Thank you very much for inviting me to speak here in India. I am honored to be in the land of Mahatma Gandhi, Rabindranath Tagore, Amartya Sen, Mira Nair, Gayatri Spivak, and so many other great leaders and thinkers. Your intellectual traditions and scientific achievements, including those in mathematics, astronomy, linguistics, and medicine are remarkable and I admire your country for its support of democratic ideals. The American writer Mark Twain has called India "the cradle of the human race, the birthplace of human speech, the mother of history, the grandmother of legend, and the great grand mother of tradition."

As the largest democracy in the world, your struggles and your triumphs are an inspiration for other countries not only in your region but around the world. Your country has made much progress toward economic liberalization and global integration, and I believe that the accountancy profession has played and will continue to play a key role in these processes.

The International Federation of Accountants is proud to count the Institute of Chartered Accountants of India (ICAI) among its 155 members. As a founding member of IFAC, you have demonstrated a long-term commitment to the international accountancy profession and its role in protecting the public interest.

Good afternoon ladies and gentlemen. Thank you for inviting me to speak before you today on a topic that I think is critical to the well being of India and to other countries worldwide: that is government financial reporting. It is a topic that is receiving increasing attention from the media, the public and governments themselves, although it has long been of importance to the International Federation of Accountants (IFAC).

It is an issue of significance at all levels of government, including city government. For twenty years, IFAC has been working to improve the financial reporting and financial management of governments at all levels - national, state and provincial, and local - as well as that of other public sector entities worldwide. The fiscal accountability of governments is central to enhancing economic growth and development - one of IFAC's most important goals. Failure to hold governments accountable, can, I believe, compromise and jeopardize private sector initiatives directed at building and maintaining confidence in the financial reporting process, as well as diminishing confidence in democratic processes.

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has released International Public Sector Accounting Standards (IPSASs) which identify disclosures to be made by governments and other public sector entities that make their approved budgets publicly available. These disclosures will contribute greatly to improving accountability by helping readers to compare budget amounts with actual amounts arising from carrying out the budget.

A new standard, IPSAS 24, Presentation of Budget Information in Financial Statements, applies to entities that adopt the accrual basis of financial reporting. In addition, the cash basis IPSAS, Financial Reporting under the Cash Basis of Accounting, has been updated to include both required and encouraged disclosures that apply to entities that adopt the cash basis of financial reporting.

Both standards require that a comparison of budget and actual amounts for the reporting period be included in the financial statements. They also require explanations for material differences between the budget and actual amounts in the notes to the financial statements or in a separate report issued in conjunction with those statements.

"Reporting the actual amounts resulting from execution of budget against the approved budget and explaining the variance will enhance the transparency of financial statements," states Philippe Adhémar, immediate past Chair of the IPSASB who oversaw the development of the new standards. "Compliance with the standards enables public sector entities to better discharge their accountability obligations by demonstrating compliance with the approved budget for which they are held publicly accountable."

IPSAS 24 and Financial Reporting under the Cash Basis of Accounting can be downloaded from the IFAC online bookstore: http://www.ifac.org/store. Both standards will also be included in the 2007 edition of the Handbook of International Public Sector Pronouncements.

IFAC is the worldwide 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 155 members and associates in 118 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.

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), has issued the first four final International Standards on Auditing (ISAs) redrafted as part of its comprehensive program to enhance the clarity of its standards. It has also approved amendments to the Preface to International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services, which establishes the conventions to be used by the IAASB in drafting future ISAs and the obligations of auditors who follow those standards. A report developed by the IAASB staff on the status of the IAASB's clarity project was also released summarizing these and other developments. New ISAsThe IAASB has issued the following four redrafted standards:

• ISA 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements;
• ISA 300, Planning an Audit of Financial Statements;
• ISA 315, Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and Its Environment; and
• ISA 330, The Auditor's Responses to Assessed Risks.

