The COVID-19 pandemic is a global health and humanitarian crisis. Beyond the significant challenges that lay ahead in all facets of life, the pandemic has the potential to significantly impact the way that audits are undertaken.

The IAASB has created a COVID-19 web page to help our stakeholders, and the larger accounting community, navigate some of the challenges ahead.

Click HERE to learn more.

Organizations are increasingly reporting about their broader performance or impact (“Extended External Reporting” or “EER”) either voluntarily or as required by law or regulation, and there is a growing demand for assurance engagements on such reporting. In response, the International Auditing and Assurance Standards Board (IAASB) has developed for feedback it’s non-authoritative EER Guidance and is requesting public input by July 13, 2020.

“Extended external reporting and the role it has to play will only continue to grow in importance,” said Tom Seidenstein, Chair of the IAASB. “It’s a very exciting time for the IAASB as the work we’re undertaking today to develop international assurance guidance for non-financial information in the form of EER will, we believe, pave the way for much greater engagement and consistency in this area.  We welcome and encourage all feedback during our comment period, which runs through July 13, and look forward to learning from the comments we receive.”

EER encapsulates many different forms of reporting including, but not limited to, integrated reporting, sustainability reporting and other reporting by entities about financial and non-financial matters, including environmental, social and governance matters, related to an entity’s activities.

The purpose of the IAASB’s Public Consultation on Proposed Guidance, Extended External Reporting Assurance is to promote consistent high-quality application of ISAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information so as to:

• Strengthen the influence of EER assurance engagements on the quality of EER reports;
• Enhance user trust in the resulting assurance reports; and
• Engender greater confidence in the credibility of, trust in and reliance upon EER reports by their intended users.

The draft non-authoritative guidance addresses Special Considerations in Performing Assurance Engagements on Extended External Reporting.

Importance of Feedback

Input received will assist the IAASB in finalizing the non-authoritative guidance document. Comments are also invited on two supplementary documents, should respondents wish to comment on their content, structure and relationship to the draft guidance document – Supplement A: Credibility and Trust Model and Background and Contextual Information and Supplement B: Illustrative Examples.

The IAASB invites input from all stakeholders, especially those with practical experience in this evolving area of reporting, including practitioners and other experts involved in performing EER assurance engagements, preparers of EER reports, investors and other users of EER reports and assurance reports on them, standard setters, and regulators.

The IAASB’s EER Assurance project is being run with the support of the World Business Council for Sustainable Development. This work is part of a conservation and financial markets collaboration among Ceres, World Business Council for Sustainable Development, World Wildlife Fund and the Gordon and Betty Moore Foundation. For more information, please visit www.moore.org

Aspects for Consideration

This draft non-authoritative guidance covers the following aspects of the performance of an EER assurance engagement where practitioners commonly encounter challenges in applying ISAE 3000 (Revised):

• Applying appropriate competence and capabilities to an EER engagement;
• Exercising professional skepticism and professional judgment in the context of an EER engagement, where there may be a heightened need to do so;
• Determining preconditions and agreeing the scope of an EER assurance engagement;
• Determining the suitability and availability of criteria (reporting framework(s), standards or preparer-developed criteria) used to prepare the EER report;
• The preparer’s governance and internal control over its process to prepare the EER report;
• Considering an entity’s process to develop preparer-developed criteria to determine the topics to be reported on in the entity’s EER report (sometimes referred to as a preparer’s ‘materiality process’);
• The types of misstatements that may occur in the EER report (using assertions);
• Obtaining evidence;
• Considering the materiality of misstatements in the EER report;
• Preparing the assurance report;
• Considerations in addressing qualitative EER information; and
• Considerations in addressing future-oriented EER information.

Click HERE for more info.

About the IAASB

The IAASB 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 the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

Out of an abundance of caution, the International Auditing and Assurance Standards Board (IAASB) has decided to host their upcoming board meeting virtually by video teleconference instead of gathering in New York City March 16 – 20.

More info: https://www.iaasb.org/meetings

Due to the ongoing COVID-19 pandemic, the International Ethics Standards Board for Accountants (IESBA) will host their upcoming board meeting virtually by video teleconference instead of gathering in New York City June 8 - 12 & 15.

More info here: https://www.ethicsboard.org/meetings

IFAC today released the latest installment of its Exploring the IESBA Code educational series: The Conceptual Framework–Step 2, Evaluating Threats.

