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Page 1 | Confidential and Proprietary Information
Building For Sustainable Growth
– (re)Defining Accountancy
Profession in the Age of Twitter
Szymon Radziszewicz
Senior Technical Manager
Member Body Development Team Leader
PICPA Seminar
Manila, Philippines
April 11, 2013
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Conventional Approach
Think Profession
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Live Core Values – Think Different
Think Profession
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• The context
• Regulation of the profession – the global perspective
• Role of the national profession– Commitment to quality
– Implementation support & thought leadership
• What is IFAC & its SMOs
• Adoption & Implementation of international standards
• Quality Assurance – concept & examples
• How IFAC assists
Outline
Today’s Presentation
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5000 Years Ago
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500 Years Ago
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84 Years Ago
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5 Years Ago
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Last Year
Why Greece won't go awayBy Laurence Knight Business reporter, BBC News6 February 2012
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What Now?
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Global Landscape Today
• Pressures on the broader financial architecture– Economy in recovery
– Increased regulatory proposals resulting from global financial crisis
– Sovereign debt crisis
• Globalization– Information, capital, accountants moving across borders
– Integrated reporting and long term sustainability
• Diverse and segmented– Large multinationals/networks and smaller local SMEs and SMPs
– Accountants in diverse roles: auditors, preparers, advisors, strategic
business leaders (CFO/CEO/COO)
• Twitter generation– 140
Complexity
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• Global regulatory convergence– IFAC’s position; importance of high-quality globally accepted standards
and consistent adoption, implementation and oversight
• Balancing shared regulation– Policy Position Paper (PPP) 1 and the role of professional accountancy
organizations
• Statements of Membership Obligations (SMOs)– A framework for credible and high quality professional accountancy
organizations (PAOs)
IFAC Perspective on Regulation
Clarity
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• Regulation of individual
professional accountants is
primarily conducted at a national
level, with professional
accountancy organizations playing
an important role in working with
governments to ensure that such
regulation is effective, efficient,
and in the public interest
• Shared approach to regulation –
roles for government and PAOs
Regulation of the Accountancy Profession
Finding the Balance
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Strong Accountancy Profession = Inclusive and
Sustainable Growth
• Maintain core values
• Think different
• Push boundaries
• Commit to public interest
• Create, contribute, give!
Role of the Profession
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The Goal – Provide Quality Information
• Contribute to economic stability and growth
• Enhance efficiency and accountability of businesses
• Promote and support governmental transparency and
accountability
• Be a key player in (re)building confidence in financial
markets
Role of the Profession
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• Educate stakeholders
• Advocate the role of the profession
• Raise awareness – Need for accountants and auditors
– Global regulatory convergence
– Public & Private Sector
• Input into development of legislation and regulation
• Support to those in charge
Be the Voice
Role of the Profession
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• Education and training
• If not the responsible body
• Advocacy for international best practice
• Input into the development of standards
• Support implementation of standards
• Promote and monitor adherence to ethics and
independence requirements
Provide Support
Role of the Profession
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• Commitment to the public interest
• Adherence to the values of integrity, transparency and
expertise
• Commitment to follow high standards
• Ongoing education
• Oversight of its public interest activities
Leadership Through Action
Role of the Profession
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Global Profession
IFAC
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For the global accountancy profession to be
recognized as a valued leader in the
development of strong and sustainable
organizations, financial markets and
economies
IFAC’s Vision
Ultimate Objective
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Overview of IFAC Structure
TransnationalAuditors
Committee
Professional Accountancy Organization Development Committee
ProfessionalAccountantsin BusinessCommittee
Small andMedium
PracticesCommittee
ComplianceAdvisory Panel
InternationalAuditing andAssuranceStandards
Board
InternationalAccountingEducationStandards
Board
InternationalEthics
Standards Board for
Accountants
InternationalPublic SectorAccountingStandards
Board
Forumof Firms
Planning and Finance Committee