The four redrafted ISAs and the amended Preface were exposed for public comment in October 2005. The IAASB refined its clarity drafting conventions based on the comments received to the exposure drafts and after extensive consultation with interested parties, such as the IAASB's Consultative Advisory Group and national auditing standard setters. In developing these final standards, the IAASB improved the consistency with which the conventions were applied to the ISAs and considered the need for them to be applicable to audits of entities of all sizes.

"The release of these final ISAs in the new drafting style represents an important milestone for the IAASB as it works to improve the clarity of its international standards," states John Kellas, IAASB Chairman. "The IAASB is satisfied that these four redrafted ISAs are clearer and the expectation of consistent application by professional accountants worldwide has been strengthened. We are now proceeding with the application of the clarity conventions to all the ISAs."

The four redrafted ISAs have a provisional effective date for audits of financial statements for periods beginning on or after December 15, 2008. While the final common effective date for all redrafted ISAs will be determined as the IAASB's agenda progresses, it will not be earlier than December 15, 2008. The amended Preface contains important statements about the authority of the IAASB's standards.

In order to embed these within the ISAs themselves, the IAASB intends to revise ISA 200, Objective and General Principles Governing an Audit of Financial Statements to incorporate relevant provisions of the amended Preface. When ISA 200 is revised and exposed for public comment in 2007, respondents will be invited to comment on the material derived from the amended Preface in that new context. Clarity Project Update Progress that the IAASB has made so far and the direction it plans to take as it continues to redraft standards is outlined in the report Status of the IAASB's Work to Improve the Clarity of Its Standards. This staff report describes the main changes to the IAASB's standards arising from the application of its clarity drafting conventions and explains the IAASB's approach to implementing the conventions to all ISAs. How to Access The four ISAs and the Preface may be downloaded free-of-charge from the IFAC online bookstore at http://www.ifac.org/store. They will also be included in the 2007 Handbook of International Auditing, Assurance, and Ethics Pronouncements. The status report on the clarity project may be downloaded from the IAASB's website at http://www.iaasb.org.

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 worldwide 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 155 members and associates in 118 countries, 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 Ethics Standards Board for Accountants (IESBA), an independent standard-setting board within the International Federation of Accountants (IFAC), has issued an exposure draft updating and strengthening the independence requirements contained in the IFAC Code of Ethics for Professional Accountants. The last substantive revisions to the Code were made in November 2001.

The changing environment in the past few years has led the IESBA to consider what revisions to auditor independence requirements might be needed. Over the two-year development period of the exposure draft, the IESBA consulted with interested stakeholders, including regulators, standard setters, leaders of accountancy organizations, and members of the profession. "Auditor independence is a critical cornerstone of financial reporting," states Richard George, IESBA Chair. "We believe that the proposed changes to the Code contain important provisions that we consider are appropriate to protect the public interest." Significant proposed modifications to the Code include:

• Expanding the applicability of partner rotation requirements;
• Updating requirements related to the provision of non-assurance services, including setting out additional guidance on the provision of tax services to audit clients; and
• Extending the independence requirements to the audits of a wider range of entities of significant public interest.

How to Comment
Comments on the exposure draft are requested by April 30, 2007. The exposure draft may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to edcomments@ifac.org. They can also be faxed to the attention of the IESBA Senior Technical Manager at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on IFAC's website.

About the IESBA and IFAC
The IESBA develops ethical standards and guidance for use by professional accountants. It encourages member bodies of IFAC to adopt high standards of ethics for their members and promotes good ethical practices globally. The Public Interest Oversight Board oversees the activities of the IESBA and, as one element of that oversight, establishes the criteria for its due process and working procedures.

IFAC is the worldwide 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 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international standards of ethics through the IESBA, IFAC, through its independent standard-setting boards, sets auditing and assurance, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

At its most recent meeting in London in December, the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), approved new proposals to enhance the written representations that auditors request from management, those charged with governance and others, as well as five new exposure drafts written in accordance with its new clarity drafting conventions.

