The Small and Medium Practices (SMP) Committee of the International Federation of Accountants (IFAC) today issued the second edition of its Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities (ISA Guide). The implementation guide is intended to help practitioners understand and efficiently apply the Clarified International Standards on Auditing (ISAs), which are effective for audits of financial statements for periods beginning on or after December 15, 2009.

“Many practitioners around the world are transitioning to the use of the Clarified ISAs. While the Clarity Project made the ISAs more understandable, clear, and capable of consistent application, the SMP Committee has long recognized the challenges facing SMPs in applying new standards—which range from resource constraints to the distinctive traits of audits of small- and medium-sized entities,” says Sylvie Voghel, SMP Committee chair. “The updated ISA Guide provides IFAC member bodies—and ultimately the SMPs they represent—with a unique resource to help them implement the new requirements efficiently and deliver high-quality service.”

The first edition of the ISA Guide was issued in December 2007 and was IFAC’s second most popular publication during 2008. The second edition includes various improvements based on feedback from users of the first edition. In addition, it features two integrated case studies, one of which focuses on an audit of a micro-entity, increased focus on SME audits, and a new colorful design.

The ISA Guide also now comes in two stand-alone volumes:

• Volume 1 describes the basic concepts of a risk-based audit in conformance with the Clarified ISAs. It is directed at practitioners and students with little or no familiarity with the ISAs who want to understand them and apply them in practice. This volume might also provide material to training providers, institutes, and universities that teach audit practices.
• Volume 2 provides practical guidance for the audit of SMEs. It is aimed at practitioners with a good working knowledge of the ISAs who want a tool for reference purposes, as well as specific guidance on conducting SME audits cost effectively.

IFAC wishes to thank the Canadian Institute of Chartered Accountants for producing the ISA Guide and the global panel of reviewers for volunteering their time and effort to helping with its development.

The PDF version of the ISA Guide can be downloaded for personal use from the Publications & Resources section of the IFAC website. For information on reproducing or translating publications issued by IFAC, please see our policy statement or contact permissions@ifac.org.

The IFAC SMP Committee welcomes readers to visit its International Center for Small and Medium Practices (www.ifac.org/smp), which hosts a collection of IFAC publications (including recently issued guides on quality control and practice management) and relevant links to resources from IFAC member bodies and other organizations, including a category devoted to implementing international standards. The site also hosts a discussion board, where practitioners can exchange views on how to apply the ISAs, a link to the Translations Database, where downloadable translations of the ISA Guide are available, and a link to the IAASB Clarity Center, which hosts an array of implementation support materials.

About IFAC
IFAC (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. It is comprised of 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

Accountancy leaders from around the world met in Geneva on October 12 to discuss next steps for global corporate governance reforms. With an eye to helping prevent future financial crises, they collectively supported the following points:

• The accountancy profession has a key role to play in strengthening corporate governance and facilitating the integration of governance and sustainability into the strategy, operations, and reporting of an organization.
• Boards should be focused on the long-term sustainability of their businesses. As such, corporate governance reform must include strengthening board oversight of management, positioning risk management as a key board responsibility, and encouraging remuneration practices that balance risk and long-term (social, environmental, and economic) performance criteria.
• Governance is more than having the right structures, regulation and principles in place—it is about ensuring that the right behaviors and processes are in place.
• Governance mechanisms need to be strengthened at banks and other companies to ensure better oversight of risk management and executive compensation.
• More dialogue is needed between policy makers, the accounting profession, and other financial industries to consider how we can work together effectively on a global level.

The conference, hosted by the International Federation of Accountants (IFAC) and the United Nations Conference on Trade and Development (UNCTAD), took place at the United Nations Office in Geneva, Switzerland.

Professor Mervyn King, author of the King Code on Corporate Governance, was the keynote speaker. Participants from more than 50 countries were on hand to address key questions including: What lessons has the financial crisis revealed about corporate governance? What corporate governance reforms should be developed on a global basis? And what role should the accountancy profession play?

“Professional accountants can serve as a critical link to ensure that good corporate governance is practiced,” said IFAC President Robert L. Bunting. “Accountants provide strategic direction to boards and governing bodies, aiming to ensure that risks are managed appropriately and resources are used responsibly—all key processes for facilitating sound corporate governance.”

