Co-hosted with the Institute of Certified Public Accountants of Uganda
and the Pan African Federation of Accountants 

RPG 2 provides guidance for preparing and presenting financial statement discussion and analysis. Financial statement discussion and analysis will assist users to understand the financial position, financial performance, and cash flows presented in the general purpose financial statements (“financial statements”).

RPG 1 provides guidance on reporting on the long-term sustainability of a public sector entity’s finances (“reporting long-term fiscal sustainability information”). It also provides information on the impact of current policies and decisions made at the reporting date on future inflows and outflows and supplements information in the general purpose financial statements (“financial statements”).

IFAC President Warren Allen and IIA President/CEO Richard Chambers discuss the recently signed Memorandum of Understanding with Compliance Week.

The International Auditing and Assurance Standards Board (IAASB) today released its Post-Implementation Review—a Report that highlights the results of the IAASB’s efforts to learn whether the clarified International Standards on Auditing (ISAs) are being consistently understood and implemented in a way that achieves the IAASB’s goals in clarifying and revising them. 

The Report summarizes feedback from those most directly involved in the audit process in jurisdictions that have implemented the clarified ISAs. It describes the IAASB’s process in summarizing the comments and identifies the main themes that have emerged.

“I am pleased to note the many informative and useful comments received in response to the post-implementation review,” said IAASB chairman Prof. Arnold Schilder. “The IAASB issued the clarified ISAs in 2009 as an essential input to audit quality, and the IAASB is committed to their continuous improvement. The Report, therefore, is an important input to the IAASB’s planning process, both in the short term and in the context of its 2015–2019 strategy deliberations.”

Input was received from independent audit inspection bodies, other regulators, and audit committee members, and from the larger accounting firms, smaller practices, and International Federation of Accountants (IFAC) member bodies.

The post-implementation review is the second phase of the IAASB’s efforts to monitor the implementation of the clarified ISAs. The report on the first phase of IAASB’s work, undertaken in 2009 and 2010, was published in November 2010.

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 the International Federation of Accountants (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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Listen to the podcast below. See the June 2013 meeting page for additional materials, including meeting highlights, agenda papers, and full audio recordings.

This report highlights the findings of the IAASB’s efforts to learn whether the clarified ISAs are being consistently understood and implemented in a way that achieves the IAASB’s goals in clarifying and revising them. The report summarizes the feedback from those most directly involved in the audit process in jurisdictions that have implemented the clarified ISAs. It also describes the IAASB’s process in summarizing the comments and identifies the main themes that have emerged. 

The International Federation of Accountants (IFAC) and The Institute of Internal Auditors (The IIA) have signed a Memorandum of Understanding (MoU) to create a formal basis for the advancement of risk management and internal controls toward a common goal of enhanced governance.

Signed today at The IIA’s International Conference, the IFAC-IIA MoU outlines a new plan for enhanced coordination, collaboration, and resource sharing that will draw on the strengths and expertise of the two organizations. Both are engaged in the restoration of public confidence in business reporting and enhancing governance processes in the private and public sectors.

“This Memorandum of Understanding further strengthens the important relationship between The IIA and IFAC. It represents our united commitment to serve the public interest and restore the confidence of the general public in business reporting,” said Richard Chambers, president and chief executive officer of The IIA.

As outlined in the MoU, IFAC and IIA recognize that the following are fundamental to an organization fulfilling its objectives, implementing reliable financial management and reporting, and serving its stakeholders and the public interest:

• The implementation of international auditing and accounting standards;
• Strong risk management practices, including the design and implementation of effective and efficient internal controls; and
• An effective governance process.

“IFAC welcomes this opportunity to continue our collaboration with The IIA,” said IFAC President Warren Allen. “Our professions are closely related, we share common goals, and address the same issues. Joining our efforts and voices therefore makes sense.”

Through the development of an Annual Work Plan, the organizations will create structures and processes appropriate to share information and best practices in government, risk management, and internal control as well as in audit methods and the application of international standards.

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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

About The IIA
Established in 1941, The IIA serves more than 180,000 members in 190 countries and is the internal audit profession's global voice, chief advocate, and principal educator. The Institute develops and maintains the International Professional Practices Framework for internal auditing, comprising the International Standards for the Professional Practice of Internal Auditing, and certifies professionals through the globally recognized Certified Internal Auditor. Visit www.theiia.org for more information.

