Many entities establish internal audit functions as part of their internal control, risk management, and governance structures; effective coordination and communication between the external and internal auditors can contribute positively to the external audit. Recognizing this, the International Auditing and Assurance Standards Board (IAASB) today released International Standard on Auditing (ISA) 610 (Revised), Using the Work of Internal Auditors, which addresses the external auditor’s responsibilities if using the work of an internal audit function in obtaining audit evidence.

“Internal auditing standards and practices have continued to develop, as has the relationship between external and internal auditors. Equally, the expectations on the external auditor continue to evolve, particularly with recent heightened emphasis on audit quality and accountability,” stated Prof. Arnold Schilder, IAASB chairman. “Our standards must also evolve to take account of these changes. Our revision of this standard involved extensive input from, and liaison with, the regulatory community, which we believe has helped enhance the quality of the final standard.”

The revised standard is aimed at enhancing the external auditor’s performance by providing a more robust framework for evaluating and using the work of an entity’s internal audit function. Related changes have also been made to ISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, to explain how the internal audit function and its findings can usefully inform the external auditor’s risk assessments.

“The external auditor may be able to use the work of a robust internal audit function. Nevertheless, the external auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced by the external auditor’s use of the work of the internal audit function,” notes James Gunn, IAASB technical director. “This revised ISA defines the conditions that are necessary for the external auditor to be able to use the work of internal auditors, including ensuring that the internal audit function’s work is adequate for the audit, and preventing overuse or undue use of such work.”

Both ISA 610 (Revised) and ISA 315 (Revised) are effective for audits of financial statements for periods ending on or after December 15, 2013.

Using Internal Auditors to Provide Direct Assistance
In revising ISA 610, the IAASB also agreed on requirements and guidance that specify the conditions and establish responsibilities of the external auditor if the external auditor intends to use internal auditors to provide direct assistance during the audit.

The IAASB has engaged closely with the International Ethics Standards Board for Accountants (IESBA) in relation to this matter. While the IAASB has concluded its deliberations on the requirements addressing direct assistance, it intends to incorporate such material in ISA 610 (Revised) only after the IESBA concludes its deliberations on its February 2012 exposure draft of proposed changes to the definition of “engagement team” in the Code of Ethics for Professional Accountants (IESBA Code). The IESBA exposure draft proposes to resolve a perceived inconsistency between the ISAs and the IESBA Code regarding the ability of external auditors to use internal auditors to provide direct assistance.

About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.

About IFAC
IFAC 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 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

#  #  #

Article IFAC's paper calling for enhanced financial management transparency and accountability in the public sector, especially in the midst of the sovereign debt crisis.

The International Federation of Accountants (IFAC) seminar, The Sovereign Debt Crisis, a Matter of Urgency―From Lessons to Reform, convened key decision makers, politicians, public finance management leaders, and others over two days in Vienna. The presentations, debates, and discussions sought a comprehensive understanding of the causes contributing to the international sovereign debt crisis and conveyed a clear and consistent message that the fiscal stress and instability associated with the crisis need to be addressed urgently, through a radical reform of public financial management systems and institutions in many countries.

“We heard over these two days that the problems with financial management and reporting are not confined to a small handful of European countries, but are widespread. There is a real danger of the current sovereign debt crisis, coupled with the fiscal challenges of aging populations, deepening into a global fiscal crisis—and it is therefore more urgent than ever that we act to bring about a radical transformation in public financial management,” said Ian Ball, CEO of IFAC. “Our goal is enhanced transparency and accountability on the part of public sector entities around the world. This would achieve long-term fiscal sustainability, more effective and efficient governments, and reduced risk of new fiscal crises.”

Speakers included influential financial and accounting leaders, such as Vincenzo La Via, Chief Financial Officer of the World Bank Group; Göran Persson, former Prime Minister of Sweden; Hon. Ruth Richardson, former New Zealand Minister of Finance; and Hon. David Walker, Founder and CEO of the Comeback America Initiative and former United States Comptroller General (complete list attached).

