Drivers of Accounting Excellence

Jim Sylph, Executive Director of Professional Standards at IFAC, discussed the meaning of 'audit quality'. He noted that International Standards on Auditing (ISAs) provide guidance on an auditor's responsibility for a single engagement. International Standard on Audit Quality No 1, on the other hand, is addressed to the firm, providing guidance on the controls that must be in place to achieve audit quality. Regarding client relationships, he said that auditors must act in the interests of the shareholders of the client and in the public interest, which sometimes may not be the same as the interests of the management and board of directors of the client. Mr Sylph noted that audit risks increase significantly in two circumstances – when it is a first-year audit and the auditor does not know the client well enough and when accounting and auditing standards have changed and the auditor has not kept up.

Richard George, Chair of the International Ethics Standards Board for Accountants, pointed out that cultural aspects within an audit firm are as important to audit quality as auditing methodology. While a robust methodology is essential, an audit involves scepticism, professional judgement, independence, objectivity, and integrity – ethical issues. He said that many issues in financial reporting are matters of professional judgement, not fact. For example, choices of accounting policies, measurements, and estimates require objectivity. Mr George also pointed out that IFAC's Revised Code of Ethics went into effect in July 2009 and that it applies not just to auditors but to all members of IFAC member bodies, including financial statement preparers. Mr George highlighted that the choice of accounting policies is an ethical issue, not just a matter of regulatory compliance – from an ethical point of view it is not 'free choice' – the public interest in high quality information is paramount.

Recent Trends and Regional Initiatives in Accounting and Auditing Policymaking

Manual Sanchez y Madrid, Deputy Chair of IFAC's Compliance Advisory Panel, discussed IFAC's Member Body Compliance Program. The Program is a means to evaluate the quality of IFAC member and associate member bodies' endeavors to meet IFAC membership requirements. The Program includes a self-assessment of compliance and development of country-specific action plans. Click here for more information about IFAC's Member Body Compliance Program.

Henri Fortin, Senior Financial Management Specialist at The World Bank, discussed the World Bank's ROSC Reports on Accounting and Auditing in Latin America and the Caribbean. He noted that in the region 15 ROSC A&A reports have been completed, 3 are at the drafting stage, and in 3 countries the review is underway. The objectives of the ROSC program are two-fold:

• Assessment. Analyse comparability of national accounting and auditing standards with international standards, determine the degree with which applicable accounting and auditing standards are complied, and assess strengths and weaknesses of the institutional framework in supporting high-quality financial reporting.
• Action plan. Assist the country in developing and implementing a country action plan for improving institutional capacity with a view to strengthening the country's corporate financial reporting regime.

Luciano Schweizer, Operations Specialist at the Interamerican Development Bank (IDB), said the IDB has organised IFRS and ISA projects in nine countries in the region. These include assistance in adopting IFRSs and ISAs, IFRS training, and helping to design the curriculums at 12 universities. Mr Schweizer said that, in the region, some countries have the capacity to adopt IFRSs and ISAs directly, while others, for now, converge their local standards toward international norms. He acknowledged that with convergence, the result is not necessarily an international standard.

SMEs and SMPs: A Prosperous Partnership for Sound Financial Reporting

Paul Pacter, the IASB's Director of Standards for SMEs, reviewed the history of development of the IFRS for SMEs, which was published in 9 July 2009. The IFRS for SMEs is a self-contained standard of 230 pages tailored for the needs and capabilities of smaller businesses. Many of the principles in full IFRSs for recognising and measuring assets, liabilities, income, and expenses have been simplified; topics not relevant to SMEs have been omitted; and the number of required disclosures has been significantly reduced. To further lessen the reporting burden for SMEs, revisions to the IFRS will be limited to once every three years, Mr Pacter said. He noted that the Spanish translation of the IFRS for SMEs was posted on the IASB's website on 17 September 2009. To support implementation the IASC Foundation is developing comprehensive multilingual training material and is working with international development agencies to provide instructors for regional workshops to 'train the trainers' in the use of the training material, particularly within developing and emerging economies. The English language material will be downloadable free of charge from the IASB's website in late 2009.

Ricardo Rodil, Member of IFAC's Small and Medium Practices Committee, said SMEs have been affected by the global financial crisis and are finding access to capital more difficult. There is a need for all SMEs, including micros, to public good quality financial reports if they want to obtain capital.

Vania Maria da Costa Borgeth, Chief Accountant at BNDES (a Brazilian government-sponsored development bank that supports SMEs), said her bank welcomes the IFRS for SMEs because it provides high quality, transparent information for small companies. We want to work to make the IFRS for SMEs become a reality for Brazilian SMEs, Ms Borgeth said, but she noted that some SMEs resist the effort and cost of making such a significant change.

This summary is based on notes taken by observers at the conference and should not be regarded as an official or final summary.