The International Auditing and Assurance Standards Board (IAASB) today released International Standard on Auditing (ISA) 540 (Revised), its revised standard for the audit of accounting estimates and related disclosures.

Banks, insurers and other financial services firms have seen revolutionary change in their accounting practices as they moved to new accounting standards that changed the way they deal with loan provisions and insurance contracts. ISA 540 (Revised) reflects this rapidly evolving business environment and ensures that the standard continues to keep pace with the changing market.

This revised standard is the first to be completed as part of the IAASB’s broader program ‘Addressing the Fundamental Elements of an Audit’ and is an important part of the IAASB’s efforts to improve audit quality globally. Some of the significant revisions include:

• An enhanced risk assessment that requires auditors to consider complexity, subjectivity and other inherent risk factors in addition to estimation uncertainty. This will drive auditors to think more deeply about the risks inherent to accounting estimates.
• A closer link between the enhanced risk assessment and the methods, data and assumptions used in making accounting estimates, including the use of complex models.
• Specific material to show how the standard is scalable to all types of accounting estimates.
• Emphasis on the importance of applying appropriate professional skepticism when auditing accounting estimates to foster a more independent and challenging skeptical mindset in auditors.

ISA 540 (Revised) becomes effective for financial statement audits for periods beginning on or after December 15, 2019.

It is critical that all parties in the financial reporting supply chain, particularly regulators, national standard-setters and firms collaborate in the implementation of a standard with such far-reaching effects on the audit of financial statements. The IAASB will provide implementation support to help auditors navigate and apply the revised standard.  Please visit the IAASB website for more information.

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.

• 51% of Gen Z feel it is important for their government to prioritize a national approach to policy, while 32% prefer a globalist approach.
• Gen Z’s top career priorities include: a stable career path (89% important or very important), competitive salary and benefits (87%), and work-life balance (84%).
• 73% of Gen Z respondents would consider a career in professional accountancy, and over one fifth (21%) have already decided to pursue an accounting career.

NEW YORK, SEPTEMBER 25, 2018 – Generation Z (Gen Z) is concerned for the economy and their job prospects, according to a new survey published today by IFAC (International Federation of Accountants), the voice of the global accounting profession. The survey of over 3,300 individuals aged 18-23 across 19 G20 countries takes the pulse of next-generation attitudes on public policy and career expectations.

Understanding Gen Z priorities will be critical for policy makers and employers alike, as public policy debates increasingly confront inter-generational trade-offs in wealth and as Gen Z is set to comprise the world’s largest generation.

Politically Engaged, Economically Conservative
This generation’s top public policy priorities are advancing economic stability, quality education, and job availability. However, views on how to achieve desired outcomes depend on geography. The survey found 51% of Gen Z’ers globally favor a nationalist approach to public policy, while 32% favor globalism and international collaboration.

Gen Z’ers in France (52%) and Germany (43%) most strongly support international policy collaboration, while preference for a nationalistic approach to public policy is strongest in China (65%), South Africa (63%), India (60%), and Russia (59%).

“Gen Z views appear to reflect the tension between national protectionism and global policy cooperation playing out in contemporary geopolitical and economic debates,” said Russell Guthrie, IFAC Executive Director. “The emphasis on economic stability speaks volumes about what the future will hold, given that this generation is already exercising its active and passionate voice on the global stage.”

Beyond the clash between national protectionism and globalization, other concerns include healthcare, especially in Canada, France, Germany and the U.S., and tackling systematic corruption, which was rated a top priority by respondents in Argentina, Brazil, India and Indonesia.

Desire Job Security in Stable Professions
Gen Z’s desire for stability is also apparent in its workplace expectations. They anticipate digitalization and emerging technology to be a double-edged sword, bringing new ways of working but also the decline of traditional jobs as a result.

Contrasted with the “live the dream at all costs” outlook commonly attributed to the preceding Millennial generation, Gen Z’s top priorities in choosing a career include a stable career path (89% important or very important), competitive salary and benefits (87%) and work-life balance (84%).

Gen Z’s perception of professional accountancy is highly aligned with its top two priorities in choosing a career. 87% of Gen Z see professional accountancy as attractive or very attractive in offering a stable career path, while 86% see the profession as meeting or exceeding their salary and benefits expectations.

