Proposes Definitional Framework Based on Responsibilities of the Accountancy Profession

The International Federation of Accountants (IFAC), the global organization for the accountancy profession, has released for public exposure A Public Interest Framework for the Accountancy Profession(IFAC Position Paper #4).

In order to consider and address issues in the accountancy profession on a consistent and clearly articulated basis, IFAC has developed a principles-based framework of the public interest, which can be applied to standard-setting, governance processes, policy analysis, and regulatory issues. Although mainly designed for use by IFAC itself, it may also be useful to the accountancy profession as well as to policymakers, regulators, and business leaders.

IFAC considers that the accountancy profession, in serving the public interest, should be evaluated against three criteria: 1) consideration of costs and benefits for society as a whole; 2) adherence to democratic principles and processes; and 3) respect for cultural and ethical diversity. These criteria enable IFAC to assess the extent to which any policy, action, process, or condition is in the public interest.

"For IFAC to play its part in the financial system, we must be sure that our actions are consistent with the public interest. The primary purposes of this paper are to explain how we understand the public interest, and to be transparent about how we will use that understanding to shape our decisions and actions,” said IFAC Chief Executive Officer Ian Ball. “By exposing this paper for public comment, we seek both to receive input that can help us finalize our position and to stimulate other organizations to articulate how they interpret this fundamental concept.”

How to Comment
IFAC invites all stakeholders to comment on its proposals. To access the exposure draft or submit a comment, visit IFAC’s website. Comments on the exposure draft are requested by March 25, 2011.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

The International Auditing and Assurance Standards Board (IAASB) today released a progress report on its project to monitor the implementation of its clarified ISAs. The report—Implementation of the Clarified International Standards on Auditing (ISAs)—highlights key findings from the first phase of the IAASB’s initiative to develop a process for gathering information to help it evaluate the effective and consistent implementation of the clarified ISAs. Following completion of the Clarity Project,* the first phase of this IAASB initiative has focused on learning more about early implementation experiences.

“Effective implementation is key to realizing the full benefits of the clarified ISAs,” said Prof. Arnold Schilder, Chairman of the IAASB. “With extensive implementation efforts now underway around the world, it is important for the IAASB to obtain timely feedback on the clarified ISAs from a variety of key stakeholders. The information we gather from this first phase and subsequent efforts of our monitoring project will help the IAASB continue to meet its objective of developing high-quality ISAs.

To promote awareness and understanding of the clarified ISAs, the IAASB also has released a second series of ISA modules,** focusing on some of the new and more significantly revised ISAs. These modules cover ISAs that address materiality in planning and performing an audit of financial statements, the evaluation of identified misstatements, written representations, using the work of an auditor’s expert, and auditor reporting.

As further support for ISA implementation, IAASB staff has released Auditor Considerations Regarding Significant Unusual or Highly Complex Transactions, a questions-and-answers (Q&A) publication. The Q&A highlights considerations in the ISAs that are relevant to auditing such transactions, often an area that gives rise to risks of material misstatement of the financial statements.

“These new resources will assist people responsible for adopting and implementing the clarified ISAs and, in particular, auditors as they prepare for the upcoming audit season,” explained IAASB Technical Director James Gunn. He added, “This additional support underscores the IAASB’s commitment to facilitating effective implementation of the ISAs and, ultimately, to enhancing audit quality.”

The new ISA modules are available to download free of charge from the IAASB Clarity Center on the IAASB’s website (www.iaasb.org/clarity-center). The IAASB encourages IFAC members, associates, regional accountancy bodies, and firms to use these materials and to promote their availability to their members and employees.

About the IAASB
The IAASB (www.iaasb.org) develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

Notes to Editor:

* The Clarity Project, completed by the IAASB in March 2009, resulted in the issuance of 36 ISAs and one International Standard on Quality Control in a new style that is easier to understand, translate, and implement. Approximately half of the ISAs also contain substantive new requirements intended to improve practice in a variety of respects. The new set of clarified ISAs is now in effect for 2010 year-end audits.

