Transcript INTERNATIONAL FEDERATION OF ACCOUNTANTS

International Federation of Accountants
International Standard Setting
Meeting the Challenges of the Modern World
Alta Prinsloo, IAASB Deputy Director
September 12, 2007
A Time to Celebrate
• 30 years since the establishment of IFAC
• 20 years since the establishment of the first audit
firm in Russia
• 5 years since the establishment of the Audit
Council in Russia
Agenda
• International Federation of Accountants (IFAC)
– Reformed to meet the challenges of the modern world
– Important contributor to international standard setting
• International convergence
• High standards of ethics
• High-quality auditing standards
About IFAC
IFAC Today
• Expanding organization of 155 members and associates in
118 countries
• Represents 2.5 million accountants in public practice,
education, government service, industry and commerce
• Promotes high-quality performance by professional
accountants through Member Body Compliance Program
• Provides for public interest input and has public oversight
About IFAC
IFAC’s Mission
• To serve the public interest, IFAC will continue to
strengthen the worldwide accountancy profession
and contribute to the development of strong
international economies by …
About IFAC
IFAC’s Mission (Continued)
• Establishing and promoting adherence to highquality professional standards
• Furthering the international convergence of such
standards
• Speaking out on public interest issues where the
profession’s voice is most relevant
About IFAC
IFAC Standard-Setting Boards
• International Accounting Education Standards Board
(IAESB)
• International Auditing and Assurance Standards
Board (IAASB)
• International Ethics Standards Board for Accountants
(IESBA)
• International Public Sector Accounting Standards
Board (IPSASB)
About IFAC
IFAC Committees
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Professional Accountants in Business Committee
Small and Medium Practices Committee
Developing Nations Committee
Transnational Auditors Committee
About IFAC
Features of IFAC Standard-Setting
• Independent boards with balanced membership
• Transparency
– Meetings are open to the public
– Website (www.ifac.org)
• Agenda material and recordings of IAASB meetings
• Exposure drafts and final pronouncements
• Consultative advisory groups
• Rigorous due process that provides for extensive
consultation
• Public interest oversight
About IFAC
Public Interest Oversight
• Public Interest Oversight Board (PIOB)
established in February 2005
• As part of IFAC reforms to
– Strengthen standard-setting processes of standardsetting boards
– Enhance transparency of those processes
– Provide for public interest oversight
– Continue collaboration between profession and
regulators
• Responsible to the public, not IFAC
Oversight
& Consultation
IFAC
Oversight
& Consultation
KEY
ACCOUNTABILITY
OVERSIGHT
CONSULTATION/ADVICE
Convergence
Why is Convergence Important?
• International convergence
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Enhances credibility of national standards
Increases comparability of auditors’ reports
Leads to more efficient capital markets
Reduces costs for those who need and use financial
statement information
– Minimizes complexity when reporting in multiple
jurisdictions
Convergence
Why IFAC Standards for Convergence?
• Robust structure and rigorous due process renders
high-quality standards
– Global benchmark
– Wide acceptance
Convergence
Support for ISAs
• Financial Stability Forum
– 12 Key Standards for Sound Financial Systems
• World Federation of Exchanges
– Issued statement of support
• Europe
– European Commission (EC) 8th Directive envisages use of
ISAs for statutory audits in the European Union (EU)
– Directive to be implemented by 2008; timing of ISA
adoption yet to be determined
Convergence
Support for ISAs (Continued)
• US listed companies
– Public Company Accounting Oversight Board (PCAOB)
– Except for reporting on internal control, priorities similar
to past and current IAASB topics
• US unlisted companies
– Auditing Standards Board (ASB)
– De facto move to ISAs
• 100+ countries use, rely or compare to ISAs
Convergence
Challenges
• Cultural differences
• Philosophical differences
• Applicability of standards to all types and sizes of
entity by all sizes of audit firm
• Translation
• Training and education
• Implementation
• Frequency and complexity of changes
• Monitoring and enforcement
Convergence
Assisting with Convergence
• Multilingual communication in five United Nations
languages, including Russian
• Publications and other up-to-date information
available free of charge on IFAC website
(www.ifac.org)
• Permission to reproduce / translate and reproduce
publications free of charge
– Permissions policy
Convergence
Assisting with Convergence (Continued)
• Facilitation of convergence
– Guidance for national standard setters that adopt the
IAASB’s pronouncements with limited modifications
– Basis for conclusions issued with new pronouncements
• Facilitation of translations
– Translations policy
– Information about translations to be published on website
during fall 2007
Convergence
Assisting with Convergence (Continued)
• Toolkits
– Establishing and developing a professional accountancy body
– Ethics education
• Visits, presentations, forums, surveys, etc.
– IFAC President visited Russia in July 2007
– IFAC to host:
• SMP Forum in Malta on October 30, 2007
• Seminar on “The Financial Reporting Environment of the 21st Century”
in Mexico City on November 14, 2007
• Forum on “Government, the Accountancy Profession, and the Public
Trust” in New York City on December 4, 2007
– IFAC Global Leadership Survey planned for October/November
Ethics
High Ethical Standards
• Accountancy profession is built on public’s trust
• Requires commitment to high ethical standards and
integrity
• Requires effective codes of conduct for all
participants in financial reporting process
Ethics
IFAC Code of Ethics
• Revised Code effective June 30, 2006
• Five fundamental principles of professional ethics
– Integrity, objectivity, professional competence and due
care, confidentiality, and professional behavior
• Establishes conceptual framework  professional
accountants to
– Identify threats to fundamental principles
– Evaluate significance of threats
– If threats other than clearly insignificant, apply safeguards
to eliminate threats or reduce them to an acceptable level
Auditing
IAASB – Objective
• Serves the public interest by
– Setting high-quality standards for
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Quality control
Auditing
Other assurance engagements
Related services engagements
– Facilitating convergence
– Enhancing the quality and uniformity of practice
throughout the world
– Strengthening public confidence in the global auditing
and assurance profession
Auditing
Recent Standard-Setting Activities
• Past few years focused on fundamentals
– Quality control at firm and engagement level
– Risk assessment and responses, including fraud
– Audit documentation, and auditor reporting
• Efforts now focused on addressing
– Audit areas of higher risk (e.g., accounting estimates and fair values,
related party transactions)
– Specific topics (e.g., audit of group financial statements)
• Major initiative to improve clarity of ISAs
Auditing
IAASB Future Strategy
• Strategy review during 2007
• Consultation paper on strategy 2009-2011 to be
issued in October 2007
• Proposed strategic focus
– Contributing to the effective operation of the world’s
capital markets
– Assisting with the implementation of standards
– Addressing the needs of SMEs and their auditors
International Federation of Accountants
www.ifac.org
September 12, 2007