Written Representations

The proposals, which are incorporated in proposed International Standard on Auditing (ISA) 580 (Revised and Redrafted), Written Representations, provide for general written representations regarding the financial statements, including internal control, and the completeness of information made available to the auditor, and for written representations about specific assertions in the financial statements. "The aim of this project was to improve the quality and appropriateness of written representations sought by the auditor and, in particular, to deal with concerns about whether auditors may over-rely on representations at the expense of other evidence," explains John Kellas, IAASB Chairman.

New Clarity Exposure Drafts

As part of its comprehensive program to enhance the clarity of international standards, the IAASB has also issued the following exposure drafts of proposed ISAs:

• ISA 230 (Redrafted), Audit Documentation;
• ISA 540 (Revised and Redrafted), Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures;
• ISA 560 (Redrafted), Subsequent Events;
• ISA 610 (Redrafted), The Auditor's Consideration of the Internal Audit Function; and
• ISA 720 (Redrafted), The Auditor's Responsibility in Relation to Other Information in Documents Containing Audited Financial Statements.

Proposed ISA 540 (Revised and Redrafted) is a combination of 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 approved ISA 540 (Revised) in September 2006 as a basis for applying the clarity drafting conventions. As part of the redrafting of ISA 540 (Revised), the IAASB decided that the similarities between estimates and fair value information could be emphasized, and redundancy eliminated, by combining ISA 540 (Revised) and ISA 545 within the proposed revised and redrafted ISA 540.

"The proposed ISA 540 (Revised and Redrafted) will reinforce best practice and cause the auditor to give appropriate attention to areas of accounting judgment, such as assumptions, and to possible bias. The other proposed redrafted standards contain clear requirements and easy to understand application guidance," notes Mr. Kellas.

The exposure drafts form part of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the new drafting conventions, which were developed after extensive consultation with interested parties, such as the IAASB's Consultative Advisory Group and national auditing standard setters, and public consultation. Key elements of the new drafting conventions include: basing each standard on the objective of the auditor with respect to the subject matter of the standard; separating the requirements that the auditor is required to follow from guidance on their application; eliminating the present tense to describe actions by the auditor, which raised ambiguity about whether such actions were required; and other structural and drafting improvements to enhance the overall readability and understandability of the standards. Standards redrafted in this way are described as "redrafted." If further revision has been undertaken, a standard is described as "revised and redrafted."

How to Comment

Comments on the exposure drafts of proposed redrafted ISAs 230, 560, 610 and 720 are requested by March 31, 2007. Comments on the exposure drafts of proposed ISAs 540 (Revised and Redrafted) and 580 (Revised and Redrafted) are requested by April 30, 2007. The exposure drafts may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org. They can also be faxed to the attention of the Executive Director, Professional Standards at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted of IFAC's website.

About the IAASB and IFAC The objective of the IAASB, an independent standard-setting board within IFAC, 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 the criteria for its due process and working procedures.

IFAC is the worldwide 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 155 members and associates in 118 countries, 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 Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has released a new standard on reporting revenue from non-exchange transactions. This new standard will contribute greatly to enhancing the transparency of financial reporting by governments and other public sector entities. Taxes and transfers are the major source of revenue for most governments and other public sector entities. However, internationally agreed requirements for financial reporting of these revenues have not previously been developed.

IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers), addresses a range of matters critical to government financial reporting of tax revenue, including the basis on which a wide range of taxes should be recognized and measured. It also deals with the other major source of non-exchange revenue for public sector entities - transfers, which include grants from other governments and international organizations, gifts and donations. In addition, the IPSAS establishes requirements on how conditions and restrictions on the use of transferred resources are to be reflected in the financial statements.

"IPSAS 23 is the culmination of four and a half years of intense work, debate and consultation by the IPSASB, which specifically solicited the input of experts in the field of governmental financial reporting throughout the world," states Philippe Adhémar, IPSASB Chair. "This new standard also represents a major achievement for the IPSASB in addressing public sector specific issues at a global level and in establishing an international benchmark for the financial reporting of taxes and transfers. Compliance with IPSAS 23 will enhance the quality, comparability and transparency of financial reporting by public sector entities around the world."

