international federation of accountants international standard setting meeting the challenges of the...

International Federation of AccountantsInternational Federation of Accountants

International Standard Setting International Standard Setting Meeting the Challenges of the Modern WorldMeeting the Challenges of the Modern World

Alta Prinsloo, IAASB Deputy DirectorAlta Prinsloo, IAASB Deputy Director

September 12, 2007September 12, 2007

A Time to Celebrate A Time to Celebrate

• 30 years since the establishment of IFAC30 years since the establishment of IFAC

• 20 years since the establishment of the first audit 20 years since the establishment of the first audit firm in Russiafirm in Russia

• 5 years since the establishment of the Audit 5 years since the establishment of the Audit Council in RussiaCouncil in Russia

• International Federation of Accountants (IFAC)International Federation of Accountants (IFAC)– Reformed to meet the challenges of the modern worldReformed to meet the challenges of the modern world

– Important contributor to international standard setting Important contributor to international standard setting

• International convergenceInternational convergence

• High standards of ethicsHigh standards of ethics

• High-quality auditing standardsHigh-quality auditing standards

AgendaAgenda

• Expanding organization of 155 members and associates in Expanding organization of 155 members and associates in 118 countries118 countries

• Represents 2.5 million accountants in public practice, Represents 2.5 million accountants in public practice, education, government service, industry and commerceeducation, government service, industry and commerce

• Promotes high-quality performance by professional Promotes high-quality performance by professional accountants through Member Body Compliance Programaccountants through Member Body Compliance Program

• Provides for public interest input and has public oversightProvides for public interest input and has public oversight

IFAC TodayIFAC Today

About IFACAbout IFAC

IFAC’s MissionIFAC’s Mission

• To serve the public interest,To serve the public interest, IFAC will continue IFAC will continue to strengthen the worldwide accountancy to strengthen the worldwide accountancy profession and contribute to the development of profession and contribute to the development of strong international economies by …strong international economies by …


IFAC’s Mission (Continued) IFAC’s Mission (Continued)

• Establishing and promoting adherence to high-Establishing and promoting adherence to high-quality professional standards quality professional standards

• Furthering the international convergence of such Furthering the international convergence of such standardsstandards

• Speaking out on public interest issues where the Speaking out on public interest issues where the profession’s voice is most relevantprofession’s voice is most relevant


IFAC Standard-Setting BoardsIFAC Standard-Setting Boards

• International Accounting Education Standards Board International Accounting Education Standards Board (IAESB)(IAESB)

• International Auditing and Assurance Standards International Auditing and Assurance Standards Board (IAASB)Board (IAASB)

• International Ethics Standards Board for International Ethics Standards Board for Accountants (IESBA)Accountants (IESBA)

• International Public Sector Accounting Standards International Public Sector Accounting Standards Board (IPSASB)Board (IPSASB)


IFAC CommitteesIFAC Committees

• Professional Accountants in Business CommitteeProfessional Accountants in Business Committee• Small and Medium Practices CommitteeSmall and Medium Practices Committee• Developing Nations CommitteeDeveloping Nations Committee• Transnational Auditors CommitteeTransnational Auditors Committee


Features of IFAC Standard-SettingFeatures of IFAC Standard-Setting• Independent boards with balanced membershipIndependent boards with balanced membership• TransparencyTransparency

– Meetings are open to the publicMeetings are open to the public– Website (Website (www.ifac.orgwww.ifac.org))

• Agenda material and recordings of IAASB meetingsAgenda material and recordings of IAASB meetings• Exposure drafts and final pronouncementsExposure drafts and final pronouncements

• Consultative advisory groupsConsultative advisory groups• Rigorous due process that provides for extensive Rigorous due process that provides for extensive

consultationconsultation• Public interest oversightPublic interest oversight


Public Interest OversightPublic Interest Oversight• Public Interest Oversight Board (PIOB) Public Interest Oversight Board (PIOB)

established in February 2005established in February 2005• As part of IFAC reforms toAs part of IFAC reforms to

– Strengthen standard-setting processes of standard-Strengthen standard-setting processes of standard-setting boardssetting boards

