International Federation of Accountants IFAC s Role and Major Initiatives John Kellas, IAASB Chairman. FCM Seminar Cairo, September 2005

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1 International Federation of Accountants IFAC s Role and Major Initiatives John Kellas, IAASB Chairman FCM Seminar Cairo, September 2005

2 IFAC Today Expanding organization of 163 member bodies in 119 countries Represents 2.5 million accountants in public practice, education, government service, industry and commerce Provides for public interest input and has public oversight

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

4 IFAC s Mission Establishing and promoting adherence to high quality professional standards Furthering the international convergence of such standards Speaking out on public interest issues where the profession s voice is most relevant

5 IFAC Serves the International Profession Accountancy organizations worldwide Large, medium and small firms Developed and developing countries Professionals in public practice, business and government

6 Priorities for International convergence Development of the profession Economic stability and development Strengthening the financial reporting supply chain

7 International Convergence Globalization demands development of consistent set of high quality standards Contributes to transparency and accountability Facilitates investor confidence and economic growth Convergence is a goal for all IFAC standard setters

8 IFAC Standard Setting International Auditing and Assurance Standards Board (IAASB) Ethics Committee Education Committee International Public Sector Accounting Standards Board

9 Auditing convergence - challenges The starting point Established national standard setting process vs. new economies The position of standard setters Standard setting no longer a function of many IFAC member bodies

10 Cultural differences Challenges (Cont.) Philosophical differences Rules vs. principles / objectives The scope of the standards Application of standards to all types and sizes of entity by all sizes of audit firm Translation Complexity and frequency of changes

11 Meeting the Challenges Partnership with national standard setters National standard setters to address matters of domestic concern Composition of the IAASB Dialogue with stakeholders IAASB Consultative Advisory Group and others Development of high-quality standards

12 KEY ACCOUNTABILITY OVERSIGHT CONSULTATION/ADVICE

13 Public Interest Oversight Board (PIOB) Formally established in February 2005 Comprises 10 members appointed by regulators and international organizations Oversees the Public Interest Activity Committees IAASB, Education and Ethics Committees, and Compliance Programme

14 Public Interest Activity Committees Receive input through Consultative Advisory Groups Have public members Rigorous due process subject to PIOB review Meetings are open to the public

15 Ethics Committee Develops Code of Ethics for all accountants Code features principles-based approach No member body or firm is allowed to apply less stringent standards Current focus on independence Independence Forum on October 11

16 Education Committee Standards designed to achieve global quality and consistency in accounting education Member body compliance required in 2005 Exposure draft issued in April on Competence Requirements for Audit Professionals

17 International Public Sector Accounting Standards Board (IPSASB) Members include professional accountants in supreme audit institutions, government organizations and public practice Develops International Public Sector Accounting Standards (IPSASs) under the cash and accrual bases World Bank, OECD and others use IPSASs

18 IPSASB Facilitates convergence of national and international standards, including convergence with IFRSs and statistical basis of reporting where appropriate for the public sector Spanish translations of IPSASs available; French translations in development; other translations being developed by member bodies

19 Development of the Profession Member Body Compliance Programme Developing nations Small and medium accounting practices (SMPs)

20 Member Body Compliance Programme Statements of Membership Obligations (SMOs) serve as the foundation Works in partnership with IFAC member bodies and regional accountancy organizations Assists member bodies in complying with IFAC standards and IFRSs

21 Member Body Compliance Programme Part 1 Fact-based questionnaire on the regulatory and standard-setting framework in a member s home country Over 150 member bodies have responded; responses are posted on IFAC s website Shows differences in national regulatory environments and challenges to convergence

22 Member Body Compliance Programme Part 2 Member body self-assessment of compliance with specific requirements of the SMOs Identifies whether and how the member body has incorporated international standards Determines how the fundamental principles in the IFAC Code of Ethics have been incorporated in a member s ethical guidelines

23 Developing Nations Permanent Task Force Supports the development of the accountancy profession in all regions of the world Provides input to international standard setters Seeks resources and development assistance Plans to issue a tool kit to assist in the development of professional accountancy bodies

24 SMP Permanent Task Force Represents the interests of small and medium practices and entities The subject of separate sessions

25 Economic Stability and Development High quality international standards are the foundation Integrity, expertise and transparency are key Coordination of capacity building efforts High quality performance by all those in the financial reporting supply chain

26 Professional Accountants in Business (PAIB) Committee Helps IFAC member bodies support more than 1 million professional accountants in business Facilitates the global exchange of knowledge and best practices Works to build public awareness of the role of PAIBs

27 PAIB Committee Addresses key issues affecting PAIBs: Enterprise governance Risk management Ethics Financial reporting Sustainability

28 Strengthening the Global Financial Reporting Supply Chain New study initiated by the IFAC Board in July 2005 Identify investor expectations and needs Address such issues as corporate governance, regulatory developments, and auditor independence Provide practical suggestions for enhancing the financial reporting process

29 International Federation of Accountants September 2005