Key findings of the seminar included:

• The sovereign debt crisis has identified a compelling and urgent need for governments to address seriously the quality of their public financial management systems and institutions.
• The fiscal risks associated with the aging population in many countries amplify the risks associated with poor fiscal measurement and management that have been exposed by the sovereign debt crisis.
• The current crisis has emphasized the deficiencies associated with cash-based accounting and budgeting.
• Governments need to adopt accrual accounting and budgeting to better measure and manage fiscal position.
• The adoption of International Public Sector Accounting Standards (IPSASs) is necessary to provide global consistency and comparability in public sector financial reporting.
• Accrual accounting and IPSASs are being successfully implemented in many countries, including Australia, Austria, New Zealand, Spain, Switzerland, and Sweden; these countries now have the tools for better resource allocation and fiscal decision-making.
• The accountancy profession has a key role to play in this transformation, and should be leaders and catalysts for change.
• Politicians, governments, and ministers of finance need to recognize the political advantages of high-quality financial management systems in absorbing and managing economic shocks.
• Conversely, politicians, governments, and ministers of finance need to recognize that the cost of failure in financial management can be a loss of sovereignty.
• Many stakeholders have a role to play: International organizations (like the Financial Stability Board) should consider the institutional changes necessary; citizens, investors, credit rating agencies, and auditors general need to be educated, communicated with, and engaged.
• The International Public Sector Accounting Standards Board must have strong governance and legitimacy, as well as financial and operational stability.

The Sovereign Debt Crisis, a Matter of Urgency—From Lessons to Reform took place March 19-20, 2012, at the Hilton Vienna. Event sponsors included CECCAR, Ernst & Young, PwC, and the World Bank.

For more information about the conference, visit http://sovereigndebt.ifac.org.

About IFAC
IFAC 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 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

Speakers for The Sovereign Debt Crisis, a Matter of Urgency—From Lessons to Reform included:

• Ian Ball, Chief Executive Officer, International Federation of Accountants
• Andreas Bergmann, Chair, International Public Sector Accounting Standards Board
• Jón Blöndal, Head of Budgeting and Public Expenditures, Organisation for Economic Co-operation and Development (OECD)
• Robert Dacey, Chief Accountant, the United States Government Accountability Office
• Prof. Dr. Roger J.M. Dassen RA, Global Managing Director Clients, Services and Talent, Deloitte Touche Tohmatsu Limited
• John M. Herhalt, Global Chair, Government and Infrastructure, KPMG LLP
• Ms. Belén Hernández, Public Accounting Directorate, Spain
• Vincenzo La Via, Chief Financial Officer, World Bank Group
• Bo Lundgren, Director General, Swedish National Debt Office
• Professor the Hon. Stephen Martin, Chief Executive, Committee for Economic Development of Australia
• The Hon. Ruth Richardson, Former New Zealand Finance Minister
• Göran Persson, Former Prime Minister of Sweden
• Gerhard Steger, Director General Budget and Public Finance Ministry of Finance, Austria
• Jan Sturesson, Leader Global Government and Public Services, PWC
• Göran Tidström, President, International Federation of Accountants
• James S. Turley, Chairman and Chief Executive Officer, Ernst & Young
• Nicolas Véron, Senior Fellow, Bruegel–Brussels, Visiting Fellow, Peterson Institute for International Economics–Washington, D.C.
• Hon. David M. Walker, Founder, President and CEO, Comeback America Initiative and Former Comptroller General of the U.S.
• Fritz Zurbrügg, Director, Swiss Federal Finance Administration

#    #    #

The International Federation of Accountants (IFAC), the global organization for the accountancy profession with members and associates in 127 countries, today released Policy Position Paper 4, Public Sector Financial Management Transparency and Accountability: The Use of International Public Sector Accounting Standards.

The paper sets out IFAC’s view that governments around the world must provide clear and comprehensive information regarding the financial consequences of economic, political, and social decisions, in order to protect the public as well as investors in government bonds. It is issued at a time when deficiencies in many governments’ financial management, transparency, and accountability have become more prominent, as a result of the worsening sovereign debt problems around the globe. Transparency and accountability can only be provided through a high-quality, robust, and effective accrual-based financial reporting system, which allows for government assets and liabilities (including debt) to be appropriately recorded, reported, and disclosed—and hence effectively monitored.

The most globally accepted high-quality accrual-based financial reporting system is the International Public Sector Accounting Standards (IPSASs), issued by the International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board supported by IFAC.

Speaking from the IFAC Sovereign Debt Seminar, which brings together key government, public sector, and accountancy professionals from all over the world to promote the need for enhanced public sector financial reporting, Ian Ball, chief executive officer of IFAC, said, “The sovereign debt crisis has highlighted the lack of transparency and accountability of governments, poor public finance management and public sector financial reporting, and the deficiency of institutions for fiscal management in many countries. Governments around the world must collectively embrace high-quality and uniform accrual-based standards for financial reporting in order to protect the interests of both investors and citizens. While the problems highlighted by the sovereign debt crisis cannot be solved by better reporting alone, they cannot be solved in the long term without it.”

