The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), has released its 2007 annual report which highlights its work in enhancing the clarity of international standards and notes progress in achieving global convergence to international auditing standards. The report also details the IAASB's consultation and outreach program and offers a preview of its proposed future strategy.

A central part of the IAASB's work program over the past year has been the redrafting of its international standards to make them clearer and to promote their adoption and translation. During 2007, the IAASB approved seven final International Standards on Auditing (ISAs) and 21 exposure drafts as part of its Clarity project. It also announced that the effective date for all final redrafted ISAs will be for periods beginning on or after December 15, 2009. The IAASB plans to complete the redrafting of all ISAs by the end of 2008.

To further promote international convergence of standards, the IAASB engaged in extensive consultation and coordination activities in 2007 with international regulators and organizations, national auditing standard setters, and other stakeholders. The IAASB also continued to receive oversight from the Public Interest Oversight Board and obtained input to its work program and technical projects from the IAASB Consultative Advisory Group (CAG). A report from David Damant, Chairman of the IAASB CAG, is included in the annual report.

Throughout 2007, the IAASB actively consulted with stakeholders and users of its standards regarding the development of its proposed future technical strategy and work program. The annual report presents highlights of the proposed future strategy, which the IAASB is reviewing at its meeting in New York City this week.

The 2007 IAASB annual report can be downloaded from its website.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

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 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Federation of Accountants (IFAC) has released its 2008 Handbook of International Auditing, Assurance, and Ethics Pronouncements. The handbook can be downloaded in PDF format from the IFAC online bookstore (http://www.ifac.org/store), and print copies can be ordered now for shipment in mid-March. In addition, the 2008 Handbook of International Public Sector Accounting Pronouncements is currently being finalized and will be available for download from the IFAC bookstore later in March.

Auditing and Assurance Handbook
The 2008 auditing and assurance handbook is presented in two parts. The first part contains pronouncements on auditing, review, other assurance, and related services issued by the International Auditing and Assurance Standards Board (IAASB) as of January 1, 2008. It also includes the IFAC Code of Ethics for Professional Accountants, issued by the International Ethics Standards Board for Accountants, along with new definitions for "firm," "network," and "network firm." The second part of the handbook features nine International Standards on Auditing redrafted by the IAASB to improve their clarity, as well as background information on the IAASB's Clarity project.

Print copies of the handbook can be ordered for US$150.00 plus shipping. Discounts are available for students, academics, and individuals living in developing countries, as well as for orders of 10 or more copies.

Public Sector Accounting Handbook
The 2008 Handbook of International Public Sector Accounting Pronouncements will contain all pronouncements of the International Public Sector Accounting Standards Board (IPSASB) as of December 31, 2007. It will also feature two new standards - International Public Sector Accounting Standard (IPSAS) 25, Employee Benefits, and IPSAS 26, Impairment of Cash-Generating Assets - as well as an updated Cash-Basis IPSAS, Financial Reporting under the Cash Basis of Accounting. Print copies of the public sector handbook can be ordered for no charge, except for a US$25.00 shipping cost, for shipment in late-March.

How to Order
The 2008 Handbook of International Auditing, Assurance, and Ethics Pronouncements can be downloaded or ordered from the IFAC online bookstore. Orders can also be placed by calling 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 157 members and associates in 123 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. Through its independent standard-setting boards, IFAC sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Federation of Accountants (IFAC) is inviting professional accountants and others who work in the public sector to complete an online survey on the ways in which public sector entities set objectives, measure performance, and report on results. Currently, there is little information available about public sector performance measurement structures around the world. This global survey is designed to identify similarities and differences in performance measurement structures and the extent to which these structures help public sector entities meet their objectives. The survey also seeks examples of strengths and weaknesses of performance measurement structures and what can be done to further improve the assessment, monitoring and reporting of financial and non-financial performance in the public sector.

The survey is part of a project to help professional accountants in business and others in evaluating and improving performance measurement systems. The results will also assist IFAC's Professional Accountants in Business (PAIB) Committee in considering specific public sector aspects when developing its principles-based guidance.
 
The survey, which takes 10-15 minutes to complete, can be accessed online at www.ifac.org/publicsectorperformancesurvey. Responses are requested by April 30, 2008.

For more information on the work of IFAC's PAIB Committee, visit: http://www.ifac.org/paib.  

