adopted international standards would be able to attract investment through transparency. It also reduced the cost of capital and increased worldwide investment.

Tweedie said the US had emerged "bruised" in light of the Enron and WorldCom scandals. The board would be meeting with the US regulators next month to go through the differences between the country's accounting standards and international standards, he said.

A working committee had been set up in this regard. "We will get rid of those standards which are unacceptable. We intend smashing the standards together to find a common framework," said Tweedie.

Convergence was high on the agenda. He explained that the US accounting system was based on rules, and it was unlike the international accounting system, which was based on principles.

The biggest challenge facing the standards board was whether the US Securities Exchange Commission was going to accept any of the international standards.

Tweedie said the "move was on as far as international standards were concerned".

Last month the European Union (EU) passed a regulation that all listed companies had to use international accounting standards by January 2005.

Last week the Financial Reporting Council of Australia also passed a regulation that all reporting entities would have to use international standards by January 1 2005. Tweedie said New Zealand was expected to take a similar decision shortly.

He said this "would increase momentum for convergence towards international standards".

The Canadian Securities Exchange has invited public comment on its proposal to allow certain foreign listed companies in that country to apply international standards without reconciliation to Canada's generally accepted local accounting principles.

Tweedie said the world of financial reporting was at a crossroads. The board intended looking at the "lack of transparency".

It also intended going to "war with the US over share option schemes. Share options had a lot to do with Enron."

Tweedie explained that US companies did not declare share option payments on income statements.

Companies had presented arguments such as they were not party to the transaction, employees did not provide services and there was no cost to the company, he said.

Tweedie said that this practice would be changed. The board also intended looking into aspects of accounting for financial instruments.

Tweedie said the board wanted to improve 12 existing international standards. It was also looking at countries that were adopting international standards for the first time.

Also high on the agenda was a new basis of accounting known as business combinations.

Other issues the board intended looking into included pension costs, liability recognition, revenue recognition, performance reporting and leasing.

Tweedie said the board was determined to reinstate "tough accounting standards".

"The profession must tell us what it does not like we are prepared to compromise.

"We are determined to win. We will get the US back on board we will keep you on the edge of your seats," he said.

The board was established in January last year under the chairmanship of Tweedie. It replaced the International Accounting Standards Committee.

The creation of the board arose from the recommendations of the committee's strategy working committee, which was created in 1997 and charged with reviewing the committee's structure and process and proposing changes to better prepare the organisation for the future of international accounting standard setting.

With acknowledgements to Sanchia Temkin and Business Day.