IPSAS 23 can be downloaded from the IFAC online bookstore: http://www.ifac.org/store. It will also be included in the 2007 edition of the Handbook of International Public Sector Pronouncements.

About IFAC

IFAC is the worldwide 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 155 members and associates in 118 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.

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has released a new International Public Sector Accounting Standard (IPSAS) designed to improve the quality and uniformity of financial information reported by public sector entities around the world.

IPSAS 22, Disclosure of Financial Information about the General Government Sector, establishes requirements for governments that choose to disclose information about the general government sector and that prepare their financial statements under the accrual basis of accounting. The new standard permits governments to disaggregate their consolidated financial statements in accordance with the sectors established in the statistical bases of financial reporting. This is significant because it will allow governments to distinguish the financial position, performance and cash flows of the general government sector, which is comprised of government controlled entities that are primarily engaged in non-market activities. It was developed in consultation with the International Task Force on Harmonization of Public Sector Accounting, whose goal is to harmonize the statistical and financial reporting requirements of governments.

"In many jurisdictions, governments prepare budgets and have their performance assessed on the basis of statistical requirements," states Philippe Adhémar, IPSASB Chair. "This IPSAS will enable governments to disclose the operations of the general government sector, which will provide a higher level of transparency to the public. It is also a useful bridge between the world of accountants and national accounts statisticians."

Because this information is not required in many jurisdictions, the IPSAS is a voluntary disclosure standard. IPSAS 22 can be downloaded from the IFAC online bookstore: http://www.ifac.org/store. It will also be included in the 2007 edition of the Handbook of International Public Sector Accounting Pronouncements.

About IFAC

IFAC is the worldwide 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 155 members and associates in 118 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.

The International Federation of Accountants (IFAC) has released a new information paper that explores the needs of users and preparers of the financial reports of micro-entities. Entitled Micro-Entity Financial Reporting: Perspectives of Preparers and Users, the paper comprises a review of the existing research on the topic, a survey of the legal status of micro-entities in different countries, and the various definitions that exist in different jurisdictions.The International Federation of Accountants (IFAC) has released a new information paper that explores the needs of users and preparers of the financial reports of micro-entities. Entitled Micro-Entity Financial Reporting: Perspectives of Preparers and Users, the paper comprises a review of the existing research on the topic, a survey of the legal status of micro-entities in different countries, and the various definitions that exist in different jurisdictions.

The research was prompted by a concern that the International Accounting Standards Board's (IASB) proposed accounting standard for SMEs, International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs)*, may not be suited to micro-entities, which for the purpose of this study are defined as those with less than ten employees. The IASB's proposed IFRS for SMEs is expected to be released as an exposure draft in late December 2006 or January 2007.

Key challenges and findings with respect to micro-entities include the following:

• The cost/burden implications of new regulation on the smallest entities;
• The issue of enforcing such regulations;
• The increasing demands of users of micro-entity reports; and
• Issues of literacy and training in some developing countries.

The research contained in the paper was undertaken by Dr. Suki Sian of the Cardiff Business School, Wales and Professor Clare Roberts of the University of Aberdeen, Scotland. In their findings, the researchers state, "Very little research has been previously conducted looking specifically at micro-entities as these tend to be subsumed in the term SME. Furthermore much of the published literature is restricted to studies conducted in developed countries and does not reflect the very different environment in which micro-entities operate in developing, emerging or transition economies." They conclude that "This gap in the literature indicates that this is an area that is ripe for further in-depth examination and research."

IFAC is considering undertaking further research in this area, in particular, to investigate whether the proposed IFRS for SMEs is likely to meet the needs of users of financial reports of micro-entities. IFAC is also encouraging its member bodies and regional accountancy organizations to respond to the IASB's exposure draft on IFRS for SMEs.

Micro-Entity Financial Reporting: Perspectives of Preparers and Users may be downloaded free-of-charge from the IFAC website.

IFAC is the worldwide 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 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets standards on auditing and assurance, ethics, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

* Note to Editors: For more information on the IASB's International Financial Reporting Standard for Small and Medium-Sized Entities, see the IFRS Foundation website.