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Interview translated into English by IFAC and conducted by El País in Spanish. For original in Spanish, see: Entrevista con Jörgen Holmquist Presidente del Comité Internacional de Ética del Sector de Auditoría (IESBA)

English translation: 

Jörgen Holmquist is the chair of the International Ethics Standards Board for Accountants (IESBA).

Question. Why is IESBA working on a revision of the Code of Ethics for Professional Accountants (the Code)?

Answer. The issue is not to modify the content of the Code but its structure. It is difficult to read and the purpose of the revision is to make it more accessible, particularly for the small and medium size audit firms. We are in consultation within the sector and regulators to see how we can improve the structure of the Code.

Q. Would you say auditors bear some responsibility for the financial crisis?

A. There are many parties responsible for this crisis: bankers, politicians, supervisors … Auditors also bear their share of responsibility. It is not as much a problem of independence or of ethics in front of their clients but rather of failures in the way audits were performed since the work of auditors should have resulted in better information to judge what was going on.

Q. Have lessons been drawn from the recent mistakes?

A. Auditors are reflecting on how to improve their work. It is still an ongoing process. From point of view of Ethics there are several things to be considered: how to strengthen independence, how to improve rotation rules, how to proceed when irregularities are identified…

Q. Are auditors contributing to restore confidence in the markets?

A. Confidence in auditors is important and necessary since one of the services they render is to make it possible for investors to trust corporate information. This service has not changed and I believe it is generally well accomplished, although in the cases where the role of the auditor is at question it is obviously necessary to find a solution.

Q. Revenues from services other than audit are increasing in many cases, does this put the auditor’s independence at risk?

A. We cannot generalise. It is clearly stated in the Code of Ethics that there are certain services that the auditor cannot provide. We are now reviewing these rules to see if they need to be strengthened.

Q. Would you be in favour of setting a limit to such services?

A. The real challenge is to find a balance between the different sources of income. Revenues from other services should not subsidise audit, rather audit fees should fully cover the cost of audit services. In cases where revenues from other services are very significant there could be a problem, but it is very difficult to say where to set the limit, since the appropriate limit differs depending on the circumstances. Transparency is very important in these cases: let the market know what pays what and then the Audit Committee of the company should decide on such matters.

Q. The European Union has been trying to increase competition in the market for years, what do you think about this?

A. The rotation of the audit firms is not the panacea, it has advantages but also disadvantages. To improve the way the sector works there are more important issues at stake. Moreover, we have to take into account that in the course of the auditor’s engagement with the company audit partners and directors of the company usually change.

Q. Do you believe there is real competition in this industry? How do you explain the increase of revenues of the big companies year after year despite the crisis?

A. It doesn’t surprise me that revenues are stable or increasing because the crisis brings forward demand for more services. If we take a close look to the sector we see a fair amount of competition between small and medium firms. It is maybe less so in the case of the big four where there is more concentration There should be a few more players at that level, but how can this be achieved? There is no easy answer to this question.

Q. There is the feeling that auditors profited from the problem and now they profit from the solution…

A. I see what you are saying but for me the issue is whether the auditors conduct themselves in an ethical manner and whether they produce quality work. Auditors’ workload has significantly increased because of the crisis which has led to more hours worked. The trend points to a reduction of hourly fees. I don’t believe that auditors as a general rule are profiting from the crisis.

Q. The big four are all Anglo-Saxon; do you think it would be interesting to promote a big European firm?

A. It is difficult to create a brand new company that can compete with the big four because what the clients require is a worldwide network that can provide services in any country where they have a presence. 

The IFAC Nominating Committee plays a vital role in establishing the expertise of the independent standard-setting boards, the IFAC Board, Compliance Advisory Panel, and IFAC committees by seeking out and identifying the best candidates for vacancies. Whether it is one of the independent standard-setting boards or an IFAC committee, the Nominating Committee examines nominations from around the world, analyzes experience and expertise, and considers diversity when recommending new members and leadership for the boards and committees, all while maintaining transparency and strict adherence to due process. The Nominating Committee, under the oversight of the Public Interest Oversight Board (PIOB), also strives to ensure sufficient nominations are received each year and helps professional accountancy organizations and other stakeholders establish an effective nominations strategy.

The Nominating Committee is comprised of two ex-officio members—the IFAC president and deputy president—and at least four non-ex-officio members, of whom no more than two can be IFAC Board members. There are currently two Board members on the committee—Ana Maria Elorietta and Japheth Katto—although during some years there have been none. For 2013, the non-Board members, or ordinary members, are Margaret Parker, Professor Judy Tsui, and Sir David Tweedie.

