The International Federation of Accountants (IFAC) supports the goals expressed by G-20 Leaders at the Pittsburgh Summit last week to advance "a framework for strong, sustainable, and balanced growth," which includes reform of executive compensation packages, the adoption of a single set of high-quality global accounting standards, and increased resources for the World Bank and international development banks. IFAC recommends that these goals remain priorities and that G-20 Leaders act on them at a national level.
Two issues at the top of IFAC's agenda, which were reflected in its submission to the G-20 finance ministers in July, are the need for governments to address corporate governance issues and to move ahead on implementing common global standards not only for accounting, but also for auditing and for auditor independence.
"IFAC shares the G-20's view that systems of remuneration should provide incentives consistent with long-term growth and corporate performance," emphasizes Robert Bunting, IFAC President, adding, "The time has come to act on that view."
IFAC has recommended that the G-20 nations adopt and implement the Organisation for Economic Co-operation and Development's (OECD's) Principles of Corporate Governance and that they ask the OECD to address the design of remuneration systems within its corporate governance framework. In addition, IFAC has strongly urged governments to support an increased role for corporate audit and compensation committees and for ensuring that members of these committees have the appropriate expertise.
As part of its governance recommendations, IFAC has called for "competency requirements for those preparing financial statements." IFAC believes these competency requirements should apply not only to those working in listed companies, but also to those preparing governmental financial reports. This is especially critical as governments assume new forms of assets and liabilities as a result of their bailouts and stimulus plans. Greater transparency by governments, made possible through high-quality financial reporting, will help keep taxpayers informed and boost investor confidence.
"Governments can make major strides in enhancing their fiscal management and strengthening their financial reporting by adopting and implementing International Public Sector Accounting Standards (IPSASs)," emphasizes IFAC Chief Executive Officer Ian Ball. "Additionally, the adoption and consistent application of IPSASs will facilitate more reliable cross-national financial comparisons."
In addition to supporting global adoption of IPSASs, IFAC has long advocated the adoption of International Financial Reporting Standards and International Standards on Auditing. Global standards will create a level playing field in the interpretation and exchange of financial information and contribute to economic and financial stability. Similarly, the adoption of global standards on auditor independence, such as those expressed in the Code of Ethics for Professional Accountants, will help to sustain trust in capital markets.
IFAC also recognizes the key role the World Bank plays in helping to achieve more balanced economic growth and applauds the G-20 nations for their commitment to it. IFAC continues to work closely with the World Bank to develop and strengthen the accountancy profession, particularly in emerging countries. A strong accountancy profession, supported by high-quality, robust standards, is a vital component of a country's financial system.
To view IFAC's recommendations to the G-20, go to www.ifac.org/financial-crisis. For the results of the G-20 Summit, visit The Pittsburgh Summit 2009.
About IFAC
IFAC (www.ifac.org), the global organization for the accountancy profession with 157 members and associates in 123 countries, promotes the adoption and implementation of international standards and develops guidance to foster high-quality practice by professional accountants working in business, public practice, government, and education.