Nearly three-quarters (73%) of Gen Z respondents would consider a career in professional accountancy, and over one fifth of respondents (21%) indicate that they have already decided to pursue a career in the profession.

“Generation Z brings a great wealth of new and unique talent to the global workforce. This survey identifies why the global accounting profession is well positioned to attract and retain next-generation talent, particularly as the role of the accountant becomes ever more strategic,” said Fayezul Choudhury, IFAC CEO. “Employers from all industries would be well suited to understand Gen Z perspectives as they come to shape the future of the workplace.”

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Survey Method
For this study, Generation Z is defined as individuals born between the mid- 1990s and mid-2000s. Conducted by IFAC, this study gives voice to 3,388 individuals between the ages of 18 and 23 in G20 countries. This represents a sample size of 150-300 participants from: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK, and the US.

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. IFAC is comprised of over 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.

Effective governance is the outcome of a mosaic of organizational policies, processes, and cross-functional interactions, according to experts featured in a new report from The Institute of Internal Auditors (IIA) and IFAC (the International Federation of Accountants).

“United, Connected and Aligned – How the Distinct Roles of Internal Audit and the Finance Function Drive Good Governance,”  takes the pulse of 11 governance experts and thought leaders to examine the crucial roles both internal audit and the finance function play in maintaining a sound system of corporate governance.

The report identifies several key requirements for effective governance, including:

• An ethical corporate culture that empowers effective leaders throughout the organization to carry out good governance processes;
• Effective communication and collaboration among the various roles; and
• Requisite competencies for internal audit and the finance and accounting functions to earn stakeholder support and respect.

The governance experts who shared their knowledge and experiences include the leaders of the international professional associations that produced the report.

“Collaboration and cooperation between internal audit and the finance function is crucial to ensuring good governance,” said IIA President and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA. “Only by recognizing their distinct roles and the value in their successful interaction can organizations fully leverage the services they provide.”

IFAC’s President also stressed the benefit of the relationship.

“There is a deep need to pursue actions and preserve cultures that drive good governance,” said Rachel Grimes, IFAC President. “Professional accountants play a key role in governance at every line of defense, and abide by a global Code of Ethics that exemplifies the profession’s public interest mandate.”

The report notes that, because the two functions have complementary roles, their overlapping duties may help to avoid gaps in governance. Importantly, the experts demonstrate the need for both internal audit and the finance function to have champions within and outside the organization who advocate for their importance and value.

Chambers added, “Internal audit needs to be its own champion and work to articulate the benefits of including internal audit in the governance process. Stakeholders [executive management and the board] who understand the complex interactions and relationships that influence governance are best positioned to help their organizations succeed.”

“United, Connected and Aligned – How the Distinct Roles of Internal Audit and the Finance Function Drive Good Governance” represents an important collaboration between IFAC and The IIA, whose members represent a significant and vital segment of professionals who contribute to good governance. The organizations have a long, mutually supportive relationship, which includes a Memorandum of Understanding that promotes collaborative works and serve on each other’s boards and committees.

About The Institute of Internal Auditors
The Institute of Internal Auditors (IIA) is the internal audit profession’s most widely recognized advocate, educator, and provider of standards, guidance, and certifications. Established in 1941, The IIA today serves more than 190,000 members from more than 170 countries and territories. The IIA’s global headquarters are in Lake Mary, Fla. For more information, visit www.theiia.org.

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. IFAC is comprised of over 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.

Mr. Martin Baumann has been appointed Chair of the International Auditing and Assurance Standards Board (IAASB) for a three-year term beginning January 1, 2019. Mr. Baumann’s appointment was recommended by the Interim Nominating Committee after an extensive international search. The IFAC Board endorsed the Interim Nominating Committee’s recommendation, which was approved by the Public Interest Oversight Board (PIOB), which oversees the IAASB's activities. The Monitoring Group was informed of the recommendation.

“Martin Baumann is a leader who brings vision, a passion for the public interest and a depth of experience to the role of IAASB Chair," said Ryozo Himino, Interim Nominating Committee Chair. "As its next Chair, he will lead the IAASB during an important period of innovation and change as well as continuing the Board’s work developing high-quality international audit, assurance, quality control and related services standards that are accepted and used around the world."