I asked committee members to share their experiences and thoughts on the work of the committee in order to increase the knowledge among our stakeholders of the work and diligence involved.

—Warren Allen, IFAC President

1. What made you interested in serving on the Nominating Committee?
   
   Ana Maria Elorrieta: Due to my accumulated knowledge of IFAC, I felt that I had a reasonable understanding of most of the needs at the board and committee level so I realized that I could contribute to the nominations process. Additionally, in so doing, I would be representing Latin America.
   
   Japheth Katto: I wanted to make a contribution to the leadership and governance of IFAC, its committees, and the independent standard-setting boards by being part of the selection of professionals serving on the boards and committees. In my view this is an important exercise as serving the public interest is the foundation of IFAC's mission.
   
   Margaret Parker: My member body contacted me to put my name forward. I was on a nominating committee in my state in Australia so was familiar with the overall requirements of a nominating committee at the local level.
   
   Sir David Tweedie: I believe passionately in global standards, whether they are in accounting, auditing, ethics, or education. If we are to gain acceptance for these standards, we need the very best people the profession can offer to draft them. I wanted to do my best to ensure that the [boards and] committees were filled by those who were respected thinkers in their particular specialisms and had an international outlook rather than being merely placemen.
    
2. Since you became a member, has your view of the Nominating Committee and its work changed? Has serving on the Nominating Committee been what you expected?
   
   Japheth Katto: I always knew that the committee played a very big role and that its job was not an easy one. However, I did not fully appreciate how intricate and complicated the process was, especially when you have many candidates who fit the criteria of "best person for the job."
   
   Margaret Parker: Serving on the committee has been much more than I expected. The rigor and concern for the public interest are foremost in the committee’s mind. I have also come to understand that the work of the committee is vital to the quality of volunteers on the boards and committees.
   
   The committee is very cohesive and cooperative, which adds to the overall enjoyment of the work. On a personal level, it has been a wonderful experience to be on an international committee where the members are from all over the world.
   
   Judy Tsui: I was pleasantly surprised to find out that the Nominating Committee has established such comprehensive and consistent procedures and processes for all the nominations. The PIOB observer, in particular, serves as a monitor of public interest.
   
   Sir David Tweedie: I have been astounded at the thoroughness of the work of the committee. It seeks to be scrupulously fair—it examines the CVs very carefully, then ensures that not one committee member has an undue influence in the result. I have found the work of the committee and its staff extremely professional—far exceeding anything else I have experienced with nominating committees.
    
3. The competition for membership on boards and committees is very high; how does the committee select the “best” candidates for positions?
   
   Ana Maria Elorrieta: This is really a very important activity. We first analyze the profile of the best candidate in accordance with the boards’ and committees’ needs. Then we analyze the CVs received and try to match one to the other. The analysis of the CVs is very detailed work performed individually by each Nominating Committee member, so when we discuss as a group, each member has a point of view on the best candidates. Then we complete our knowledge of the candidates through the interviews to provide the basis for the final decision. It is a very comprehensive process.
   
   Japheth Katto: In arriving at the best candidate for the position, the committee's guiding criteria is the candidate's knowledge, experience, and ability to add value to the board or committee. Before the final decision, other factors, such as geographical and sector (Big 4, small- and medium-sized practices, professional accountants in business, etc.) representation are taken into account. Clearly, it wouldn't be in the public interest if all or most members of a board or committee were from the Big 4 or one region. Diversity is important.
   
   Margaret Parker: The committee members read all the CVs submitted via the Call for Nominations. We also consider the requirements of the boards and committees for which we are recommending candidates. It is, therefore, important for nominees to include their experience relevant to the particular board in their CV. The committee members individually rank the nominees prior to our meeting. At our next face-to-face meeting, a technical voting system is used to rank the nominees who are then chosen for either telephone or face-to-face interviews.
   
   Committee members, together with board/committee chairs, conduct telephone interviews, gleaning the candidates’ experience of the work of the board/committee, their relevant work experience, and what they may bring on a personal level. Written reports of the interviews are provided to the Nominating Committee for further consideration in choosing the recommended nominee.
   
   In making the final choice, all aspects of the “best” person for the job are considered—relevant experience required by the board/committee, regional representation, gender representation, and English language skills.
   