– Enhance transparency of those processesEnhance transparency of those processes

– Provide for public interest oversightProvide for public interest oversight

– CContinue collaboration between profession and ontinue collaboration between profession and regulatorsregulators

• Responsible to the public, not IFACResponsible to the public, not IFAC


KEY

ACCOUNTABILITY

OVERSIGHT

CONSULTATION/ADVICE

Oversight & ConsultationOversight & ConsultationIFAC Oversight & ConsultationIFAC Oversight & ConsultationIFAC Oversight & ConsultationIFAC Oversight & Consultation

Why is Convergence Important?Why is Convergence Important?• International convergenceInternational convergence

– Enhances credibility of national standardsEnhances credibility of national standards

– Increases comparability of auditors’ reportsIncreases comparability of auditors’ reports

– Leads to more efficient capital marketsLeads to more efficient capital markets

– Reduces costs for those who need and use financial Reduces costs for those who need and use financial statement informationstatement information

– Minimizes complexity when reporting in multiple Minimizes complexity when reporting in multiple jurisdictionsjurisdictions

ConvergenceConvergence

Why IFAC Standards for Convergence?Why IFAC Standards for Convergence?

• Robust structure and rigorous due process renders Robust structure and rigorous due process renders high-quality standardshigh-quality standards– Global benchmarkGlobal benchmark

– Wide acceptanceWide acceptance


Support for ISAsSupport for ISAs

• Financial Stability ForumFinancial Stability Forum– 12 Key Standards for Sound Financial Systems12 Key Standards for Sound Financial Systems

• World Federation of ExchangesWorld Federation of Exchanges– Issued statement of supportIssued statement of support

• EuropeEurope– European Commission (EC) 8European Commission (EC) 8thth Directive envisages use of Directive envisages use of

ISAs for statutory audits in the European Union (EU)ISAs for statutory audits in the European Union (EU)

– Directive to be implemented by 2008; timing of ISA Directive to be implemented by 2008; timing of ISA adoption yet to be determinedadoption yet to be determined


Support for ISAs (Continued)Support for ISAs (Continued)• US listed companiesUS listed companies

– Public Company Accounting Oversight Board (PCAOB)Public Company Accounting Oversight Board (PCAOB)

– Except for reporting on internal control, priorities similar Except for reporting on internal control, priorities similar to past and current IAASB topicsto past and current IAASB topics

• US unlisted companiesUS unlisted companies– Auditing Standards Board (ASB)Auditing Standards Board (ASB)

– De factoDe facto move to ISAs move to ISAs

• 100+ countries use, rely or compare to ISAs100+ countries use, rely or compare to ISAs


ChallengesChallenges• Cultural differencesCultural differences• Philosophical differencesPhilosophical differences• Applicability of standards to all types and sizes of Applicability of standards to all types and sizes of

entity by all sizes of audit firmentity by all sizes of audit firm• TranslationTranslation• Training and educationTraining and education• ImplementationImplementation• Frequency and complexity of changesFrequency and complexity of changes• Monitoring and enforcementMonitoring and enforcement


Assisting with ConvergenceAssisting with Convergence

• Multilingual communication in five United Nations Multilingual communication in five United Nations languages, including Russianlanguages, including Russian

• Publications and other up-to-date information Publications and other up-to-date information available free of charge on IFAC website (available free of charge on IFAC website (www.ifac.orgwww.ifac.org))

• Permission to reproduce / translate and reproduce Permission to reproduce / translate and reproduce publications free of chargepublications free of charge– Permissions policyPermissions policy


Assisting with Convergence (Continued)Assisting with Convergence (Continued)

• Facilitation of convergenceFacilitation of convergence– Guidance for national standard setters that adopt the Guidance for national standard setters that adopt the

IAASB’s pronouncements with limited modificationsIAASB’s pronouncements with limited modifications

– Basis for conclusions issued with new pronouncementsBasis for conclusions issued with new pronouncements

• Facilitation of translationsFacilitation of translations– Translations policyTranslations policy

– Information about translations to be published on website Information about translations to be published on website during fall 2007during fall 2007


Assisting with Convergence (Continued)Assisting with Convergence (Continued)• ToolkitsToolkits

