IFAC SMP Advisory Group Response to the IAASB Audits of LCEs Exposure Draft
The SMPAG strongly supports the IAASB Exposure Draft to create a separate, standalone standard for audits of LCEs.
The SMPAG strongly supports the IAASB Exposure Draft to create a separate, standalone standard for audits of LCEs.
The Public Interest Oversight Board’s (PIOB) newly formed Standard Setting Boards’ Nominations Committee has issued the Invitations for Application for the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants. The application period will be open until March 30, 2022.
The Nominations Committee will make recommendations to the PIOB for up to five new appointments and re-appointments to the IAASB for terms beginning January 1, 2023. The Invitations for Application are open to all individuals and interested organizations, including those representing investors and the corporate governance community, regulatory bodies, national standard setters, accounting and audit firms, professional accountancy organizations and public sector organizations, and those in academia. Individuals may also make nominations on their own behalf.
For additional information, please see the PIOB’s nominations web page or email SSBNominations@ipiob.org.
IAASB Encourages Qualified Candidates to Apply
Accrual-based financial information is the bedrock for decision making, transparency and accountability in the public sector, but transitioning to accrual-based reporting can be a lengthy and arduous process with each jurisdiction undertaking the reforms facing its own unique ch
The International Public Sector Accounting Standards Board® (IPSASB®) has today released Exposure Draft (ED) 81, Conceptual Framework Update: Chapter 3, Qualitative Characteristics and Chapter 5, Elements in Financial Statements.
ED 81 is the second exposure draft resulting from the limited scope project to revise the Conceptual Framework in specified areas. ED 81 proposes updates to the chapters of the Conceptual Framework dealing with the attributes of financial information that make financial reporting useful-qualitative characteristics-and the building blocks of financial statements-elements.
In developing its proposals, the IPSASB has considered the Board’s experience in applying the Framework to the development and maintenance of International Public Sector Accounting Standards (IPSAS), as well as recent developments in international thinking about conceptual issues.
“Since its publication in 2014 the Conceptual Framework has been the cornerstone of IPSASB’s global standards delivery activity” said IPSASB Chair Ian Carruthers. “The ED 81 proposals are intended to address issues that have emerged in the Framework’s application in practice, so that it remains central to global public sector financial reporting.”
The ED 81 proposals include:
The IPSASB welcomes the views of respondents on the proposed amendments to the Conceptual Framework.
How to Comment
To access the Exposure Draft, its summary At-a-Glance document, or to submit a comment, visit the IPSASB website. Comments are requested May 31, 2022. The IPSASB encourages IFAC members, associates, and Network Partners to promote the availability of this Exposure Draft to their members and employees.
About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through developing and maintaining accrual-based International Public Sector Accounting Standards® (IPSAS®) and other high-quality financial reporting guidance for use by governments and other public sector entities. It also raises awareness of IPSAS and the benefits of accrual adoption. The Board receives support from the Asian Development Bank, the Chartered Professional Accountants of Canada, the New Zealand External Reporting Board, and the governments of Canada and New Zealand. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.
About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.
Stakeholder Comments on Exposure Draft 81 Sought by May 31, 2022
The International Public Sector Accounting Standards Board® (IPSASB®) has issued International Public Sector Accounting Standard® (IPSAS®) 43, Leases.
IPSAS 43 is based on International Financial Reporting Standard (IFRS®) 16, Leases, developed by the International Accounting Standards Board (IASB®). For lessees, IPSAS 43 introduces a right-of-use model that replaces the risks and rewards incidental to ownership model in IPSAS 13, Leases. For lessors, IPSAS 43 substantially carries forward the risks and rewards incidental to ownership model in IPSAS 13.
IPSAS 43 has an effective date of January 1, 2025. Earlier application is permitted in certain circumstances.
“IPSAS 43, Leases will improve the transparency of lease accounting in the public sector, while maintaining alignment with IFRS,” said IPSASB Chair Ian Carruthers. “Having a three-year period to apply IPSAS 43 provides public sector entities time to prepare for the new requirements and allows for learning to be drawn from the private sector experience in applying IFRS 16.”
