Practical application of the International Education Standards (IES), issued by the International Federation of Accountants (IFAC)

Transcription

1 REPARIS THE ROAD TO EUROPE: PROGRAM OF ACCOUNTING REFORM AND INSTITUTIONAL STRENGTHENING Practical application of the International Education Standards (IES), issued by the International Federation of Accountants (IFAC) Alex Fawcett with generous support of

2 Session objectives To provide participants with a review on the education requirements for statutory auditors highlighting the requirements of International Education standards with focus on IES 7 Continuing Professional Development: a Program of Lifelong Learning and Continuing Development of Professional Competence and IES 8 Competence requirements for audit professionals. 2

3 Requirements, standards and guidance Statutory Audit Directive: requirements IE Standards (IES) - unless explicitly required in national statutory framework, they represent guidance. Guidance: Schemes operated in EU member states those assessed by EC as equivalent. 3

4 Statutory Audit Directive Complete a course of theoretical instruction, period of practical training and examination of professional competence Required to take part in appropriate programs of continuing education in order to maintain their theoretical knowledge, professional skills and values at a sufficiently high level Applies to persons who wish to be approved as statutory auditors: implemented by the competent authority designated by the Member State in its implementing legislation 4

5 Statutory Audit Directive education requirements These include core subjects, and additional topics insofar as they relate to the statutory audit: substantial common content As statutory audit requires knowledge of company, fiscal and social law, this should be tested before an auditor of another state is approved (aptitude test) Examination shall guarantee the necessary level of theoretical knowledge of subjects relevant to statutory audit and the ability to apply such knowledge in practice. Part at least of that examination shall be written Three years approved experience 5

6 Proposal for new EU Statutory Audit Directive EC has recommended the concept of a single EU passport for audit qualifications. This signals the possibility of further harmonization and mutual recognition of CPE arrangements within the European Union Period of adaption can substitute for aptitude test 6

7 International Education Standards (IAESB) framework 1. Overall objective of accounting education is to develop a competent professional accountant. 2. Professional accounting education builds upon general education, and imparts (a) professional knowledge (b) professional skills and (c) professional values, ethics and attitudes. 3. A professional accountant is defined as a person that is a member of an IFAC member body. (IFAC is addressing this challenge as a priority) 4. A separate IES addresses the additional requirements for audit professionals (IES-8) 7

8 Key terms in IES Development Learning Education (systematic learning/structured includes training) Training Growth of capabilities that contribute to competence Most development comes about through learning Main process by which person acquires capabilities (knowledge, skills, values/ethics). Includes Education, but also self-directed, unstructured, informal On the job (occupational focus on how person does the job) Mix of instruction and practice, experience related 8

9 Scope of application of IES Applicable to IFAC PAO member bodies and candidates Represent one of the IFAC SMOs (SMO 2) Do not over-ride national regulatory framework Are not incompatible with Statutory Audit Directive in terms of qualitative aspects of examinations, education content, experience and CPD Therefore, can represent excellent guidance for PAOs and regulators 9

10 Topics and issues covered by IES 1. IES-1 Entry requirements to a Program of Professional Accounting Education 2. IES-2 Content of Professional Accounting Education Programs 3. IES-3 Professional Skills and General Education 4. IES-4 Professional Values, Ethics and Attitudes 5. IES-5 Practical Experience Requirements 6. IES-6 Assessment of Professional Capabilities and Competence 7. IES-7 Continuing Professional Development 8. IES-8 Competence Requirements for Audit Professionals 10

11 IES-1 Features and updates Current entry requirement - be at least equivalent to that for admission to University degree program. The 2011 revision proposal: entry requirements are specified so that entrants have a reasonable chance of successful completion, while not putting in place excessive barriers to entry. Also requirement for transparency to make informed choice. Mixed though largely supportive response to IAESB exposure draft on IES-1. 11