Governance and Audit
Committee
NominatingCommittee
IFAC Regulatory
Liaison Group
IFACCOUNCIL
IFAC
BOARD
ACCOUNTABILITY
KEY
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Oversight of IFAC PIACs
TransnationalAuditors
Committee
Professional Accountancy Organization Development Committee
ProfessionalAccountantsin BusinessCommittee
Small andMedium
PracticesCommittee
ComplianceAdvisory Panel
InternationalAuditing andAssuranceStandards
Board
InternationalAccountingEducationStandards
Board
InternationalEthics
Standards Board for
Accountants
InternationalPublic SectorAccountingStandards
Board
Forumof Firms
Planning and Finance Committee
Governance and Audit
Committee
NominatingCommittee
Public Interest
OversightBoard
IFAC Regulatory
Liaison Group
IFACCOUNCIL
IFAC
BOARD
ACCOUNTABILITY
KEY
OVERSIGHT
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IFAC Oversight and Consultation
TransnationalAuditors
Committee
Professional Accountancy Organization Development Committee
ProfessionalAccountantsin BusinessCommittee
Small andMedium
PracticesCommittee
ComplianceAdvisory Panel
InternationalAuditing andAssuranceStandards
Board
InternationalAccountingEducationStandards
Board
InternationalEthics
Standards Board for
Accountants
InternationalPublic SectorAccountingStandards
Board
ConsultativeAdvisoryGroup
ConsultativeAdvisoryGroup
ConsultativeAdvisoryGroup
Forumof Firms
Planning and Finance Committee
Governance and Audit
Committee
NominatingCommittee
Public Interest
OversightBoard
IFAC Regulatory
Liaison Group
MonitoringGroupIFAC
COUNCIL
IFAC
BOARD
ACCOUNTABILITY
OVERSIGHT
CONSULTATION/ADVICE
KEY
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• In accordance with IFAC
Constitution, IFAC
members and associates
are required to comply
with the SMOs
• Member and associates
have to identify and take
actions to fulfill the
requirements set out in
the SMOs
What are the SMOs
IFAC SMOs – International Soft Law
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• Clear benchmarks for
PAOs
• Enable high quality
performance by
professional accountants
• Encourage continuous
improvement
• Drive sustainable
development of the
accountancy profession
Power to Grow
What are SMOs
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SMO 7:
IFRS
SMO 3:
ISA
SMO 5:
IPSAS
SMO 2: Education
SMO 4: Ethics
Building Blocks
What are SMOs
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• Serve the public interest
• Drive adoption and
implementation of
international standards
• Clarify
• Reflect international good
practice
• Increase effectiveness of
IFAC Compliance
Program
Why Revise?
2004 vs. 2012 SMOs
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• Shall = requirement
• Applicability Framework
• Comply or explain
• Best endeavors
• Compliance Program
Key Concepts
SMOs
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Understanding Diversity
Key Concepts
Regulatory frameworks
Sectors of profession
Different degree of
responsibility
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Degree of responsibility for an SMO area
Direct SharedNo
Responsibility
Implement all the
requirements of the
SMO
In exceptional situations
departures are possible
if can be justified from
the public interest
perspective and need to
be documented
For the elements for
which Member Body
has direct
responsibility follow
the approach for
"Direct"
AND
For the elements for
which Member Body
has no direct
responsibility follow
the approach for
"No Responsibility "
Use best endeavors to:
a. Encourage those
responsible for the
requirements to follow
this SMO in
implementing them;
AND
b. Assist in the
implementation where
appropriate
SMO Applicability Framework
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IFAC Compliance Assessment
Requirements and Application Guidance
Applicability Framework
Scope
Obligation
Structure of the SMOs
Revised SMOs
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Adoption
SMOs 2, 3, 4, 5, 7
Decision
Action
to make
the decision
effective
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Adoption
Tra
nsp
osit
ion
Different Approaches – One Goal
SMOs 2, 3, 4, 5, 7
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Education and
training
Raising
awareness
Dissemination
of standards
Implementation
guidance
Implementation
SMOs 2, 3, 4, 5, 7
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• Assess priorities and
challenges
• Is there a need of
translation to ensure
proper adoption and
implementation
• Process for
timely, accurate and
complete translation
Translation
SMOs 2, 3, 4, 5, 7
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Extension of the scope to ALL audits of financial
statements (priority for PIE audits)
Consider QA performed by another authority to avoid
overlap
Ensure sufficient resources
Refer to I&D if no corrective action
Consideration of public oversight
Review of implementation and effectiveness
Quality Assurance
SMO 1
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• Review and understand
revisions
• Consider actions
necessary to address
revisions
• Plan and execute actions
• Cooperate within RO/AG
• Reflect actions in the next
update of the SMO Action
Plan
What PAOs Need To Do
Revised SMOs
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Strong Global Accountancy Profession
It All Fits Together
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Why Quality Assurance?