Exploring the IESBA Code is a twelve-month series providing an in-depth look at the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). Each installment focuses on a specific aspect of the Code using real-world situations in a manner that is relatable and practical. Readers will gain a better understanding of the thought process behind important aspects of the Code through storytelling and expert analysis from professionals involved in developing the standards.

The first installment of the Series looked at the Code’s five Fundamental Principles, which establish the standard of behavior expected of all professional accountants. The second installment highlighted the Code’s Conceptual Framework with a focus on identifying threats, while this third installment focuses on how to evaluate those identified threats.

A professional accountant can often come across complex or challenging situations that are not black and white. These challenging situations require ethical considerations, some of which are expressly dealt with in the Code. The unique and informational series was developed by IFAC in collaboration with the International Ethics Standards Board for Accountants (IESBA) to help explain how the Code assists in navigating some of these challenges.

To read and download this and future installments, visit the IFAC website.

The Exploring the IESBA Code was published by IFAC and does not form part of the Code. It is non-authoritative and is not a substitute for reading the Code.

For more information about the Code, please click here.

The International Ethics Standards Board for Accountants (IESBA) today released its Phase One Report exploring the ethical implications of technology on the accounting, assurance, and finance functions.

The report is the culmination of the first phase of fact-finding work the global ethics standard-setting board initiated in recognition of the pace and magnitude of change caused by disruptive technological innovations. The initial phase of the initiative was led by the IESBA’s Technology Working Group (TWG).

In its findings, the TWG concluded that, generally, the IESBA’s International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) currently provides high level, principles-based guidance for most technology-related ethics issues that professional accountants and firms might encounter. However, the report cites various findings and sets out recommendations grouped into five key topical areas where material in the Code could be enhanced.

“Over the last few years, the pace, significance and complexity of technology advances, such as machine learning, have given rise to new opportunities and challenges for the accountancy profession,” said Dr. Stavros Thomadakis, IESBA Chair, adding “The effective organization and delivery of services are already undergoing major change. The global accountancy profession will have to recognize and address new ethical challenges in a rapidly changing technological environment. The IESBA Technology Working Group has delivered a comprehensive and informative report in this strategic area. This lays the groundwork for our substantive and timely response to ethical and public interest challenges posed by radical technological change.”

The report also includes other recommendations for the next phase of the initiative, including that the IESBA conducts additional information gathering with respect to the ethical implications of other technological developments such as blockchain, cybersecurity and Internet of Things.

Click here for more information.

A new report by ACCA and IFAC highlights the benefits of accrual information in the public sector and identifies the positive impact on citizen lives.  

In interviewing 20+ public sector experts – including IPSASB Board member Neema Kiure-Mssusa, IPSASB Program and Technical Director Ross Smith, and IPSASB Principal Joao Fonseca – the report also provides 30 recommendations for governments to improve accrual implementation.

In asking “Is Cash Still King?” IFAC and ACCA examine how important accrual information is for a strong public sector, economy, and citizen well-being. Aligned with these outcomes, the IPSASB remains committed to the strategic objective of strengthening public financial management by increasing adoption of accrual-based IPSAS. [Hear our Chair, Ian Carruthers, discuss how the IPSASB works to strengthen public financial management.]

We encourage you to read the report and to share with your stakeholders.

There are more public sector insights available on our YouTube playlist. In particular, check out:

• IPSASB Deputy Chair Mike Blake discussing the benefits of accruals for strategic asset management in the public sector
• IPSASB Member Bernhard Schatz exploring why governments should add public sector pension liabilities to the balance sheet
• Fergus McCormick of the Emerging Markets Investors Alliance exploring how investors interpret information on public finances
• Jacob Soll, USC Professor, discussing why balance sheet information must inform executive decision making in the public sector

A report issued jointly by ACCA and IFAC, Is cash still king? Maximising the benefits of accrual information in the public sector, not only confirms that a complete public sector transition to accrual accounting will serve the public interest, but also contains 30 specific recommendations to improve accrual implementation. 

Good decision-making requires the right information. Given that most government decisions have financial implications, understanding the economic reality of a government’s activities improves the quality of decisions made. By 2023, the number of countries reporting their financial position on an accruals basis is expected to increase from 37 to 98, jumping from 25% to 65% among 150 countries surveyed in the International Public Sector Financial Accountability Index.

Cash accounting, which 75 per cent of governments around the world use in some form, does not present the most accurate picture of a government’s financial health, nor does it enable adequately planning for the development, delivery, and maintenance of the services, programmes, and infrastructure on which people rely.  And that, in turn, leads to a breakdown of trust in governments.