** Developed by IAASB staff, each of the ISA modules combines short video presentations, accompanying slides, and supporting notes that explain the key principles of, and major changes in, individual ISAs.

The International Auditing and Assurance Standards Board (IAASB) today released for public exposure proposed International Standard on Related Services (ISRS) 4410, Compilation Engagements.

The proposed standard is the first step in the IAASB’S work to create robust standards for services that can be used by entities that are either not required or do not elect to be audited to meet their business reporting needs. Through a compilation engagement, practitioners can provide significant benefit by applying their expertise in accounting and financial reporting. This expertise is applied to assist the management of an entity in preparing and presenting historical financial information for use by the entity’s internal or external stakeholders.

“Regulations affecting financial reporting by small- and medium-sized entities (SMEs) continue to evolve, highlighting the critical need for standards that support quality services to meet the needs of those entities and their stakeholders,” said Prof. Arnold Schilder, IAASB Chairman. “Through the proposed ISRS 4410, as well as additional planned standards, the IAASB aims to address the growing international need for standards that support a range of services other than audit.”

“The proposed ISRS 4410 will help practitioners around the world converge on the use of a globally accepted benchmark for performance of compilation engagements,” noted IAASB Technical Director James Gunn. “Further, the ISRS will help promote development of practice in jurisdictions that currently do not have national standards in this area, and also provide clarity for users about what is delivered in a compilation engagement.”

How to Comment

The IAASB invites all stakeholders to comment on its proposals. To access the exposure draft or submit a comment, visit the IAASB’s website at www.iaasb.org/ExposureDrafts.php. Comments on the exposure draft are requested by March 31, 2011.

About the IAASB
The IAASB (www.iaasb.org) develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

The Small and Medium Practices (SMP) Committee of the International Federation of Accountants (IFAC) today issued the second edition of its Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities (ISA Guide). The implementation guide is intended to help practitioners understand and efficiently apply the Clarified International Standards on Auditing (ISAs), which are effective for audits of financial statements for periods beginning on or after December 15, 2009.

“Many practitioners around the world are transitioning to the use of the Clarified ISAs. While the Clarity Project made the ISAs more understandable, clear, and capable of consistent application, the SMP Committee has long recognized the challenges facing SMPs in applying new standards—which range from resource constraints to the distinctive traits of audits of small- and medium-sized entities,” says Sylvie Voghel, SMP Committee chair. “The updated ISA Guide provides IFAC member bodies—and ultimately the SMPs they represent—with a unique resource to help them implement the new requirements efficiently and deliver high-quality service.”

The first edition of the ISA Guide was issued in December 2007 and was IFAC’s second most popular publication during 2008. The second edition includes various improvements based on feedback from users of the first edition. In addition, it features two integrated case studies, one of which focuses on an audit of a micro-entity, increased focus on SME audits, and a new colorful design.

The ISA Guide also now comes in two stand-alone volumes:

• Volume 1 describes the basic concepts of a risk-based audit in conformance with the Clarified ISAs. It is directed at practitioners and students with little or no familiarity with the ISAs who want to understand them and apply them in practice. This volume might also provide material to training providers, institutes, and universities that teach audit practices.
• Volume 2 provides practical guidance for the audit of SMEs. It is aimed at practitioners with a good working knowledge of the ISAs who want a tool for reference purposes, as well as specific guidance on conducting SME audits cost effectively.

IFAC wishes to thank the Canadian Institute of Chartered Accountants for producing the ISA Guide and the global panel of reviewers for volunteering their time and effort to helping with its development.

The PDF version of the ISA Guide can be downloaded for personal use from the Publications & Resources section of the IFAC website. For information on reproducing or translating publications issued by IFAC, please see our policy statement or contact permissions@ifac.org.