– Establishing and developing a professional accountancy bodyEstablishing and developing a professional accountancy body– Ethics educationEthics education

• Visits, presentations, forums, surveys, etc.Visits, presentations, forums, surveys, etc.– IFAC President visited Russia in July 2007IFAC President visited Russia in July 2007– IFAC to host:IFAC to host:

• SMP Forum in Malta on October 30, 2007SMP Forum in Malta on October 30, 2007• Seminar on “The Financial Reporting Environment of the 21Seminar on “The Financial Reporting Environment of the 21stst Century” Century”

in Mexico City on November 14, 2007in Mexico City on November 14, 2007• Forum on “Government, the Accountancy Profession, and the Public Forum on “Government, the Accountancy Profession, and the Public

Trust” in New York City on December 4, 2007Trust” in New York City on December 4, 2007

– IFAC Global Leadership Survey planned for October/NovemberIFAC Global Leadership Survey planned for October/November


High Ethical StandardsHigh Ethical Standards

• Accountancy profession is built on public’s trustAccountancy profession is built on public’s trust• Requires commitment to high ethical standards and Requires commitment to high ethical standards and

integrityintegrity• Requires effective codes of conduct for all Requires effective codes of conduct for all

participants in financial reporting processparticipants in financial reporting process

EthicsEthics

IFAC Code of EthicsIFAC Code of Ethics• Revised Code effective June 30, 2006Revised Code effective June 30, 2006• Five fundamental principles of professional ethicsFive fundamental principles of professional ethics

– Integrity, objectivity, professional competence and due Integrity, objectivity, professional competence and due care, confidentiality, and professional behaviorcare, confidentiality, and professional behavior

• Establishes conceptual framework Establishes conceptual framework professional professional accountants toaccountants to– Identify threats to fundamental principlesIdentify threats to fundamental principles– Evaluate significance of threatsEvaluate significance of threats– If threats other than clearly insignificant, apply safeguards If threats other than clearly insignificant, apply safeguards

to eliminate threats or reduce them to an acceptable levelto eliminate threats or reduce them to an acceptable level

EthicsEthics

IAASB – ObjectiveIAASB – Objective• Serves the public interest byServes the public interest by

– Setting high-quality standards forSetting high-quality standards for• Quality controlQuality control• AuditingAuditing• Other assurance engagementsOther assurance engagements• Related services engagementsRelated services engagements

– Facilitating convergenceFacilitating convergence– Enhancing the quality and uniformity of practice Enhancing the quality and uniformity of practice

throughout the worldthroughout the world– Strengthening public confidence in the global auditing Strengthening public confidence in the global auditing

and assurance professionand assurance profession

AuditingAuditing

Recent Standard-Setting ActivitiesRecent Standard-Setting Activities

• Past few years focused on fundamentalsPast few years focused on fundamentals– Quality control at firm and engagement levelQuality control at firm and engagement level

– Risk assessment and responses, including fraudRisk assessment and responses, including fraud

– Audit documentation, and auditor reportingAudit documentation, and auditor reporting

• Efforts now focused on addressingEfforts now focused on addressing– Audit areas of higher risk (e.g., accounting estimates and fair Audit areas of higher risk (e.g., accounting estimates and fair

values, related party transactions)values, related party transactions)

– Specific topics (e.g., audit of group financial statements)Specific topics (e.g., audit of group financial statements)

• Major initiative to improve clarity of ISAsMajor initiative to improve clarity of ISAs

AuditingAuditing

IAASB Future StrategyIAASB Future Strategy

• Strategy review during 2007Strategy review during 2007• Consultation paper on strategy 2009-2011 to be Consultation paper on strategy 2009-2011 to be

issued in October 2007issued in October 2007• Proposed strategic focusProposed strategic focus

– Contributing to the effective operation of the world’s Contributing to the effective operation of the world’s capital marketscapital markets

– Assisting with the implementation of standardsAssisting with the implementation of standards

– Addressing the needs of SMEs and their auditorsAddressing the needs of SMEs and their auditors

AuditingAuditing

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

September 12, 2007September 12, 2007

international federation of accountants international standard setting meeting the challenges of the...

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