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 157 members and associates in 123 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. Through its independent standard-setting boards, IFAC sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

A new report, Financial Reporting Supply Chain: Current Perspectives and Directions, emphasizes that significant efforts to strengthen financial reporting in recent years have resulted in improvements in three key areas: corporate governance, the process of preparing financial reports, and the audit of financial reports. However, despite improvements to the financial reporting process, the report points out that the understandability of financial reports has not improved.

Commissioned by the International Federation of Accountants (IFAC), the report's findings are based on an independent global survey of participants in the financial reporting supply chain. The survey, conducted in 2007, sought to determine the extent to which the financial reporting process, and financial reports themselves, have improved and where there is need for further action to make them more relevant. More than 340 participants from all sectors of the financial reporting supply chain worldwide - including investors, preparers, company management and directors, auditors, standard setters, and regulators - took part in the survey. In addition, interviews were conducted with 25 high-level participants in the supply chain, including investors, company directors, CFOs, and regulators. The project was led by Norman Lyle, who recently retired as group finance director of Jardine Matheson Limited in Hong Kong.

Among the key findings, the survey found that corporate governance has improved, fueled by an increased focus on corporate governance and changes to company codes and standards.  In commenting on improvements to the financial reporting process, survey participants indicated that convergence to international standards, enhanced regulations governing financial reporting, and improved internal control over financial reporting systems all contributed to enhancing the reliability and relevance of the reports. Improvements to audit standards and practices and strengthened independence rules were seen as having contributed to enhanced audit quality.

"Despite the strengthening of the financial reporting process and the many improvements made, there is still much to be done to meet the needs of investors and other stakeholders," points out Norman Lyle, Chair of the Financial Reporting Supply Chain Project. "Survey respondents raised concern about the reduced usefulness of financial reports due to complexity and the increased focus by companies on compliance instead of reporting on the essence of the business."

Recommendations for Action

To address the usefulness of financial reporting, survey participants recommended:

• Improving communications among participants in the financial reporting supply chain;
• Producing financial and business information that is relevant, reliable and understandable;
• Including more business-driven information in financial reports; and
• Promoting the use of technology to enable users to compile their own information.

"IFAC is already working to address these challenges," emphasizes Ian Ball, IFAC Chief Executive Officer. "At its meeting in New York City last month, the IFAC Board approved a new project that will analyze actions currently being taken to address the suitability of business reporting and identify areas for future development. This project will take the findings of the financial reporting supply chain report to the next stage and deliver specific recommendations for further action."

The full report, Financial Reporting Supply Chain: Current Perspectives and Directions, is available on the IFAC website.

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 157 members and associates in 123 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. Through its independent standard-setting boards, IFAC sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

This independent report, commissioned by IFAC, highlights improvements that have been made to the financial reporting supply chain in recent years and identifies areas for further improving the usefulness of financial reports.

The International Federation of Accountants (IFAC), the global organization for the accountancy profession, is seeking nominations for the position of IFAC Deputy President and for members of its boards and committees for 2009, including three public member positions. IFAC member bodies, and in some instances members of the Forum of Firms and members of the public, may nominate candidates by April 15, 2008. The IFAC Deputy President and all members of IFAC's boards and committees are expected to act in the public interest and must sign a declaration committing to act with integrity and in the public interest in their role within IFAC.

Deputy President
IFAC member bodies may nominate individuals for the position of Deputy President for the period November 2008 to November 2010. Candidates for the position of Deputy President must be a current or nominated member of the IFAC Board. After serving a two-year term, the Deputy President will assume the Presidency of IFAC.

The Deputy President works with the President and Chief Executive Officer in implementing IFAC's Strategic Plan; represents IFAC among its member bodies, various stakeholders, and other external organizations; and chairs IFAC's Planning and Finance Committee. A nominee for the position of Deputy President should be a very senior and highly respected member of the profession with exceptional leadership skills. He or she should also have an awareness of the social and economic environment in which the global profession, IFAC and its member organizations operate.

Member Body Nominations for Board and Committees
Member bodies are also invited to nominate qualified candidates for open positions on the following IFAC boards and committees for terms commencing January 1, 2009:

• IFAC Board;
• International Auditing and Assurance Standards Board;
• International Accounting Education Standards Board;
• International Ethics Standards Board for Accountants;
• International Public Sector Accounting Standards Board;
• Compliance Advisory Panel;
• Developing Nations Committee;
• Professional Accountants in Business Committee;
• Small and Medium Practices Committee; and
• Nominating Committee.

Member bodies may submit more than one nomination for each board or committee, and they are encouraged to nominate candidates with varying backgrounds.