12 IES-2 Features and updates Equivalent to Degree level study Part of pre-qualification (Initial Professional Development - IPD) Require two years of full-time study, or part time equivalent Students should pursue a Degree in Accounting, or a professional qualification to gain the knowledge Not revised, though future revisions likely if IFAC clarifies the definition of a professional accountant. Likely eventual removal of input based 2 years requirement and more focus on learning outcomes 12

13 IES-3 Professional skills and general education Intellectual (knowledge, understanding, application, analysis, synthesis and evaluation) Technical and functional (numeracy, decision making, measurement, reporting, compliance) Personal (self-management, initiative, prioritize, adapt, incorporate ethical values in decision making, professional skepticism) Interpersonal and communication (work/communicate with others) Organizational and business management (planning, motivation, leadership) 13

14 IES-4 Professional values, ethics and attitudes Requires PAOs to integrate ethics and values in the professional education program. Proposed revisions include: - Inclusion of specific learning outcomes - Obligation of PAOs to formalize reflective activity, which means documentation by trainees of experiences and ethical framework applied/solutions applied. IAESB suggest the use of a record of learning, a reflective record, a personal development portfolio or a critical incident diary (would be included in work experience documentation) - Requirement for assessment to include elements of professional values, ethics and attitudes. 14

15 IES-5 Practical Experience Defines the practical experience requirement for accountants (3 years relevant experience highlighted). The proposed IES-5 clarifies the following requirements: Locates practical experience as a competence oriented component of Initial Professional Development (IPD) PAO to establish basis for defining and measurement utilizing input (days/hours) output (competences) or mixed approaches Requirement to document and verify practical experience Requirement that trainee is mentored by a professional accountant (approved employer scheme for example) 15

16 IES-6 Assessment IES-6 established the principles that are presently evidenced by the exam systems used by PAOs globally. The revised proposed IES 6 contains the following: Assessment over the life cycle of the accountant (IPD and CPD) Permits alternative approaches to assessing IPD, beyond a final assessment (exam), including workplace assessments Suggests principles for the PAO assessment process: valid, reliable (as before), equitable, transparent and sufficient. This proposal has attracted a large range of feedback from PAOs (see IAESB website) 16

17 IES-7 CPD proposed changes PAOs obliged to require CPD as condition for continued membership Set, monitor and enforce CPD, and facilitate access to CPD Member bodies shall require all professional accountants to develop and maintain competence relevant and appropriate to their work and professional responsibilities Input based 120 hours/3 years, 50% verifiable, minimum of 20 hours pa retained. Output based permitted and encouraged (examples include specialist qualifications, work-logs, reviewed written/published work) 17

18 IES-7 CPD Skills Audit can be based on a series of challenge and focus questions regarding the past, the present and the future. This should help the member to: Evaluate the learning and development completed Identify those learning or development activities that benefited most Explore the development activities that have been most time/cost effective so far 18

19 IES-7 CPD Skills Audit Questions: What have you achieved? What is your role? What's expected of you? What could change? How do you learn? 19

20 IES 8- Competence requirements for Audit Professionals PAOs to ensure that auditors meet defined entry, education and experience requirements: Entry: Qualify as a professional accountant and hold a university degree Education: Advanced Financial Reporting and Auditing (including IFRS, ISAs, applicable national requirements), and appropriate IT competences Skills: application of IES-4 in the context of the work of an auditor Experience: At least three years under the supervision of an engagement partner (note that trainee must gain audit experience!) Revision underway to address feedback from IES-8 20

21 IES 8- Competence requirements for Audit Professionals IE8 Guidance to Audit Firms 4 Key Steps Read the Standard Identify the Audit Professionals in your firm (i.e. those exercising significant judgements) Consider whether these Audit Professionals have the pre-requisite capabilities and competence and record these considerations, detailing any proposed actions Consider whether these capabilities and competence are maintained and keep a record of this consideration up to date. 21