As Chair, Mr. Baumann will lead the IAASB though an environment of rapid advances in current and emerging technology and changes in the breadth and complexity of information needed by investors and other stakeholders. He will be responsible for leading the finalization and implementation of IAASB’s strategic objectives; actively engaging key stakeholders around the world, including national standard setters, regulators, investors and firms of all sizes; and delivering timely high-quality standards in the public interest.

"The IAASB plays a vital role in the world's capital markets. High-quality professional standards developed in the public interest by the IAASB provide the markets with confidence in the important work done by auditors,” said Mr. Baumann. “I am committed to working tirelessly to ensure the IAASB meets its mandate, and continues to be recognized as a highly-regarded independent organization developing high-quality standards."

Mr. Baumann most recently served as Chief Auditor and Director of Professional Standards at the Public Company Accounting Oversight Board (PCAOB), where, with the Board, he was responsible for establishing auditing and related professional practice standards for audits of all companies registered with the US Securities and Exchange Commission. He also chaired the PCAOB’s Standing Advisory Group and served on the IAASB and International Ethics Standards Board for Accountants Consultative Advisory Groups. Previously he was Chief Financial Officer for Freddie Mac and a senior partner at PricewaterhouseCoopers.

Mr. Baumann succeeds Prof. Arnold Schilder, whose term as IAASB Chairman concludes after a decade of service at the end of 2018. Prof. Schilder has led the IAASB with distinction, from new landmark assurance standards addressing key aspects of sustainability reporting, to innovative and groundbreaking new auditor reporting standards, to enhancements now underway to the standards that seek to fundamentally improve audit. There are now nearly 130 jurisdictions around the world using or in the process of adopting the clarified International Standards on Auditing. Mr. Baumann will work closely with the current Chair commencing October 29, 2018 to allow for a smooth transition.

The Interim Nominating Committee was formed by the Monitoring Group in February 2018 to conduct the process for the next IAASB Chair. The Committee was chaired by Ryozo Himino, Vice Minister for International Affairs, Financial Services Agency (Japan), and was comprised of four other members including Guy Andrade, Huguette Labelle, Lord Jonathan Hugh Mance and Sir David Tweedie, and two observers, Rachel Grimes and Eddy Wymeersch. The Interim Nominating Committee followed an open and transparent process to select the most suitable candidate for the position. It will disband now that its mandate has been completed.

For more information about the work of the IAASB, visit its home page at www.iaasb.org.

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.

The International Public Sector Accounting Standards Board^® (IPSASB^®) has released IPSAS 41, Financial Instruments.

IPSAS 41 substantially improves the relevance of information for financial assets and financial liabilities. It will replace IPSAS 29, Financial Instruments: Recognition and Measurement, and improves that Standard’s requirements by introducing:

• Simplified classification and measurement requirements for financial assets;
• A forward looking impairment model; and
• A flexible hedge accounting model.

“The significance of government debt to global capital markets can often be ignored,” said IPSASB Chair Ian Carruthers. “IPSAS 41 is a major step forward in accounting for financial instruments, and responds to the problems with IPSAS 29 that were exposed by the global financial crisis. It provides principles that appropriately reflect the economics of transactions involving financial instruments, replacing the more rules-based approach of its predecessor.”

IPSAS 41 is based on International Financial Reporting Standard (IFRS) 9, Financial Instruments, developed by the International Accounting Standards Board (IASB®), but it also includes public sector-specific guidance and illustrative examples on:

• Financial guarantees issued through non-exchange transactions;
• Concessionary loans;
• Equity instruments arising from non-exchange transactions; and
• Fair value measurement.

About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through the development of accrual-based International Public Sector Accounting Standards® (IPSAS®) and other guidance for use by governments and other public sector entities. It 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.

The International Ethics Standards Board for Accountants^® (IESBA^®) today released new enhancements to its global ethics code which address more fully the responsibilities of professional accountants around the offering and accepting of inducements.

The revised standard sets out a comprehensive framework that more clearly delineates the boundaries of acceptable inducements, and guides the behavior and actions of professional accountants in business and in public practice in situations involving inducements.

“Incentives motivate behavior, and some inducements can be a powerful incentive to unethical behavior,” said IESBA Chairman Dr. Stavros Thomadakis. “This revised standard complements our standard on NOCLAR to offer a full system of ethical defenses that relate both to malfeasance committed by others and to accountants’ own involvement in potentially unethical behaviors.”