Public Member Nominations
IFAC is also seeking nominations for two public member positions on the International Auditing and Assurance Standards Board and one public member position on the International Public Sector Accounting Standards Board. Public members must be seen to be independent of any special interests and seen to be acting to represent society as a whole. Nominees for the public member positions must have an appropriate level of knowledge about the work of the respective standard-setting board, although they do not need to have a professional accountancy designation. IFAC member bodies, regional accountancy organizations, other organizations, accounting firms, and members of the general public may submit public member nominations, but in all cases the individuals nominated must clearly represent the broad public interest.

Forum of Firms Nominations
A total of five positions on the standard-setting Public Interest Activity Committees¹ are open to nominations from members of the Forum of Firms, an association of international networks of accounting firms that perform audits of financial statements that are or may be used across national borders. Two positions are open on the International Auditing and Assurance Standards Board, one position is open on the International Accounting Education Standards Board, and two positions are open on the International Ethics Standards Board for Accountants.

How to Submit Nominations
The Call for Nominations for IFAC Boards and Committees in 2009 describes the positions available and the qualifications required for each position, as well as the process for submitting nominations. The Call for Nominations may be viewed on IFAC's website at http://www.ifac.org/NominatingCommittee/index.php#Process. All nominations must be submitted by April 15, 2008 using the online Candidate Information System. For more information about the role and activities of each of IFAC's boards and committees, visit its website at http://www.ifac.org/.

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 157 members and associates in 123 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. Through its independent standard-setting boards, IFAC sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

¹ The standard-setting Public Interest Activity Committees are the International Auditing and Assurance Standards Board, the International Accounting Education Standards Board, and the International Ethics Standards Board for Accountants.

New requirements designed to enhance the rigor applied to auditing accounting estimates, including fair value accounting estimates, were released today by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC). International Standard on Auditing (ISA) 540 (Revised and Redrafted), Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, requires the auditor to focus attention on areas of higher risk, accounting judgment, and possible bias, thereby assisting the auditor to form appropriate conclusions about the reasonableness of estimates in the context of an entity's financial reporting framework.

ISA 540 (Revised and Redrafted) adopts a risk-based approach to the audit of accounting estimates including fair value accounting estimates. It addresses matters such as the auditor's evaluation of the effect of estimation uncertainty on risk assessments, management's methods for making estimates, the reasonableness of assumptions used by management, and the adequacy of disclosures. The ISA provides expanded guidance on auditing fair value accounting estimates, including audit considerations relating to the proper application of the requirements of the financial reporting framework relevant to such estimates and the use of models in valuations.

"We are clearly in an environment where the measurement and disclosure of fair values are of great importance, with recent market experience highlighting the difficulties that arise in valuing financial instruments. It is, therefore, timely that the IAASB has issued its revised standard to provide enhanced guidance on auditing accounting estimates, particularly fair value ones determined on the basis of a complex valuation model or significant unobservable inputs," states John Kellas, Chairman of the IAASB, adding, "We are confident that the standard will enhance current practice and promote consistency worldwide."

ISA 540 (Revised and Redrafted) combines ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures (Other Than Those Involving Fair Value Measurements and Disclosures), and ISA 545, Auditing Fair Value Measurements and Disclosures. The IAASB concluded that the similarities between estimates and fair value estimates could be emphasized, and redundancy eliminated, by combining these two standards. The new standard forms part of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the clarity drafting conventions.¹

Mr. Kellas explains: "Although ISA 540 (Revised and Redrafted) is effective for audits of financial periods commencing on or after December 15, 2009, the date when all the standards redrafted under the IAASB's Clarity project become effective, it deals with a subject of considerable current concern. In this climate, auditors will be well aware of the need to understand the accounting principles and rules relating to accounting on the basis of fair value, and to give appropriate consideration to their application. Auditors may therefore wish to consider the material in the new standard as they complete their 2007 audits, and plan and perform those for 2008 and 2009 engagements. Other existing standards may also be particularly relevant, for example, those on the use of experts by the auditor and on the auditor's consideration of the going concern basis of accounting."

The IAASB also recommends that auditors be alert for relevant guidance that has been, or may be, issued by other organizations: for example, the paper, Determining Fair Value of Financial Instruments under International Financial Reporting Standards (IFRS) in Current Market Conditions, issued in December 2007 by the world's six largest accounting firms (under the auspices of the Global Public Policy Committee); the US Public Company Accounting Oversight Board's Staff Audit Practice Alert No. 2, Matters Related to Auditing Fair Value Measurements of Financial Instruments and the Use of Specialists, also released in December; and the UK Auditing Practices Board's (APB) Bulletin 2008/01, Audit Issues when Financial Market Conditions are Difficult and Credit Facilities may be Restricted.