The report’s author, ACCA’s Head of Public Sector Policy, Alex Metcalfe, said: ‘Moving to accruals needs to be more than a compliance exercise, it should be about making the best use of financial information.  The range of benefits highlight in this report demonstrates the clear upside to implementing accruals in the public sector.  We need to ask whether cash is still king, when it comes to financial reporting and budgeting.’

‘The accounting profession’s public interest mandate is nowhere more apparent than in the public sector, where high-quality reporting and budgeting is a prerequisite for government transparency and effective delivery of public services,’ said Kevin Dancey, CEO of the International Federation of Accountants (IFAC). ‘To the finance professionals and public sector decision makers who are leading the transition from cash to accrual accounting, we commend you and support you.’

The benefits and complexity arising from accruals varies by types of adoption. The report notes that:

• Cash accounting and budgeting is the simplest basis but provides the least decision-useful information.
• Accrual accounting combined with cash budgeting is the most complex basis, but it generates information that helps achieve value for money, facilitates public scrutiny, and supports sustainable decision-making.
• Accrual accounting and accrual budgeting creates a ‘medium level of complexity’ and creates consistency. In addition to realising the benefits from implementing accrual accounting, this environment also puts finance right at the heart of decision making and allows governments to embed effective performance management.
• New, decision-useful information generated by accrual implementation promotes the achievement of value for money and facilitates effective public scrutiny.
• To produce decision-useful information, governments must set objectives; plan; engage stakeholders; create effective systems; and develop the right skills, including internal training beyond preparers.

This report recommends that governments implementing accruals should be:

• Directing independent fiscal policy institutions to assess contingent liabilities and produce recurring fiscal risk reports.
• Implementing accrual budgeting to put finance at the heart of decision-making, while embedding performance management across government.
• Planning to produce a fully consolidated balance sheet that provides a full financial picture of the resources and risks for the public sector. This must include State-owned Enterprises at the whole-of-government level.
• Building political challenges into the implementation roadmap from the beginning (e.g., through a sunset clause requiring the eventual recognition of employee pension liabilities).
• Including groups that provide a constructive challenge function to the reform, such as auditors and legislative committees (e.g. the UK’s Public Accounts Committee).
• Deploying experts centrally to control consulting costs and support implementation across government.

Kevin Dancey, CEO IFAC, added: ‘IFAC and ACCA are committed to supporting the adoption and implementation of International Public Sector Accounting Standards (IPSAS), which underpin public sector accrual accounting, and to developing a robust profession that implements and manages such systems. With 65 per cent of governments globally set to implement accrual accounting by 2023, we’re encouraged by the positive trend, and strongly support further adoption of accruals and IPSAS.’

- Ends -

For media enquiries, contact:

Nadia Manuelli
E: nadia.manuelli@accaglobal.com
T: +44 (0)20 7059 5661
M: +44 (0)7808 940139
Twitter @ACCANews 
www.accaglobal.com

Geena De Rose
E: geenaderose@ifac.org
T: +1 (646) 277 9390
Twitter @IFAC
www.ifac.org

Notes to editors:

The number of countries reporting on the accruals basis represents 40% of the 150 countries included in the 2018 International Public Sector Financial Accountability Report.  The research evidence was gathered in three ways. Roundtable discussions were held in three countries (UK, Canada and Australia).  Semi-structured expert phone interviews were held with 12 experts in seven countries: Austria, Canada, New Zealand, Slovakia, Switzerland, Tanzania and Zimbabwe.  The face-to-face and telephone evidence was supported by a desk-based literature review.

About ACCA

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 219,000 members and 527,000 students (including affiliates) in 179 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 110 offices and centres and 7,571 Approved Employers worldwide, and 328 approved learning providers who provide high standards of learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA has introduced major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here: www.accaglobal.com

About IFAC

The International Federation of Accountants (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. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.

The International Public Sector Accounting Standards Board^® (IPSASB^®) has released Exposure Draft (ED) 70, Revenue with Performance Obligations, ED 71, Revenue without Performance Obligations, and ED 72, Transfer Expenses. The three exposure drafts are published together to highlight for respondents the linkages between the accounting for revenue and transfer expenses. The three EDs pioneer new approaches for some of the most significant transactions of public sector entities, including inter-governmental transfers and grants for the delivery of key government services to the community by introducing:

• A more straight-forward approach to classifying revenue transactions;
• A new model for the recognition and measurement of revenue; and
• Guidance on transfer expenses, which currently does not exist in IPSAS.