Internal Quality
Controls
External Quality
Assurance Reviews
Confidence
Credibility
Reputation
Quality Assurance
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• Protects public interest
• Enhances reputation
• Reduces risk of errors and omissions
• Reflected in enhanced service to clients
• Improves the standard of audit work
• Generates referrals for new business
• Increases profits
• Meets regulatory requirements
Benefits
Quality Assurance
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Scope
• Consider efficiency & don’t reinvent the wheel
• ALL audits of financial statements – But priority to PIEs’ audits
• Other services?
• Mandatory or voluntary?
• Criteria & risk factors
Quality Assurance
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• ISQC 1
• ISA 220
• Guidance– Awareness building
– Manuals
– CPD
– Start small (voluntary programs)
• Trust the market and play to the market
Quality Control Standards & Guidance
Quality Assurance
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• Subject– Firm or engagement partner
• Criteria– Suitable
– Respectful of and aligned with the national regulatory framework
– What needs to be considered to conclude that the QC system is adequate
and the firm/partner complies
• Guidance– Awareness building
– Manuals
– CPD
– Start small (voluntary programs)
• Trust the market & play to the market
Design
Quality Assurance
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• Cycle approach
• Risk-based approach
• Mixed approach
• Other considerations
Review Cycle
Quality Assurance
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• Procedures
• Documentation
• Quality– Resources
– Skills & competence
– Quality of team leader
– Ethical requirements
• Confidentiality
Review Team
Quality Assurance
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• Conclusion– Is the firm’s system designed to meet requirements?
– Is the partner subject to the system?
– Does the firm/partner comply with internal QC system?
• Reasons for conclusion
• Recommendations for improvement
• What if the review was unsatisfactory?
Reporting & Corrective Actions
Quality Assurance
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• IFIAR principles
• Cooperate closely & share information and expertise
• Consider how to contribute to the regulation of the
profession
• IFAC PPP 1, Regulation of the Accountancy Profession
Public Oversight Considerations
Quality Assurance
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Review of Implementation and Effectiveness
Quality Assurance
Consider
Plan
ExecuteReview
Improve
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• Rwanda
• Malta
• Bahamas
• Poland
Examples from Around the World
Quality Assurance
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Quality in the performance of Auditing Engagements by ICPAR members is the goal of the Audit Quality Review Programme.
The Programme seeks to achieve its goal through education and remedial, corrective actions. This goal serves the public interest and, at the same time, enhances the significance of ICPAR membership.
The Programme is based on the principle that a systematic monitoring and educational process is the most effective way to attain and maintain the envisaged quality of professional work throughout the profession. Thus, it depends on mutual trust and cooperation. The reviewed practice unit is expected to take appropriate actions in response to deficiencies in either design of its system of quality control, or its compliance with that system, or both. These actions will be positive and remedial. Matters touching on the professional conduct of a member will be investigated within the Disciplinary Process as provided for in the Laws of the Land.
Rwanda
Examples from Around the World
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Malta
Examples from Around the World
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Feedback from Firms
• I would also like to take this opportunity to thank both of you for
the professional but friendly way you approached our visit and
your practical findings which will enable us to focus on our
weaknesses in the practice so that they can be rectified to bring
all areas up to the required standard
• In the meantime, we would like to thank you for the professional
and courteous manner in which you carried out the review and
for your honest and open approach. Your review has proved to
be very constructive and has outlined valid improvements that
need to be made in our quality control procedures
Quality Assurance
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Feedback from Firms cont.
• We would like to thank you for your very helpful and constructive comments during your visit which we found to be a very productive review and a useful process carried out in a supporting manner
• It is very encouraging to see that the BICA are using monitoring compliance officers who are realistic and understanding in their approach and have good solid actual background practice experience and appreciate more fully the real life problems and difficulties facing practitioners
Quality Assurance
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Free Tools and Resources
How IFAC assists
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Free Tools and Resources
• www.ifac.org/SMP
• web.ifac.org/clarity-center/index
• www.ifac.org/ComplianceProgram
• www.ifac.org/about-ifac/professional-accountancy-
organization-development-committee
• www.ifac.org/Ethics/Resources.php
• www.ifac.org/Translations
• www.ifac.org/issues-insights/public-policy-regulation
How IFAC Assists?
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THANK YOU
www.ifac.org/ComplianceProgram
www.ifac.org
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