The IFAC SMP Committee welcomes readers to visit its International Center for Small and Medium Practices (www.ifac.org/smp), which hosts a collection of IFAC publications (including recently issued guides on quality control and practice management) and relevant links to resources from IFAC member bodies and other organizations, including a category devoted to implementing international standards. The site also hosts a discussion board, where practitioners can exchange views on how to apply the ISAs, a link to the Translations Database, where downloadable translations of the ISA Guide are available, and a link to the IAASB Clarity Center, which hosts an array of implementation support materials.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

Accountancy leaders from around the world met in Geneva on October 12 to discuss next steps for global corporate governance reforms. With an eye to helping prevent future financial crises, they collectively supported the following points:

• The accountancy profession has a key role to play in strengthening corporate governance and facilitating the integration of governance and sustainability into the strategy, operations, and reporting of an organization.
• Boards should be focused on the long-term sustainability of their businesses. As such, corporate governance reform must include strengthening board oversight of management, positioning risk management as a key board responsibility, and encouraging remuneration practices that balance risk and long-term (social, environmental, and economic) performance criteria.
• Governance is more than having the right structures, regulation and principles in place—it is about ensuring that the right behaviors and processes are in place.
• Governance mechanisms need to be strengthened at banks and other companies to ensure better oversight of risk management and executive compensation.
• More dialogue is needed between policy makers, the accounting profession, and other financial industries to consider how we can work together effectively on a global level.

The conference, hosted by the International Federation of Accountants (IFAC) and the United Nations Conference on Trade and Development (UNCTAD), took place at the United Nations Office in Geneva, Switzerland.

Professor Mervyn King, author of the King Code on Corporate Governance, was the keynote speaker. Participants from more than 50 countries were on hand to address key questions including: What lessons has the financial crisis revealed about corporate governance? What corporate governance reforms should be developed on a global basis? And what role should the accountancy profession play?

“Professional accountants can serve as a critical link to ensure that good corporate governance is practiced,” said IFAC President Robert L. Bunting. “Accountants provide strategic direction to boards and governing bodies, aiming to ensure that risks are managed appropriately and resources are used responsibly—all key processes for facilitating sound corporate governance.”

The IFAC/UNCTAD conference was designed to allow professional accountants, corporate governance experts, and other participants to challenge current practices, exchange views on essential elements of corporate governance, and discuss best practices that will improve the current and future business and economic climate.

Mervyn King, professor at the University of South Africa, who specializes in corporate citizenship, said: “Our businesses impact society, the economy, and the environment. We are no longer distant bystanders of these organizations, but we are the stakeholders, because business impacts our society, environment, and economy.”

About IFAC

IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

About the United Nations Conference on Trade and Development (UNCTAD)

UNCTAD is the focal point of the United Nations for the integrated treatment of investment and enterprise development. Since its founding in 1964, UNCTAD has progressively evolved into an authoritative knowledge-based institution whose work aims to help shape current policy debates and thinking on development. UNCTAD is the host for the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR). For more than 25 years, ISAR has been the focal point within the UN system for issues of corporate transparency and accounting. Through ISAR, UNCTAD works to promote international best practices in financial reporting and corporate governance disclosure and to assist developing countries to build their technical capacity in this area.

This comprehensive implementation guide is intended to help practitioners understand and efficiently apply the clarified International Standards on Auditing (ISAs) to audits of small- and medium-sized entities (SMEs). First issued in 2007 and developed with the Canadian Institute of Chartered Accountants, it is designed for use by all practitioners. Volume 1 covers the basic concepts of a risk-based audit in conformance with the ISAs.

The International Auditing and Assurance Standards Board (IAASB) today released for public exposure a new proposed pronouncement—International Auditing Practice Statement (IAPS) 1000, Special Considerations in Auditing Complex Financial Instruments—that highlights practical considerations for auditors when dealing with complex financial instruments. The pronouncement gives particular emphasis to auditing considerations relating to valuation and disclosure issues for financial statement items measured at fair value.