The publication of IPSAS 43 completes the IPSASB’s first phase of work on Leases. The IPSASB will continue its work by considering additional public sector specific issues in its Other Lease-Type Arrangements project.
How to Access
To access IPSAS 43, Leases, its summary At-a-Glance document, and webcast, visit the IPSASB website. The IPSASB encourages IFAC members, associates, and Network Partners to promote the availability of IPSAS 43, Leases to their members and employees.
About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through developing and maintaining accrual-based International Public Sector Accounting Standards® (IPSAS®) and other high-quality financial reporting guidance for use by governments and other public sector entities. It also raises awareness of IPSAS and the benefits of accrual adoption. The Board receives support from the Asian Development Bank, the Chartered Professional Accountants of Canada, the New Zealand External Reporting Board, and the governments of Canada and New Zealand. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.
About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.
As part of the ACCA's virtual conference, IAASB Chair Tom Seidenstein speaks with IAASB Member Chun Wee Chiew in a two-part conversation about Tom's first two years as chair and key projects and priorities for the IAASB.
ACCA Accounting for the Future Conference
Two years into his term as chair of the International Audit and Assurance Standards Board (IAASB), Tom Seidenstein is focusing on future developments, not least the creation of a standard covering less complex entities.
As is widely recognised, auditing standards have evolved to mirror an increasingly complex business world, and yet there remain many businesses and other organisations that arguably do not require such a detailed examination. But, as Seidenstein is keen to point out, this is not about lowering the quality of audit for less complex businesses; it is about auditing in a smarter way.
AB Magazine: Interview with IAASB Chair Tom Seidenstein
Having taken the helm of the International Auditing and Assurance Standards Board (IAASB) in July 2019, Tom Seidenstein recognises the challenges posed by the loss of trust in audit quality and the intense scrutiny the profession is experiencing. He intends to respond by embracing innovation while maintaining high-quality standard-setting.
Unlike his predecessor, Professor Arnold Schilder, Seidenstein isn’t a member of the audit profession. Nevertheless, he sees strong markets, high-quality standards and a high-quality profession as directly linked. ‘I believe the profession is essential to making our economies and markets work better,’ he says. ‘That will only occur if we are able to attract the best and brightest to the profession.
AB Magazine: Interview with IAASB Chair Tom Seidenstein
The objective of ED 81 is to update Chapter 3, Qualitative Characteristics, and Chapter 5, Elements of Financial Statements, of the Conceptual Framework, in light of:
Welcome to the first market scan prepared by the IAASB's Disruptive Technology team. Building on our previous work, which included the Innovation Report created with Founders Intelligence and discussed at the January 2021 IAASB Meeting, we will bring you a regular market scan focusing on various topics from the report around every two months. The market scans will consist of exciting trends in the area, including interesting developments on this topic, what this might mean for the IAASB, corporate and start-up innovation, and noteworthy investments.
In this market scan, we will explore Data Standardization Platforms for Enabling Data Access, which falls under the activity of Accessing Information & Data. We're starting with Data Standardization because establishing a common standard of how data is structured and accessed is a foundation block to the success and widespread adoption of other innovative technologies.
We will cover:
Data Standardization is the process of converting data to a common format that allows users to better analyze and utilize the data, thereby enabling data collaboration, large-scale analytics and the use of more advanced tools to interrogate the data.
With exponential growth in the amount and variety of data that companies create and use, there is voluminous unstructured, or inconsistently structured, data in companies' repositories. This leads to data silos and data that is underutilized or unnecessarily hard to access.
One of the problems this has created, amongst others, is where auditors are spending more time on data management, particularly when trying to access, "map," and use the entity's data as well as when performing data analytics. When each entity uses different data models and systems or platforms to store, structure and extract data, the inefficiency is amplified. Some firms are developing internal tools to address these challenges, such as by building ETL (Extract, Transform, Load) tools to minimize this inefficiency e.g., KPMG had 25 different ETL projects in 2019. Auditor's time spent on data management may be better utilized on other areas of the audit, and many firms and practitioners may have challenges with obtaining tools to access, manage and evaluate data relevant for auditing and assurance engagements.