ISA 540 (Revised and Redrafted) can be downloaded free-of-charge from the IFAC online bookstore at http://www.ifac.org/store.

Task Force on Fair Value Auditing Guidance
To address some of the valuation difficulties highlighted by the problems in the world's major financial markets, the IAASB plans to explore whether and how to supplement ISA 540 (Revised and Redrafted) as soon as practicable with implementation guidance on auditing fair value estimates. Any such guidance would have the aim of raising awareness of issues and best practice on a timely basis and further promoting audit consistency. Accordingly, the IAASB agreed in December 2007 to establish a Task Force to consider how best to approach the development of possible further fair value auditing guidance.

The demand for implementation guidance from a number of constituencies, including regulators, was recognized in the IAASB Consultation Paper, Proposed Strategy for 2009-2011. That paper raised the possibility that the IAASB might develop guidance for auditors on the audit of complex valuation models. However, recent developments in the financial markets, in particular the current lack of market liquidity, have persuaded the IAASB to create the Task Force now to take this idea further even though the responses to the Consultation Paper have yet to be fully analyzed.

The Task Force, chaired by a member of the IAASB and to comprise interested parties with relevant perspectives and expertise, will consider aspects of the audit of financial statement items measured at fair value and make recommendations to the IAASB for matters that require priority attention.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

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 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

¹Key elements of the clarity drafting conventions include: establishing an objective for the auditor with respect to the subject matter of each standard; clearly distinguishing requirements from guidance on their application; avoiding ambiguity through eliminating the present tense to describe actions by the auditor and using more imperative language where a requirement was intended; and other structural and drafting improvements to enhance the overall readability and understandability of the standards.

The International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board within the International Federation of Accountants (IFAC), has issued two new standards to further convergence with International Financial Reporting Standards (IFRSs) developed by the International Accounting Standards Board (IASB). The two standards - International Public Sector Accounting Standard (IPSAS) 25, Employee Benefits and IPSAS 26, Impairment of Cash-Generating Assets - will improve the consistency and transparency of financial reporting by public sector entities. They can be downloaded from the IFAC online bookstore (http://www.ifac.org/store).

Employee Benefits
For most public sector entities, employee benefits have a major impact on financial performance and financial position. IPSAS 25 sets out the reporting requirements for the four categories of employee benefits dealt with in the IASB's International Accounting Standard (IAS) 19, Employee Benefits. These are short-term employee benefits, such as wages and social security contributions; post-employment benefits, including pensions and other retirement benefits; other long-term employee benefits; and termination benefits. The new IPSAS also deals with specific issues for the public sector, including the discount rate related to post-employment benefits, treatment of post-employment benefits provided through composite social security programs, and long-term disability benefits.

IPSAS 25 is effective for reporting periods beginning on or after January 1, 2011.

"The significance of reporting employee benefits fully and consistently cannot be overemphasized," states IPSASB Chair Mike Hathorn. "Not recognizing the costs and liabilities related to such obligations can severely undermine the reliability of a public sector entity's financial statements."

Impairment of Cash-Generating Assets
The role of most public sector entities is to provide services to citizens. However, some public sector entities (other than government business enterprises) may operate assets with the main purpose of generating a commercial return. IPSAS 26, which is based on IAS 36, Impairment of Assets, sets out the procedures for a public sector entity to determine whether a cash-generating asset has lost future economic benefit or service potential and to ensure that impairment losses are recognized in its financial reports. Non cash-generating assets, those used primarily for service delivery, are addressed separately in IPSAS 21, Impairment of Non-Cash-Generating Assets.

"In developing IPSAS 26, the IPSASB is responding to constituents who wanted guidance in dealing with the impairment of assets held by public sector entities for commercial purposes," notes Mr. Hathorn, adding, "The issuance of these two standards represents a further important step in the IPSASB's goal of convergence with IFRSs."

IPSAS 26 is effective for reporting periods beginning on or after April 1 2009.

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 157 members and associates in 123 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international public sector financial reporting standards through the IPSASB, IFAC, through its independent standard-setting boards, sets ethics, auditing and assurance, and education standards. It also issues guidance to encourage high quality performance by professional accountants in business.