“The global financial crisis highlighted the need for further guidance on this important and challenging area of financial reporting,” explained Prof. Arnold Schilder, chairman of the IAASB. “Through the proposed IAPS 1000, the IAASB seeks to raise awareness of issues being encountered in practice, in particular for fair value estimates and the valuation of assets in illiquid markets. IAPS 1000 provides useful guidance to auditors of entities of all sizes on a topic that will likely continue to prove challenging for both preparers of financial statements and auditors.”

Along with the proposed IAPS 1000, the IAASB is also exposing for comment proposed changes to the current Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services (the proposed amended Preface), which explains the authority of this and future IAPSs. James Gunn, IAASB technical director, explains, “The proposed amended Preface makes clear that the IAASB’s Practice Statements are issued to promote good practice and provide practical assistance to auditors in implementing the ISAs. As such, when a Practice Statement is relevant in the circumstances of the audit, auditors should understand the guidance in that Statement. From a practical point of view, the proposals seek to achieve a common understanding of how Practice Statements are to be used.”

The IAASB plans to finalize proposed IAPS 1000 and the statement of authority in 2011. Auditors, however, may wish to consider the material in the proposed IAPS 1000 as they plan and perform their upcoming audit engagements.

How to Comment
The IAASB invites all stakeholders to comment on its proposals. To access the exposure draft or submit a comment, visit the IAASB’s website at www.iaasb.org/ExposureDrafts.php. Comments on the exposure draft are requested by February 11, 2011.

About the IAASB
The IAASB (www.iaasb.org) develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

Over 40 senior audit professionals from 20 international networks of accounting firms met yesterday to share their experiences and industry perspectives in applying International Standard on Auditing 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors) (ISA 600). The symposium, organized by the Forum of Firms, assembled a group of experts to discuss several aspects of auditing a group, including those business activities and entities (components) that are included in the group’s financial statements.

"This symposium was designed to encourage participants to exchange views on challenges unique to auditing in a group environment, such as cross- border confidentiality considerations and differing ethics requirements,” said Nick Fraser, chair, Transnational Auditors Committee. “More importantly, with an aim of seeking ways to more fully obtain the intended benefits of ISA 600, the participants also contributed practical solutions for further consideration.”

Commencing with an overview of the key requirements of ISA 600, the symposium participants discussed a range of application issues, such as the engagement of and reporting by component auditors, communication with both management and component auditors about the group audit process, and determining materiality in a group environment. Led by speakers from across the spectrum of the Forum’s membership, including France, Germany, the United Kingdom, and the United States, the symposium concluded with a discussion on the importance of firm processes and controls that support group audit engagements.

"This event is the fourth symposium held by the Forum of Firms, and it has been a unique way to bring its members together to share and openly exchange views on present-day issues,” said Robert Dohrer, chair, Forum of Firms. “The ISA 600 symposium is an example of the Forum of Firm’s continuing commitment to promoting high-quality audit practice at a global level.”

About the Forum of Firms
The Forum of Firms (www.ifac.org/Forum_of_Firms) is an association of networks of international accounting firms that perform transnational audits. Members of the Forum have committed to adhere to and promote the consistent application of high-quality audit practices worldwide, including the use of International Standards on Auditing, and the maintenance of appropriate quality control standards in accordance with International Standards on Quality Control issued by the International Auditing and Assurance Standards Board. Through their organizations, members also conduct globally coordinated internal quality assurance reviews on a regular basis and have policies and methodologies that conform to the International Federation of Accountants' Code of Ethics for Professional Accountants. The Transnational Auditors Committee is the Executive Committee of the Forum of Firms and a committee of the International Federation of Accountants.

IFAC President Robert Bunting spoke at the 2010 American Accounting Association Annual Meeting on accounting education in a global environmnent. Watch the video here.

IFAC President Robert Bunting was named as one of Accounting Today’s Top 100 Most Influential People of 2010. Read the full article here.