International Federation of AccountantsInternational Federation of Accountants

IFAC’s Role and Major InitiativesIFAC’s Role and Major InitiativesJohn Kellas, IAASB ChairmanJohn Kellas, IAASB Chairman

FCM SeminarFCM SeminarCairo, September 2005Cairo, September 2005

•• Expanding organization of 163 member bodies in 119Expanding organization of 163 member bodies in 119countriescountries

•• Represents 2.5 million accountants in public practice,Represents 2.5 million accountants in public practice,education, government service, industry andeducation, government service, industry andcommercecommerce

•• Provides for public interest input and has publicProvides for public interest input and has publicoversightoversight

IFAC TodayIFAC Today

IFAC’s MissionIFAC’s Mission

To serve the public interest,To serve the public interest, IFAC will continueIFAC will continueto strengthen the worldwide accountancyto strengthen the worldwide accountancyprofession and contribute to the development ofprofession and contribute to the development ofstrong international economies by…strong international economies by…

IFAC’s MissionIFAC’s Mission•• Establishing and promoting adherence to highEstablishing and promoting adherence to high

quality professional standardsquality professional standards•• Furthering the international convergence of suchFurthering the international convergence of such

standardsstandards•• Speaking out on public interest issues where theSpeaking out on public interest issues where the

profession’s voice is most relevantprofession’s voice is most relevant

IFAC Serves the International ProfessionIFAC Serves the International Profession

•• Accountancy organizations worldwideAccountancy organizations worldwide•• Large, medium and small firmsLarge, medium and small firms•• Developed and developing countriesDeveloped and developing countries•• Professionals in public practice, business andProfessionals in public practice, business and

governmentgovernment

Priorities for 2005-2006Priorities for 2005-2006•• International convergenceInternational convergence•• Development of the professionDevelopment of the profession•• Economic stability and developmentEconomic stability and development•• Strengthening the financial reporting supply chainStrengthening the financial reporting supply chain

International ConvergenceInternational Convergence•• Globalization demands development of consistentGlobalization demands development of consistent

set of high quality standardsset of high quality standards•• Contributes to transparency and accountabilityContributes to transparency and accountability•• Facilitates investor confidence and economicFacilitates investor confidence and economic

growthgrowth•• Convergence is a goal for all IFAC standard settersConvergence is a goal for all IFAC standard setters

IFAC Standard SettingIFAC Standard Setting•• International Auditing and Assurance StandardsInternational Auditing and Assurance Standards

Board (IAASB)Board (IAASB)•• Ethics CommitteeEthics Committee•• Education CommitteeEducation Committee•• International Public Sector Accounting StandardsInternational Public Sector Accounting Standards

BoardBoard

Auditing convergence - challengesAuditing convergence - challenges

•• The starting pointThe starting point

–– Established national standard setting process vs.Established national standard setting process vs.new economiesnew economies

•• The position of standard settersThe position of standard setters

–– Standard setting no longer a function of manyStandard setting no longer a function of manyIFAC member bodiesIFAC member bodies

Challenges (Cont.)Challenges (Cont.)•• Cultural differencesCultural differences

•• Philosophical differencesPhilosophical differences

–– Rules vs. principles / objectivesRules vs. principles / objectives

•• The scope of the standardsThe scope of the standards

–– Application of standards to all types and sizesApplication of standards to all types and sizesof entity by all sizes of audit firmof entity by all sizes of audit firm

•• TranslationTranslation

•• Complexity and frequency of changesComplexity and frequency of changes

Meeting the ChallengesMeeting the Challenges•• Partnership with national standard settersPartnership with national standard setters

•• National standard setters to address matters ofNational standard setters to address matters ofdomestic concerndomestic concern

•• Composition of the IAASBComposition of the IAASB

•• Dialogue with “stakeholders”Dialogue with “stakeholders”

–– IAASB Consultative Advisory Group andIAASB Consultative Advisory Group andothersothers

•• Development of high-quality standardsDevelopment of high-quality standards

KEY

ACCOUNTABILITY

OVERSIGHT

CONSULTATION/ADVICE

Public Interest Oversight Board (PIOB)Public Interest Oversight Board (PIOB)

•• Formally established in February 2005Formally established in February 2005•• Comprises 10 members appointed by regulatorsComprises 10 members appointed by regulators

and international organizationsand international organizations•• Oversees the Public Interest Activity CommitteesOversees the Public Interest Activity Committees

– IAASB, Education and Ethics Committees, and– IAASB, Education and Ethics Committees, andCompliance Compliance ProgrammeProgramme

Public Interest Activity CommitteesPublic Interest Activity Committees•• Receive input through Consultative AdvisoryReceive input through Consultative Advisory

GroupsGroups•• Have public membersHave public members•• Rigorous due process subject to PIOB reviewRigorous due process subject to PIOB review•• Meetings are open to the publicMeetings are open to the public

Ethics CommitteeEthics Committee

•• Develops Code of Ethics for all accountantsDevelops Code of Ethics for all accountants•• Code features principles-based approachCode features principles-based approach•• No member body or firm is allowed to apply lessNo member body or firm is allowed to apply less

stringent standardsstringent standards•• Current focus on independenceCurrent focus on independence•• Independence Forum on October 11Independence Forum on October 11

Education CommitteeEducation Committee

•• Standards designed to achieve global quality andStandards designed to achieve global quality andconsistency in accounting educationconsistency in accounting education