The data management industry, firms, and regulators are exploring various approaches to help audit and assurance professionals and other professional service providers with these challenges. The UK's Brydon review in 2019, for example, recommends initiatives to develop a standard method of data extraction covering both structured and unstructured data.
Data standardization complements this approach by helping to address the root cause of difficulties by converting the data to be extracted into a common format. In particular, digital multi-party platforms are gaining traction as a solution to provide standardized data structure and mechanisms to access data silos with non-uniform formats, thereby facilitating the sharing of data to unlock new values both internally and externally. One exciting development is the development of Common Data Models (CDM). A CDM is a shared data language, allowing standardized metadata and its meaning to be shared across applications easily. Unfortunately, at present, there is no one model adopted globally across specific industries or jurisdictions.
This section is designed to provide examples of recent developments that may signal future disruption in this area. It is not a complete list of all activities in the field of data standardization.
1. Disruptive start-ups are gaining traction
Other Data Standard InitiativesData standards exist in various forms already. Another example is ISO 21378, Audit Data Collection, issued by the International Organization for Standardization (ISO). This standard leveraged the American Institute of CPA American Institute of Certified Public Accountants Audit Data Standards. |
2. InfoSum raised a further $65m in their Series B to scale its privacy-focused data collaboration platform:
InfoSum's 'non-movement of data' technology enables companies to connect their data (both internally and externally) to unlock new customer value. This works by having companies standardize their data (i.e., map their data) according to InfoSum's Global Schema rules and upload it to InfoSum's platform.InfoSum raised a further $65m in their Series B to scale its privacy-focused data collaboration platform:
What does this mean? It means investors see an opportunity for data standardization when companies want to collaborate and share data without moving data outside their companies. It also signals the growing maturity of the data collaboration space as InfoSum is a leading start-up and is raising large sums of money to upscale its operations.
Key Venture Capital & Investment TermsVenture capital (VC) is a form of financing where capital is invested into a company, usually a start-up or small business, in exchange for equity in the company. VC funding stages can be useful signals for the maturity of the start-up and its products or services – the later the stage, the more developed and established in market the startup typically is. VC funding can also be a useful barometer for the interest in a particular technology and how influential it may be in the market as well as an indicator of potential wider adoption. For simplicity it can be useful to group start-up funding stages into the below broad categories:
For a deeper dive see Venture Capital Jargon Buster by Founders Intelligence and MJ Hudson. |
2. Relevant industry players are taking more interest in data standardization
I. A leading US accounting firm custom-built a common data model
II. The EDM Council, a global association created to elevate the practice of Data Management, is leading the development of an open-source semantic data standard
3. Knowledge graphs for audit use cases is showing promising progress
I. Engine B's audit knowledge graph hopes to improve the quality of audits
II. The EDM Council is creating an Open Knowledge Graph Lab (OKGL) on top of their FIBO initiative
The IAASB has an interest in improving the data available to assurance practitioners as this may enable the performance of more advanced analytics and otherwise improve areas of the audit that use data (e.g., evaluating models and related controls). Data standardization also enables collaboration between the entity and others, including auditors or assurance practitioners. Data standards are of particular interest in the sustainability space as a tool for entities to satisfy different reporting standards.
Data standardization is not within the IAASB's remit because it is fundamentally a matter for how the entity manages its data. Local law or regulation requiring the maintenance of books and records may be most relevant. However, because of the benefits to audit and assurance quality, the IAASB should stay close to the topic and take opportunities to raise it with other stakeholders, such as regulators, preparers, and assurance practitioners.
While the developments on data standardization are promising, there is still a considerable way to go before it is widely adopted by entities and therefore able to fully benefit audit and assurance. In the absence of a widely adopted CDM or another method to standardize data, the gap in data management capabilities between differently equipped firms and practitioners, including between jurisdictions, may grow. Furthermore, widespread adoption of innovative automated audit tools and techniques will be inhibited when data is not structured in a standard format.
As prominent CDMs are more widely adopted and supported by entities and made available to firms, there may be a need for standards on assurance services on whether data is compliant with the relevant data standard.
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Our next Market Scan bulletin will be distributed by January 2022.