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International Federation of Accountants Member Body Compliance Program Russell Guthrie, Executive Director IESBA Meeting New York, USA October 19, 2011 Member Body Compliance Program A Brief History • Program and Compliance Advisory Panel launched in 2004 as part of IFAC Reforms • Established 7 Statements of Membership Obligations (SMOs): – QA, Education, ISAs, Ethics, IPSASs, I&D, IFRS • PIOB oversight Compliance Program Focus Strategic Considerations • Supporting continuous improvement of strong PAOs through SMOs • Influence PAOs’ agendas and actions • Information and knowledge sharing • Collaboration with stakeholders Compliance Program Focus Continuous Development and Improvement • Part 1 – Information Gathering: Overview of regulatory and standard-setting framework in a member’s jurisdiction • Part 2 – Self-assessment: Benchmarking against the 7 SMOs • Part 3 – Own Strategy: Action Plans for development & continuous improvement in addressing the SMOs Impact / Achievements Beginning of the Road • Action Plans as first step: – Transparent plans for continuous improvement (153 out of 163 published) – Annual updates by all member bodies – Monitoring of progress by the CAP • Time and resources needed to achieve meaningful change • Outreach activities and policy advice provided by the IFAC Staff Impact / Achievements Enforcement – since 2005 • To date – key focus on commitment to and participation in the Compliance Program • Enforcement Actions – 43 suspension warnings – 18 suspensions – 9 expulsion warnings – 5 expulsions Uptake of the Code of Ethics Russia –Drivers of Local Modifications • Working on adoption of the recent Code • Adoption environment: – Ethics Committee of the Audit Council under Min Fin – Independence rules must eventually be aligned with Russian legislation – Initial proposal to start with existing Russian CoE (based of old and abbreviated version of IESBA Code) and then make necessary additions – Auditors and accountants need different Codes • IFAC Staff providing guidance and analysis to PAOs, Large Firms, MoF Uptake of the Code of Ethics Latin America – Multiple Stakeholders • Challenges: – Barriers of legal, institutional, cultural and financial nature – Lack of ongoing mechanism for adopting and implementing changes – Lack of current translation makes it difficult to discuss with regulators, analyze independence requirements and organize relevant communications and trainings – To achieve meaningful change a thorough cultural change is needed • IFAC coordinates formation of a Latin America Review Committee to facilitate translation at the regional level Uptake of the Code of Ethics France – More Stringent Requirements • Ministry of Justice adopts ethical requirements for CNCC: – Requirements for CNCC endorsed by MinJus in consultation with AMF (securities market regulator), and the H3C – Requirements are considered to be more stringent than IESBA Code • CSOEC drafts its ethical requirements to be approved by Ministry of Economy and Finance – Direct incorporation of IESBA code impossible due to a different structure (Ordinance of 1945, OEC bylaws, other doctrinal texts) • Both French Bodies are planning to promote the adoption of the recent IESBA CoE to the Government Uptake of the Code of Ethics Malawi – Direct Adoption • IFAC Member sets the ethical requirements through a mandate implied by general consensus • Adopted IESBA Code of Ethics in 2008 without any modifications • Issuing the current IESBA CoE with Jan 2012 effective date • Action Plan focus on implementation support Uptake of the Code of Ethics Overarching Themes • CoE clearly used as a major point of reference – Strong awareness among PAOs • Adoption challenges – Principles and rules at a national level often embedded in legislation, regulation and member body governance documents • Implementation challenges – Overcoming cultural barriers Tracking of Adoption – Challenges Complex National Environments • Government (MinFin, Ministry of Justice) • Regulators (Capital Market, Insurance, Banking) • Professional accountancy organizations • Cultural differences, even different understanding of the concept of morality Tracking of Adoption – Challenges Differing MB Constituencies • Auditors: – Big firms – SMPs • Professional Accountants in Business • Management Accountants • Public Finance Accountants • Accounting Technicians Tracking of Adoption – Challenges Different than Standards that Tend to be Adopted en Block Other Matters of Interest Moving Forward • SMO Revisions – Clarified no best endeavors where PAO has direct responsibility – Removed “no less stringent standards” langauge • How do we best track and articulate “adoption” of CoE and/or key independence provisions Other Matters of Interest Moving Forward • Who is will determine whether local modifications are substantive (i.e., lead to different outcomes)? International Federation of Accountants www.ifac.org