The IFAC/UNCTAD conference was designed to allow professional accountants, corporate governance experts, and other participants to challenge current practices, exchange views on essential elements of corporate governance, and discuss best practices that will improve the current and future business and economic climate.

Mervyn King, professor at the University of South Africa, who specializes in corporate citizenship, said: “Our businesses impact society, the economy, and the environment. We are no longer distant bystanders of these organizations, but we are the stakeholders, because business impacts our society, environment, and economy.”

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 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

About the United Nations Conference on Trade and Development (UNCTAD)

UNCTAD is the focal point of the United Nations for the integrated treatment of investment and enterprise development. Since its founding in 1964, UNCTAD has progressively evolved into an authoritative knowledge-based institution whose work aims to help shape current policy debates and thinking on development. UNCTAD is the host for the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR). For more than 25 years, ISAR has been the focal point within the UN system for issues of corporate transparency and accounting. Through ISAR, UNCTAD works to promote international best practices in financial reporting and corporate governance disclosure and to assist developing countries to build their technical capacity in this area.

This comprehensive implementation guide is intended to help practitioners understand and efficiently apply the clarified International Standards on Auditing (ISAs) to audits of small- and medium-sized entities (SMEs). First issued in 2007 and developed with the Canadian Institute of Chartered Accountants, it is designed for use by all practitioners. Volume 1 covers the basic concepts of a risk-based audit in conformance with the ISAs.

The International Auditing and Assurance Standards Board (IAASB) today released for public exposure a new proposed pronouncement—International Auditing Practice Statement (IAPS) 1000, Special Considerations in Auditing Complex Financial Instruments—that highlights practical considerations for auditors when dealing with complex financial instruments. The pronouncement gives particular emphasis to auditing considerations relating to valuation and disclosure issues for financial statement items measured at fair value.

“The global financial crisis highlighted the need for further guidance on this important and challenging area of financial reporting,” explained Prof. Arnold Schilder, chairman of the IAASB. “Through the proposed IAPS 1000, the IAASB seeks to raise awareness of issues being encountered in practice, in particular for fair value estimates and the valuation of assets in illiquid markets. IAPS 1000 provides useful guidance to auditors of entities of all sizes on a topic that will likely continue to prove challenging for both preparers of financial statements and auditors.”

Along with the proposed IAPS 1000, the IAASB is also exposing for comment proposed changes to the current Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services (the proposed amended Preface), which explains the authority of this and future IAPSs. James Gunn, IAASB technical director, explains, “The proposed amended Preface makes clear that the IAASB’s Practice Statements are issued to promote good practice and provide practical assistance to auditors in implementing the ISAs. As such, when a Practice Statement is relevant in the circumstances of the audit, auditors should understand the guidance in that Statement. From a practical point of view, the proposals seek to achieve a common understanding of how Practice Statements are to be used.”

The IAASB plans to finalize proposed IAPS 1000 and the statement of authority in 2011. Auditors, however, may wish to consider the material in the proposed IAPS 1000 as they plan and perform their upcoming audit engagements.

How to Comment
The IAASB invites all stakeholders to comment on its proposals. To access the exposure draft or submit a comment, visit the IAASB’s website at www.iaasb.org/ExposureDrafts.php. Comments on the exposure draft are requested by February 11, 2011.

About the IAASB
The IAASB (www.iaasb.org) 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 (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. It is comprised of 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

Over 40 senior audit professionals from 20 international networks of accounting firms met yesterday to share their experiences and industry perspectives in applying International Standard on Auditing 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors) (ISA 600). The symposium, organized by the Forum of Firms, assembled a group of experts to discuss several aspects of auditing a group, including those business activities and entities (components) that are included in the group’s financial statements.

"This symposium was designed to encourage participants to exchange views on challenges unique to auditing in a group environment, such as cross- border confidentiality considerations and differing ethics requirements,” said Nick Fraser, chair, Transnational Auditors Committee. “More importantly, with an aim of seeking ways to more fully obtain the intended benefits of ISA 600, the participants also contributed practical solutions for further consideration.”