•• Member body compliance required in 2005Member body compliance required in 2005•• Exposure draft issued in April on CompetenceExposure draft issued in April on Competence

Requirements for Audit ProfessionalsRequirements for Audit Professionals

International Public Sector AccountingInternational Public Sector AccountingStandards Board (IPSASB)Standards Board (IPSASB)

•• Members include professional accountants inMembers include professional accountants insupreme audit institutions, governmentsupreme audit institutions, governmentorganizations and public practiceorganizations and public practice

•• Develops International Public Sector AccountingDevelops International Public Sector AccountingStandards (IPSASs) under the cash and accrualStandards (IPSASs) under the cash and accrualbasesbases

•• World Bank, OECD and others use World Bank, OECD and others use IPSASsIPSASs

IPSASBIPSASB

•• Facilitates convergence of national andFacilitates convergence of national andinternational standards, including convergenceinternational standards, including convergencewith IFRSs and statistical basis of reporting wherewith IFRSs and statistical basis of reporting whereappropriate for the public sectorappropriate for the public sector

•• Spanish translations of IPSASs available; FrenchSpanish translations of IPSASs available; Frenchtranslations in development; other translationstranslations in development; other translationsbeing developed by member bodiesbeing developed by member bodies

Development of the ProfessionDevelopment of the Profession

•• Member Body Compliance Member Body Compliance ProgrammeProgramme•• Developing nationsDeveloping nations•• Small and medium accounting practices (SMPs)Small and medium accounting practices (SMPs)

Member Body Compliance Member Body Compliance ProgrammeProgramme•• Statements of Membership Obligations (SMOs)Statements of Membership Obligations (SMOs)

serve as the foundationserve as the foundation•• Works in partnership with IFAC member bodiesWorks in partnership with IFAC member bodies

and regional accountancy organizationsand regional accountancy organizations•• Assists member bodies in complying with IFACAssists member bodies in complying with IFAC

standards and IFRSsstandards and IFRSs

Member Body Compliance Member Body Compliance ProgrammeProgramme•• Part 1 – Fact-based questionnaire on the regulatoryPart 1 – Fact-based questionnaire on the regulatory

and standard-setting framework in a member’sand standard-setting framework in a member’shome countryhome country

•• Over 150 member bodies have responded;Over 150 member bodies have responded;responses are posted on IFAC’s websiteresponses are posted on IFAC’s website

•• Shows differences in national regulatoryShows differences in national regulatoryenvironments and challenges to convergenceenvironments and challenges to convergence

Member Body Compliance Member Body Compliance ProgrammeProgramme•• Part 2 – Member body self-assessment ofPart 2 – Member body self-assessment of

compliance with specific requirements of thecompliance with specific requirements of theSMOsSMOs

•• Identifies whether and how the member body hasIdentifies whether and how the member body hasincorporated international standardsincorporated international standards

•• Determines how the fundamental principles in theDetermines how the fundamental principles in theIFAC Code of Ethics have been incorporated in aIFAC Code of Ethics have been incorporated in amember’s ethical guidelinesmember’s ethical guidelines

•• Supports the development of the accountancySupports the development of the accountancyprofession in all regions of the worldprofession in all regions of the world

•• Provides input to international standard settersProvides input to international standard setters•• Seeks resources and development assistanceSeeks resources and development assistance•• Plans to issue a tool kit to assist in thePlans to issue a tool kit to assist in the

development of professional accountancy bodiesdevelopment of professional accountancy bodies

Developing Nations Permanent Task ForceDeveloping Nations Permanent Task Force

•• Represents the interests of small and mediumRepresents the interests of small and mediumpractices and entitiespractices and entities

•• The subject of separate sessionsThe subject of separate sessions

SMP Permanent Task ForceSMP Permanent Task Force

•• High quality international standards are theHigh quality international standards are thefoundationfoundation

•• Integrity, expertise and transparency are keyIntegrity, expertise and transparency are key•• Coordination of capacity building effortsCoordination of capacity building efforts•• High quality performance by all those in theHigh quality performance by all those in the

financial reporting supply chainfinancial reporting supply chain

Economic Stability and DevelopmentEconomic Stability and Development

Professional Accountants in BusinessProfessional Accountants in Business(PAIB) Committee(PAIB) Committee

•• Helps IFAC member bodies support more than 1Helps IFAC member bodies support more than 1million professional accountants in businessmillion professional accountants in business

•• Facilitates the global exchange of knowledge andFacilitates the global exchange of knowledge andbest practicesbest practices

•• Works to build public awareness of the role ofWorks to build public awareness of the role ofPAIBsPAIBs

PAIB CommitteePAIB CommitteeAddresses key issues affecting Addresses key issues affecting PAIBsPAIBs::•• Enterprise governanceEnterprise governance•• Risk managementRisk management•• EthicsEthics•• Financial reportingFinancial reporting•• SustainabilitySustainability

Strengthening the Global FinancialStrengthening the Global FinancialReporting Supply ChainReporting Supply Chain

New study initiated by the IFAC Board in July 2005New study initiated by the IFAC Board in July 2005•• Identify investor expectations and needsIdentify investor expectations and needs•• Address such issues as corporate governance,Address such issues as corporate governance,

regulatory developments, and auditor independenceregulatory developments, and auditor independence•• Provide practical suggestions for enhancing theProvide practical suggestions for enhancing the

financial reporting processfinancial reporting process

International Federation of AccountantsInternational Federation of Accountantswww.ifac.orgwww.ifac.org

September 2005September 2005