   Sir David Tweedie: Once the CVs have been read by the individual members, we all vote electronically at the same time and then select for interview those nominees that receive the highest number of votes. We usually interview twice as many candidates as there are vacancies. The interviews are carried out by a Nominating Committee member and the chair of the committee [in question]. The notes on these interviews are then passed to the whole committee at the next meeting where the interview results are debated. If there are doubts about the caliber of those interviewed other candidates may be sought from member bodies.
    
4. How is your role as an ordinary (non-Board) member different from a Board member? How is your role as a Board member different from an ordinary (non-Board) member?
   
   Ana Maria Elorrieta: The difference between a Board member and non-Board member is that we have the input from the Board, including suggestions and concerns related to the other boards and committees. This includes discussions around strategy and risks. We can add this perspective to the Nominating Committee discussion.
   
   Japheth Katto: I think as a Board member, I bring the perspective of the Board as a whole. I will know the Board's thinking based on previous experience and on ongoing consultations between the Nominating Committee and the Board.
   
   Margaret Parker: I don’t believe my role as an ordinary member is different from a Board member. We all have a say in the decision making, all have a vote in choosing the candidates for interview, all have an opportunity to provide input after an interview. The Board members will have wider experience with IFAC, which occasionally will impact our decisions; however, generally, there is no difference.
   
   Sir David Tweedie: In most cases, there is no difference between the two roles. The Board members, however, are more experienced with the workings of IFAC—they can explain IFAC policies and answer questions about individuals who have served on IFAC boards/committees in the past or explain the history of certain applications.
    
5. What does serving the public interest, which is embedded in IFAC’s mission, mean to you as a member of the Nominating Committee?
   
   Ana Maria Elorrieta: To serve the public interest is to act with an objective and balanced view and avoid influence of any type. It means to think strategically and with a long-term view, looking to protect the society and not any individual part.
   
   Japheth Katto: Simply put, serving in the public interest means selecting those candidates that are going to work not in the interest of their nominating organization or their employers or regions, who are not going to allow [themselves] to be unduly influenced, and who are going to act with integrity in the interest of the global profession and the public that it serves.
   
   Margaret Parker: To me, serving the public interest means making decisions that are best for the whole rather than a part of the whole. This can be applied from a wide perspective, such as making decisions that are best for the world rather than a particular country or region, or doing what is best for a group rather than the individual. When applying this philosophy to the nominating [process], it means making decisions that are in the best interest of the public at large, rather than the accountancy profession in particular, or a particular region, country, or individual.
   
   Sir David Tweedie: The public interest should be in the DNA of every accountant. In looking at candidates, I look for those that have clearly been involved in public policy issues, have written articles advocating professionalism, or have given time to move the profession forward. Public interest to me is acting in a neutral, unbiased way to present transparent information to society at large and to act with integrity and objectivity without regard to particular interests. I look for this in those who are nominated for the [boards or] committees.
    
6. How does the committee ensure due process in its actions?
   
   Ana Maria Elorrieta: There is a clear and objective process that is carefully followed. There are discussions at each phase, to reaffirm the adequacy of the decisions taken at each stage of the process. Every member is free to contribute and discuss.
   
   Japheth Katto: The committee has procedures and processes that are agreed [to], including Terms of Reference [which are approved by the IFAC Council and the PIOB]. It makes consensus decisions and documents its processes. In addition, its work is observed by the PIOB.
   
   Judy Tsui: Due process is ensured through:
   
   • Open, detailed, and rigorous discussions;
   • Adhering to anonymous electronic voting [to derive a shortlist of candidates];
   • Adhering to the principle of candidate selection based on the “best person for the job” and meeting geographical and gender diversity when possible once the candidates meet performance criteria; and
   • Maintaining the practice of having the board/committee chair and Nominating Committee members conduct telephone interviews for selecting board/committee members, and conducting in-person interviews for selecting IFAC Board and Nominating Committee members, and board/committee chairs.
   Margaret Parker: The committee members are very conscious of working in the public interest and according to the Terms of Reference of the committee. Members of the staff of IFAC who are familiar with the Constitution and regulations surrounding the work of the committee are also in attendance at the meetings to provide input where necessary. However, the meetings of the Nominating Committee are overseen by a member of the PIOB who ensures due process is followed and that the public interest is protected.
   
   Sir David Tweedie: See the answer to question three. Sometimes, however, excellent candidates simply are unable to obtain a place on a committee by virtue of the fact that their country or region is over represented and views from other parts of the world are necessary to give balance to that committee. In such cases, the unsuccessful candidates are frequently advised to reapply for a position. Due process isn’t simply looking for the best candidates but seeking to achieve a balanced composition on any board or IFAC committee.