Central to this framework is a new intent test that prohibits the offering or accepting of inducements where there is actual or perceived intent to improperly influence the behavior of the recipient or of another individual. The framework also:

• Clarifies the meaning of an inducement;
• Establishes a requirement to understand and comply with laws and regulations that prohibit the offering or accepting of inducements in certain circumstances, such as in relation to bribery and corruption;
• Guides professional accountants in applying the enhanced conceptual framework underpinning the International Code of Ethics for Professional Accountants (including International Independence Standards) where there is no improper intent; and
• Provides enhanced guidance on the offering and accepting of inducements by professional accountants’ immediate or close family members.

The revised provisions become effective June 2019, including consequential amendments to the independence provisions of the Code addressing gifts and hospitality. The changes constitute the last piece of the recently revised and restructured Code.

About the IESBA

The IESBA is an independent standard-setting board that develops and issues, in the public interest, high-quality ethical standards and other pronouncements for professional accountants worldwide. Through its activities, the IESBA develops the International Code of Ethics for Professional Accountants^TM (including International Independence Standards^TM), which establishes ethical requirements for professional accountants. The structures and processes that support the operations of the IESBA are facilitated by IFAC. Please visit www.ethicsboard.org for more information, and follow us on Twitter @Ethics_Board.

IFAC (International Federation of Accountants) and the International Bar Association (IBA) today announce their shared commitment to continue their work combating corruption in all its forms. Published ahead of the gathering of global economic leaders (G20), taking place in Buenos Aires, Argentina, the signed IBA and IFAC Anti-Corruption Mandate highlights the role of business and government in safeguarding a fair and transparent future for all.

“Grounded in a strong ethical code, professional accountants across the globe play a critical role in the fight against corruption, bringing essential transparency, relevance and integrity to the systems that underpin vibrant economies,” says IFAC CEO Fayezul Choudhury. “We are proud to partner with the IBA to highlight and advance the role of our global professions in serving the public interest now and in the future.”

According to the International Monetary Fund, bribery, which is just one aspect of corruption, costs the global economy nearly $2tn – approximately two per cent of global GDP – each year. However, where governance architecture is strong, the role played by professional accountants in tackling corruption is amplified, such as in G20 countries and in countries that have adopted anti-money laundering laws in line with international recommendations.

The presence of professional accountancy organizations is another important factor, as they advance the adoption of ethical, educational, investigation and discipline requirements that are central to the profession. According to research from IFAC, there is a strong link between the percentage of professional accountants in the workforce and more favorable scores on the main global measure of corruption.

Mark Ellis, IBA Executive Director, commented: “Corruption is a significant impediment to economic stability and development, tarnishing public trust in institutions and inhibiting citizens’ access to opportunities and prosperity. With empirical research that demonstrates the world’s poor pays the highest percentage of their income in bribes, the imminent meeting of the G20 Finance Ministers and Central Bank Governors presents an important opportunity to remind leaders that every stolen dollar, euro, lira, peso, pound, rand, real, rouble, rupee, yen or yuan robs someone of an equal opportunity in life, and that everyone has a responsibility to combat corruption. The IBA-IFAC cross-sector collaboration aims to reinforce the role and responsibility of international professions to tackle corruption, and we are delighted to be partnering with IFAC.”

In all its variations, corruption has far reaching negative consequences, including when money is misappropriated through illicit financial flows that can lead to the funding of organized high level crimes such as drug trafficking, human trafficking and terrorism.

The international accountancy and legal professions continue to promote core ethical values, facilitate national and international cooperation in the fight against corruption, and advance monitoring and enforcement systems in the public interest. With the IBA and IFAC global membership spanning more than 170 countries, they play a vital role in training, educating and supporting professionals to uphold the highest levels of integrity and ethics in business.

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. 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.

About the International Bar Association
The International Bar Association (IBA), established in 1947, is the world’s leading organisation of international legal practitioners, bar associations and law societies, spanning more than 170 countries. It is comprised of specialist committees relating to practice areas of law, including the Anti-Corruption Committee and the Anti-Money Laundering Committee. Through its global membership of individual lawyers, law firms, bar associations and law societies, the IBA influences the development of international law reform and shapes the future of the legal profession throughout the world.