Commencing with an overview of the key requirements of ISA 600, the symposium participants discussed a range of application issues, such as the engagement of and reporting by component auditors, communication with both management and component auditors about the group audit process, and determining materiality in a group environment. Led by speakers from across the spectrum of the Forum’s membership, including France, Germany, the United Kingdom, and the United States, the symposium concluded with a discussion on the importance of firm processes and controls that support group audit engagements.

"This event is the fourth symposium held by the Forum of Firms, and it has been a unique way to bring its members together to share and openly exchange views on present-day issues,” said Robert Dohrer, chair, Forum of Firms. “The ISA 600 symposium is an example of the Forum of Firm’s continuing commitment to promoting high-quality audit practice at a global level.”

About the Forum of Firms
The Forum of Firms (www.ifac.org/Forum_of_Firms) is an association of networks of international accounting firms that perform transnational audits. Members of the Forum have committed to adhere to and promote the consistent application of high-quality audit practices worldwide, including the use of International Standards on Auditing, and the maintenance of appropriate quality control standards in accordance with International Standards on Quality Control issued by the International Auditing and Assurance Standards Board. Through their organizations, members also conduct globally coordinated internal quality assurance reviews on a regular basis and have policies and methodologies that conform to the International Federation of Accountants' Code of Ethics for Professional Accountants. The Transnational Auditors Committee is the Executive Committee of the Forum of Firms and a committee of the International Federation of Accountants.

IFAC President Robert Bunting spoke at the 2010 American Accounting Association Annual Meeting on accounting education in a global environmnent. Watch the video here.

IFAC President Robert Bunting was named as one of Accounting Today’s Top 100 Most Influential People of 2010. Read the full article here.

Prof. Linda de Beer has been appointed chairman of the Consultative Advisory Group (CAG) to the International Auditing and Assurance Standards Board (IAASB). The IAASB CAG^** is an independent body and provides the forum in which the representatives of its various member organizations—including regulators, preparers, and others with an interest in international auditing and assurance—provide advice on technical and public interest matters relating to the drafts of IAASB standards and strategy. The IAASB is an independent standard-setting board that establishes in the public interest International Standards on Auditing (ISAs) and other pronouncements for use by professional accountants around the world.

As a representative of the Johannesburg Stock Exchange (JSE), Prof. de Beer currently represents the World Federation of Exchanges on the CAG. She was elected by the CAG membership to succeed the current CAG chairman, David Damant, who since June 2004 has served as the first independent IAASB CAG chairman. Prof. de Beer’s appointment—a three-year term effective October 1, 2010—has been approved by the International Public Interest Oversight Board (PIOB).^*

The chairman of the IAASB CAG provides leadership direction to the CAG, overseeing the achievement of the CAG's objectives and liaising with the PIOB and the IAASB. The PIOB oversees the activities of the IAASB and of the CAG.

“Linda brings a wealth of expertise to her current role as a member of the IAASB CAG,” said IFAC Chief Executive Officer Ian Ball. “I’m extremely pleased that she has been appointed as independent chairman, and I know that under her leadership the IAASB CAG will continue to make a highly effective contribution to audit standard setting. I would like also to acknowledge the vision, experience, and commitment David Damant brought to the role over the past six years.”

Commenting on the appointment, Prof. Arnold Schilder, chairman of the IAASB, said: “Linda’s experience as a professional advisor will serve her well as she works to enhance the CAG’s public interest input to the development of our standards and guidance. I very much look forward to working with her as IAASB CAG chairman.”

Prof. de Beer is an independent financial reporting and corporate governance advisor, and visiting professor at the University of the Witwatersrand in Johannesburg. She serves as an independent non-executive director on the boards of Afgri Holding Ltd (listed on the JSE) and Royal Bafokeng Platinum Ltd. She is a member of the King Committee on Corporate Governance, the Issuers’ Services Advisory Committee of the JSE, and the Committee for Auditing Standards of the Independent Regulatory Board for Auditors in South Africa.