“Sound accounting for revenue is crucial for all governments and other public sector bodies. We are confident that the proposed use of the performance obligation approach in ED 70, together with the updates to IPSAS 23 in ED 71, will improve financial reporting for both users and preparers of public sector financial statements,” said IPSASB Chair Ian Carruthers. “ED 72 complements the other two EDs by proposing guidance for the first time on transfer expenses, which are a major area of government expenditure, often recognized as revenue by other public sector bodies.”

ED 70 is aligned with IFRS 15, Revenue from Contracts with Customers, while extending the income recognition approach in that standard to address common public sector transactions which include performance obligations, including those where the ultimate beneficiary is a third party. It is intended to supersede IPSAS 9, Revenue from Exchange Transactions, and IPSAS 11, Construction Contracts.

ED 71 is an update of IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers) that addresses some of the issues encountered in its application. Unlike the current revenue standards, which classify revenue based on an exchange or non-exchange distinction, ED 70 and ED 71 differentiate revenue transactions based on whether or not the transaction has a performance obligation, which is defined as a promise to transfer goods or services to a purchaser or a third-party beneficiary. ED 71 also provides public sector-specific guidance on capital transfers for the first time.

ED 72 proposes guidance for transfer expenses, where a transfer provider provides resources to another entity without receiving anything directly in return. In providing guidance for the first time on the expense side of transactions that may be accounted under the revenue EDs by other public sector organizations, ED 72 includes proposals for transactions with and without performance obligations.

The IPSASB welcomes the views of respondents on the proposed standards and the other matters raised for comment in the three EDs.

How to Comment
To access the Exposure Drafts and their summary At-a-Glance documents, or to submit a comment, visit the IPSASB website, www.ipsasb.org. Comments on the Exposure Drafts are requested by November 1, 2020. The IPSASB encourages IFAC members, associates, and regional accountancy organizations to promote the availability of this Exposure Draft to their members and employees. 

About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through developing and maintaining accrual-based International Public Sector Accounting Standards® (IPSAS®) and other high-quality financial reporting guidance for use by governments and other public sector entities. It also raises awareness of IPSAS and the benefits of accrual adoption. The Board receives support from the Asian Development Bank, the Chartered Professional Accountants of Canada, the New Zealand External Reporting Board, and the governments of Canada and New Zealand. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org. 

About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.

All stakeholders are invited to register and participate

Feb 12, 2020 | New York, New York | English

Today, the International Ethics Standards Board for Accountants^® (IESBA^®) announced the dates for two webinars focused on the recently released Exposure Drafts, with proposals relating to Non-assurance services (NAS) and Fees that further reinforce auditor independence.

Please click below to register and join us for each 60-minute webinar event.

• Tuesday, March 17, 2020 from 8:30 a.m. to 9:30 a.m. EST; Overview of Proposed Revisions to the Non-Assurance Services Provisions of the Code

• Thursday, March 19, 2020 from 10:00 a.m. – 11:00 a.m. EST; Overview of Proposed Revisions to the Fee-Related Provisions of the Code.   

During the March 17 webinar, the NAS Task Force Chair, Mr. Richard Fleck, will explain the key NAS proposals, including:

• A prohibition on providing NAS to an audit client that is a public interest entity (PIE) if a self-review threat to independence will be created;
• Further tightening of the circumstances in which materiality may be considered in determining the permissibility of a NAS;
• Strengthened provisions regarding auditor communication with those charged with governance (TCWG), including, for PIEs, a requirement for NAS pre-approval by TCWG; and
• Stricter requirements regarding the provision of some NAS, including certain tax and corporate finance advice.

During the March 19 webinar, the Fees Task Force Chair Mr. Ian McPhee, will explain the significant aspects of the fee-related proposals which include:

• A prohibition on firms allowing the audit fee to be influenced by the provision of services other than audit to the audit client;
• In the case of PIEs, a requirement to cease to act as auditor if fee dependency on the audit client continues beyond a specified period; and
• Communication of fee-related information to TCWG and to the public to assist their judgments about auditor independence.

Don’t miss out on this unique opportunity to engage with representatives of the IESBA and learn more about the NAS and fee-related proposals.

The IESBA welcomes feedback on the NAS and Fees EDs from all stakeholders, including investors and other users of financial statements, the corporate governance community, the regulatory and audit oversight community, preparers, firms, national standard setters, IFAC member bodies, academics and others.

The comment deadline for the NAS and Fees Exposure Drafts is May 4, 2020.

If you have any questions, please email Szilvia Sramko at szilviasramko@ethicsboard.org.