ROSC 2015 Report On Observance Of Standards And Codes Accounting & Auditing Bank-Fund Joint Initiative on Standards & Codes Twelve Standards and Codes –
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ROSC 2015 Report On Observance Of Standards And Codes Accounting & Auditing Bank-Fund Joint Initiative on Standards & Codes Twelve Standards and Codes – financial stability Macroeconomic policy and data transparency 1. Data Transparency 2. Fiscal Transparency 3. Monetary and Financial Policy Transparency Financial Sector Regulation & Supervision 4. Banking Supervision 5. Securities Regulation 6. Insurance Supervision 7. Payments Systems 8. Anti-money laundering Market Integrity – institutional and market infrastructure 9. Accounting 10. Auditing 11. Corporate Governance 12. Insolvency and Creditor Rights 2 2 Figure 1.1. GDP Growth and FDI Inflows Country Context • End of civil conflict • Middle Income Country status • SL ranked highest in South Asia for ease of doing business • Development of the BPO sector Figure 1.2, Capital Market Development Relevance to WB Country Partnership Strategy Facilitating sustained private and public investment supporting structural shifts in the economy improving living standards and social inclusion improve resilience to climate and disaster risks Approach Statutory Framework Education & Training Accountancy Profession & Ethics Accounting Standards Auditing Standards Monitoring, Enforcement & Oversight Areas of Focus in ROSC A&A Institutional Framework underpinning Corporate Reporting • Laws and regulations for SBEs/SOEs/SMEs, • SMO for PAOs, • Codes, • Standard setting processes, • Monitoring mechanisms, • Accounting education Comparison of Accounting & Auditing Standards • Benchmarking with IFRS and ISA Actual Reporting & Auditing Practices • Independent review of a sample covering listed companies, SOEs and other SBEs including Banks and insurance cos, • Review regulators processes and results Stakeholder needs and perceptions on quality of corporate reporting • Capital market development • Access to finance for SMEs • Oversight of SOEs that are SBEs 6 Stakeholder Consultations • CASL – main partner • PFM Steering Committee • Preparers of financial statements • SME and Financial Institutions • All PAOs • Auditor roundtables (large and SMPs separately) • All regulators (separate meetings), Registrar of Companies, Dept of Inland Revenue • Auditor General • DG MOF (SOE) • Chamber of Commerce • Statutory Auditing Standards Committee & Accounting Standards Committee • Learning providers • Ministry of Finance • DG’s and staff of State Accounts, Public Finance, Public Enterprises 7 SLAASMB Sri Lanka Accounting & Auditing Act No.15 of 1995 Accounting Standards Committee Auditing Standards Committee Companies Act No.7 of 2007 Registrar of Companies Securities & Exchange Commission Securities & Exchange Commission Act Colombo Stock Exchange Institutional Framework Banking Act No.30 of 1988 CBSL Dept of Banking Supervision Finance Business Act CBSL Dept of Non Banking Supervision Regulation of Insurance Industry Act Insurance Board of Sri Lanka Inland Revenue Act Department of Inland Revenue Ministry of Finance Constitution & Public Finance Act Auditor General 8 Finance Business Act No 42 of 2012 ROSC 2014 RII Act No,3 of 2011 Convergence to IFRS 2012 Amendments to Banking Act and issue of directions Companies Act No 7 of 2007 replaces CA 15 of 1982 ROSC 2004 9 Global IASB (Financial Reporting Standard Setter) Sri Lanka SLAASMB CBSL (Bank and NBFI) IFAC (Auditing, Ethics, Education, Public Sector Standard Setter and apex body for PAOs) Profession SEC & CSE CASL Registrar of Companies Standard Setter for A&A Other Local Bodies Accounting Bodies AATSL / ICMA CIMA/ ACCA State & Foreign Universities IBSL 10 Entities 291 Companies listed on CSE 3938 Public companies 2 unlimited companies 22 Insurance Companies 1591 Associations 10 Leasing Companies 64,423 Registered Companies 9 Foreign Entities 48 Finance Companies 348 Limited by Guarantee 232 Foreign Entities 1313 SBEs 24 Commercial Banks 9 Licensed Specialised Banks Achievements and Challenges • Achievements • Contributes to the growth of a knowledge hub • Professional Education aligned with international education standards Profession • Challenges • Growth of profession is mainly Colombo centric • Qualification framework is not in place • Standard setting process needs to recognise new professional bodies 12 Achievements and Challenges • Achievements • Adoption of international reporting standards • Introduction of simplified standards Reporting • Challenges • Requirement of new skills • No legal backing for the simplification agenda • Dual Reporting – CBSL & Inland Revenue • Low capacity SMEs Achievements and Challenges • Achievements Auditing • Compliance with international auditing standards • Introduction of audit quality assurance • Challenges • Registered Auditors • Low capacity of SMP Achievements and Challenges • Achievements Regulators • All regulators have increased capacity and enhanced their methodologies. • Challenges • Continuous improvements to meet changing needs as goal posts shift 15 Policy Recommendations Statutory Framework • Companies Act • Differential reporting • Require sufficient information on annual return • Information to the Registrar of companies • Auditor Categories • ICASL Incorporation Act • Registration of practicing audit firms Local PAOs • Code of Conduct and disciplinary procedures of members Policy Recommendations Auditing Profession • Develop policy for re-admitting auditors who have been out of practice for more than 3 years • Voluntary merger program for sole practitioners Education & Training • Expand National Quality Framework to include all PAOs • Implement structured framework for monitoring learning providers and employers • Monitor CPD and sanction non-compliance • Reduce disparity in service between Western Province and other provinces Policy Recommendations Accounting & Auditing Standards • Revisit representation of professional accounting organisations in standard-setting • Increase influence at international standards setting level • Increase support for preparers of financial statements • Customised training for key stakeholder groups • SMEs, SMPs, CASL, chambers of commerce and providers of capital must work together to facilitate access to capital Monitoring, Compliance & Enforcement • Enhance methodologies, capacity and information sharing processes • Enhance SLAASMB reviews to adopt more risk based methods • Implement a mandatory audit quality assurance review process for audit firms to fully implement SLSQC 1 Thank You