Prof. de Beer stated: “The IAASB CAG plays a vital role in ensuring that the recipients of assurance services—namely the preparers and users of financial information, regulators, and other participants in the financial reporting supply chain—have an influence on ISAs and the other standards of the IAASB, as well as on the strategic direction of the IAASB. It is critical for the credibility of financial reporting to have these constituents involved in the standard-setting process. I am honored and humbled by my colleagues’ decision to elect me to lead them in this role. I am very much looking forward to the challenge.”

About the IAASB
The IAASB (www.iaasb.org) develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the PIOB, which oversees the activities of the IAASB, and the IAASB CAG, 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 (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. It is comprised of 159 members and associates in 124 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce.

* The Public Interest Oversight Board (PIOB)
Established in 2005 as the oversight board for the global accountancy profession, the PIOB oversees IFAC's public interest activities with the objective of increasing the confidence of investors and others that such activities, including the setting of standards, are properly responsive to the public interest. The PIOB oversees the activities of the IAASB and of the CAG and, as one element of this oversight, establishes the criteria for their due processes and working procedures. PIOB members are nominated by international institutions and regulatory bodies.

** IAASB CAG Members (As at September 1, 2010)

• Asian Financial Executives Institutes
• Associação Brasileira de Instituições Financeiras de Desenvolvimento
• Basel Committee on Banking Supervision
• BUSINESSEUROPE
• CFA Institute
• Dean of the Graduate School of Financial Management, Moscow
• European Commission
• European Federation of Accountants and Auditors for SMEs
• European Financial Executives Institutes
• Fédération des Experts Comptables Européens
• Gulf States Regulatory Authorities
• Information Systems Audit and Control Association
• Institute of Internal Auditors
• International Accounting Standards Board
• International Actuarial Association
• International Association of Insurance Supervisors
• International Bar Association
• International Corporate Governance Network
• International Organization of Securities Commissions
• International Organization of Supreme Audit Institutions
• International Valuation Standards Council
• Islamic Financial Services Board
• Japan Securities Dealers Association
• National Association of State Boards of Accountancy
• North American Financial Executives Institutes
• Organisation for Economic Cooperation and Development
• Sri Lanka Accounting and Auditing Standards Monitoring Board
• United Nations Conference on Trade & Development
• World Bank
• World Federation of Exchanges
  

IAASB CAG Observers (As at September 1, 2010)

• Financial Services Agency, Japan
• U.S. Public Company Accounting Oversight Board

This IAASB Staff Q&A highlights considerations in the International Standards on Auditing (ISAs) that are relevant to auditing transactions that are significant unusual or highly complex, judged in the light of the auditor's understanding of the entity and its environment and other information obtained during the audit. Because of their nature, these transactions may give rise to risks of material misstatement of the financial statements and, accordingly, may merit heightened attention by auditors.

The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) today released for comment a Consultation Paper, Competent and Versatile: How Professional Accountants in Business Drive Sustainable Organizational Success, that highlights how employer expectations of professional accountants in business are expected to change in light of global trends and evolving organizational needs.

The paper analyzes these expectations in relation to eight drivers of sustainable organizational success—what companies need to do to achieve and sustain success in the changing global economic landscape. The drivers were defined based on an analysis of three long-term trends influencing organizations: globalization, complexity, and technology. The drivers provide the framework for key activities that professional accountants will be expected to perform. These activities are highlighted under the following four roles that form the cornerstones of the services provided by professional accountants: creators, enablers, preservers, and reporters of sustainable value. Previously defined in the proposed PAIB Strategy and Work Plan 2010-12, these roles have received wide support so far.

IFAC PAIB Committee Chair Roger Tabor commented, “This employer-based view of the expectations of professional accountants in business will help accountants prepare for the roles they will be expected to fill in the future. The world is changing, organizational needs are evolving, and professional accountants need to adapt their skills and competences to these changing requirements and circumstances. Our demand-driven approach will enable the global accountancy profession to ensure that its members are positioned to help drive their organization’s sustainable performance.”

The discussion questions that precede the Consultation Paper ask for feedback on, for example, the usefulness of developing an international competency framework that would cover the roles and domain of professional accountants in business, among other key topics.

Comments on the Consultation Paper are requested by November 30, 2010.

About IFAC
IFAC (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 159 members and associates in 124 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce.