A policy position paper released today by the International Federation of Accountants (IFAC) describes and explains the international standard-setting process, particularly for International Standards on Auditing (ISAs). The paper, International Standard Setting in the Public Interest, explains how responsibility is shared between public and private sector organizations to produce high quality standards that are in the public interest. The paper identifies the underlying principles of legitimacy, independence, accountability, transparency and performance that are key to a successful standard-setting process, and it describes how the structures and processes of the independent standard-setting boards in the areas of international auditing, ethics and accounting education are consistent with these principles.A policy position paper released today by the International Federation of Accountants (IFAC) describes and explains the international standard-setting process, particularly for International Standards on Auditing (ISAs). The paper, International Standard Setting in the Public Interest, explains how responsibility is shared between public and private sector organizations to produce high quality standards that are in the public interest. The paper identifies the underlying principles of legitimacy, independence, accountability, transparency and performance that are key to a successful standard-setting process, and it describes how the structures and processes of the independent standard-setting boards in the areas of international auditing, ethics and accounting education are consistent with these principles.
In the immediate post Sarbanes-Oxley period, IFAC and the international regulatory community took initiatives to strengthen the international auditing standard-setting process in line with these principles. Among the most important actions was the establishment of the Public Interest Oversight Board (PIOB) to provide independent public interest oversight of the key elements of the standard-setting structure and process. The PIOB, formed in 2005, oversees the International Auditing and Assurance Standards Board (IAASB), the International Accounting Education Standards Board, the International Ethics Standards Board for Accountants, as well as the IFAC Member Body Compliance Program.
"A system of shared responsibility for standard setting draws on the strengths of the profession and of the regulators. Each group brings different skills, experiences and authority to the standard-setting process," states IFAC Chief Executive Officer Ian Ball. "The PIOB, for example, provides assurance that the standard-setting process is operating independently and in the public interest."
In addition to the establishment of the PIOB, other significant elements of the standard-setting process include a highly transparent due process, a strong role for Consultative Advisory Groups that provide technical input from the perspective of external stakeholders, including regulators, and a composition of the standard-setting boards that has an appropriate balance of "practitioner" and "non-practitioner" members.
Speaking about the system as a whole, Mr. Ball emphasizes, "The ultimate test of any system is that it works well, in this case meaning it produces high quality standards that operate in the public interest. The level of adoption and endorsement of the standards - also outlined in the paper - suggest that this test is being met."
"IFAC and the regulators share a common goal: we want effective standard-setting processes," points out new IFAC President Robert Bunting. "To be effective they must operate in the public interest, they must be balanced, not resulting in excessive compliance costs for any group, and they must contribute to building public confidence in financial reporting. These criteria are ageless, but they are worth re-emphasizing in times of global crisis like these."
International Standard Setting in the Public Interest may be downloaded from the IFAC website by going to http://www.ifac.org/Store/.
IFAC (http://www.ifac.org/) 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 158 members and associates in 122 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. The organization, through its independent standard-setting boards, sets international ethics, auditing and assurance, education, and public sector accounting standards. IFAC also issues guidance to encourage high quality performance by professional accountants in business.