Small- and medium-sized practices (SMPs) may require practical support when implementing the International Standards on Auditing (ISAs) in audits of small- and medium-sized entities (SMEs). IFAC (International Federations of Accountants) has updated the Guide to Using ISAs in the Audits of SMEs, Fourth Edition (the Guide) to help firms efficiently and proportionally apply ISAs on SME audits.

This fourth edition is updated to reflect recent changes to the ISAs including International Auditing and Assurance Standards Board (IAASB) projects on:

• Auditor Reporting;
• Disclosures;
• The Auditor’s Responsibilities Relating to Other Information; and
• Using the Work of Internal Auditors.

The Guide is designed for use by all practitioners. Volume 1 covers the fundamental concepts of a risk-based audit in conformance with the ISAs. Volume 2 contains practical guidance on performing SME audits, including two illustrative case studies—one of an SME audit and one of a micro-entity audit.

Since it was first published in 2007, the Guide has been downloaded over 100,000 times and there are 22 translations completed or in progress. To help facilitate additional translations, IFAC Members can request a Word version of the Guide with tracked changes.

Many firms use the Guide for training purposes and as the basis for firm manuals. In order to help them and our member organizations maximize the Guide’s use, IFAC has also updated the Companion Manual which provides practical ‘best use’ suggestions for the Guide.

IFAC has a long history of developing implementation support for international standards. In addition to the Guide, the extensive suite of material includes:

• Guide to Quality Control for Small- and Medium-Sized Practices, Third Edition
• Guide to Review Engagements
• Guide to Compilation Engagements
• Agreed-Upon Procedures (AUP) Engagements A Growth and Value Opportunity
• Choosing the Right Service: Comparing Audit, Review, Compilation, and Agreed-Upon Procedure Services

The International Auditing and Assurance Standards Board (IAASB) seeks public comment by November 2, 2018 on Exposure Draft, ISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement.

To ensure that International Standards on Auditing continue to form the basis for high-quality, valuable and relevant global audits, the IAASB proposes more robust requirements and improved guidance to:

• Drive consistent and effective identification and assessment of risks of material misstatement;
• Modernize ISA 315 to meet evolving business needs, including information technology, and how auditors use automated tools and techniques, including data analytics, to perform audit procedures;
• Improve the standard’s applicability to entities across a wide spectrum of circumstances and complexities; and
• Focus auditors on exercising professional skepticism throughout the risk identification and assessment process.

Through its ISA Implementation Monitoring Project and targeted continuing stakeholder outreach, the IAASB has received significant stakeholder input as the proposed revisions have been developed. The Exposure Draft is a key element of the IAASB’s work to address the fundamental elements of an audit and thereby enhance audit quality.

The International Auditing and Assurance Standards Board (IAASB) invites all interested stakeholders to its global series of discussions to help shape the future of assurance over emerging forms of external reporting (EER).

Save the Dates!

Please see below for event locations most convenient for you:

Why you should attend

The IAASB is developing non-authoritative guidance to address key challenges arising in the performance of assurance engagements over EER performed using its assurance standard, ISAE 3000 (Revised).

To help shape the future of IAASB’s assurance over EER, the half-day discussions will cover:

• progress in the development of the first phase of the draft guidance;
• implications of the guidance for assurance engagements; and
• assurance issues faced in your region.

Who should attend

The events are open to all. The IAASB wants to engage with those who prepare EER reports, assurance practitioners, regulators, standard-setters, investors and other users of EER reports. Accountants and non-accountants alike are encouraged to attend and participate to help shape the IAASB’s work in this area.

How to register

To express initial interest, please email IAASBmeetings@iaasb.org with your name, organization, country and the event you would like to attend. We will then notify you when registration opens. For updates, please visit our website and follow us at @IAASB_News and #EERassurance.

What is EER?

EER encapsulates many different forms of reporting, including, but not limited to, integrated reporting, sustainability reporting and non-financial reporting about environmental, social and governance matters. Such reports may be prepared under legislative or regulatory requirements and established frameworks, standards and guidance issued by international or national standard setters.

Further details can be found in a discussion paper, the related feedback statement, and the project proposal.