IFAC’s global seminar, The Sovereign Debt Crisis, A Matter of Urgency—from Lessons to Reform, is being held March 19-20, 2012, in Vienna. The Seminar features prestigious guest speakers that include: Vincenzo LaVia, Chief Financial Officer of the World Bank Group; Hon. David Walker, Founder and CEO of the Comeback America Initiative and Former United States Comptroller General; and Göran Persson, Former Prime Minister of Sweden. 

About IFAC
IFAC 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 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

#  #  #

Today over 200 delegates from 40 professional accountancy organizations in 36 countries convened in Singapore for the sixth annual IFAC Small and Medium Practices (SMP) Forum. Co-hosted with the Institute of Certified Public Accountants of Singapore (ICPAS), this year’s event featured a keynote address by Ms. Jessica Tan, Chairman of the Government Parliamentary Committee for Finance and Trade & Industry in Singapore, and speakers from the Singapore Business Federation (SBF) and Accounting and Corporate Regulatory Authority (ACRA) of Singapore.

Delegates from IFAC member bodies convened with representatives from the regulatory community, leading regional business associations, and international standard setters to discuss the hot-button challenges facing the SMP sector and to collaborate on the solutions on a global level. Plenary panel session topics included shaping regulations and standards and how SMPs can capitalize on emerging opportunities in an ever-changing marketplace.

In his opening remarks, IFAC Deputy President Warren Allen gave an overview of IFAC’s role in the changing SME/SMP landscape: “The results of the 2011 IFAC Global Leadership Survey highlighted that the needs of SMPs and small- and medium-sized entities (SMEs) continue to be a high-priority area among IFAC’s membership. This may be because SMEs—and the SMPs that serve them—often constitute the backbone of economic stability. Here in Singapore, for instance, SMEs and small components (subsidiaries, branches, etc.) of multinational corporations contribute up to half of gross domestic product (GDP). And that is why IFAC is speaking out to ensure that world leaders recognize that the small business sector is a public interest issue, and that policy, regulation, and standards are developed in a way that will facilitate the growth of this sector.”

ICPAS President Dr. Ernest Kan said, “ICPAS is honored to co-host this year’s SMP Forum with IFAC. The focus on SMPs and SMEs dovetails with ICPAS’ strategic focus on SMP development. In today’s complex global economic environment, SMPs and SMEs face unique challenges in value creation and capacity building. With the forum, we aim to provide a platform for international representatives to share insights on supporting this sector.”

IFAC SMP Committee Chair Giancarlo Attolini added, “We can see from the attendance here today and the high level of participation in the SMP Quick Poll throughout 2011 that IFAC members are committed to serving their SMP constituents. IFAC shares this commitment since small accountancy practices typically serve small businesses, and when small businesses prosper, their local economies tend to prosper as well. We believe that SMEs and SMPs can be a part of the solution to the global economic recession.”

For media enquiries:

 
About the IFAC Small and Medium Practices Forum

This annual event provides a unique, global platform for delegates of IFAC member bodies to learn, debate, and collaborate on the opportunities and challenges facing SMPs and their small- and medium-sized entity clients. Learn more at www.ifac.org/2012SMPForum. This year’s event was made possible by the generous support of its co-host, the Institute of Certified Public Accountants of Singapore, and the sponsorship of the following IFAC member bodies: Association of Chartered Certified Accountants; Body of Expert and Licensed Accountants of Romania (CECCAR); Certified General Accountants Association of Canada; Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili; CPA Australia; Hong Kong Institute of Certified Public Accountants; and Institute of Chartered Accountants in England and Wales.

About the Institute of Certified Public Accountants of Singapore
Established in 1963, the Institute of Certified Public Accountants of Singapore (ICPAS) is the national accountancy body that develops, supports, and enhances the integrity, status, and interests of the profession.

ICPAS accords the Certified Public Accountant Singapore (CPA Singapore) designation. The CPA Singapore is a professional in accountancy, finance, and business distinguished by their technical expertise, integrity, and professionalism, in addition to a recognized accountancy qualification and relevant work experience. CPAs Singapore serve every corner of the world in every industry. Many of them helm some of the most prominent local and international corporations. Presently, there are close to 25,000 members in ICPAS.

About the IFAC SMP Committee
The SMP Committee of the International Federation of Accountants (IFAC) represents the interests of professional accountants operating in small- and medium-sized practices (SMPs). The committee collaborates with IFAC member bodies to develop guidance and tools and speaks out on behalf of SMPs and small- and medium-sized entities (SMEs) to raise awareness of their role and value. The committee also works to ensure that the needs of the SMP and SME sectors are considered by standard setters, regulators, and policy makers.

About IFAC
IFAC 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 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

#    #    #

Ian Ball, CEO of IFAC, calls on accountants to pressure governments to be transparent about their accounting and management of taxpayers’ money.