For the majority of public sector entities, the costs of employee benefits have a major impact on financial performance and financial position. To assist governments and other public sector entities in appropriately accounting for these benefits, the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has issued an exposure draft (ED) of a proposed new International Public Sector Accounting Standard (IPSAS), ED 31, Employee Benefits.

"The proposed standard will contribute to more transparent and consistent accounting for employee benefits, which is essential to ensure responsible financial reporting by governments and other entities," emphasizes IPSASB Chair Philippe Adhémar. "The significance ofemployee benefits for the vast majority of public sector entities cannot be overestimated. The ED's requirements that entities account for obligations under public sector defined benefit plans and, when appropriate, recognize liabilities related to those obligations are particularly notable and may lead to important changes in existing practice for many public sector entities globally."

ED 31 is based on International Accounting Standard (IAS) 19, Employee Benefits, and addresses the four categories of employee benefits dealt with in IAS 19:

• Short-term employee benefits;
• Post-employment benefits;
• Other long-term employee benefits; and
• Termination benefits.

The proposed standard also deals with a number of issues of specific relevance to the public sector, including:

• Determining the risk-free discount rate to be applied for discounting obligations arising from post-employment benefits;
• The treatment of post-employment benefits provided through composite social security programs; and
• Mechanisms for the orderly implementation of the proposed standard in the public sector.

This ED was developed in accordance with one of the IPSASB's key strategic aims: promoting convergence with International Financial Reporting Standards (IFRSs) where the requirements of IFRSs are applicable to the public sector. It is also critical to the IPSASB's work to improve the quality of financial information reported by public sector entities around the world.

How to Comment

The IPSASB has identified a number of issues of particular significance to the public sector and is particularly keen to obtain constituents' views on how the ED deals with these issues. Comment on these and other issues raised in the ED are requested by February 28, 2007. It may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to publicsectorpubs@ifac.org. They can also be faxed to the attention of the IPSASB Technical Director 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 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's current membership consists of approximately 160 professional accountancy bodies in 120 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.

Ladies and gentlemen. It is a pleasure to be here with you today for the SC International annual conference and to commemorate the 20^th anniversary of the founding of SC International, one of the top 25 global accounting associations. Congratulations on reaching this important milestone.

I would like to thank Mr. Donal Watkin, your Executive Director, for the invitation to be here with you today. The firms you represent are a critical constituency of our international profession and I foresee that you will play an even greater role in the years to come in serving clients around the globe. We know that growing economies in Asia, where you have a strong presence, as well as in other parts of the world are in increasing need of services from professional accountants, as our role, indeed your role, is vital to assisting them in achieving economic growth.

I have been asked to speak to you today about the future of the accountancy profession. While our past success as a profession is a good foundation for the future, predicting the future simply by looking at the past assumes that conditions remain constant. That is like driving a car by looking only in the rear view mirror! 

Conditions certainly are not remaining constant. The environment in which we work has changed dramatically in the last few years and we are likely to see more significant changes in the upcoming years. Whether we are working in large, medium, or small firms, I believe that our fundamental duty is to the public interest and that our current and future activities must focus on achieving this goal. This is because our profession will have a future if and only if it serves, and is seen to serve, the public interest above all else. This morning, I will consider what future the profession might face and what IFAC is doing to bring about a successful future. I invite you to think about three interrelated global trends:

• First, the nature of business relationships will change in line with the changing balance of economic and, ultimately, geopolitical power between East and West, in particular with the rise of major economic powers in Asia, such as India and China. We are already seeing the success and vibrancy of their economies. Both these nations have big advantages – an enormous home market with few language barriers, the ability to spread research and development costs, huge investment in education and modern technology and mobile and educated workforces.
• Second, this shift will have a consequential effect on business and on reporting performance. Eastern business relationships are predominantly relationship-based, not transaction-based, and this is a major shift in perception for the West. Western business men and women – from the European Union, the United States and other nations – will need to look more closely at the development of financial and non-financial reporting as the values, expectations and decision-making criteria of society change.
• Third, the imperative that the developed world should be doing more to help developing nations, to benefit from globalization in a truly fair way, will become a primary focus of achieving world financial stability. Clearly, this objective is right for its own sake – both morally and ethically. In this effort, professional accountants will contribute where our expertise is most valuable, by building an investment climate of trust and by supporting both institutional strengthening and organizational performance throughout the world.

I am not alone in believing these to be significant trends. They are also recognized by business and government leaders, international standard setters, regulators, and international development and funding agencies.

Our profession has historically been responsible for the spread of financial knowledge and for a commitment to helping others around the world to develop the capacity to succeed. The growth of the profession has mirrored the growth of the capital markets and clearly – in business, practice and the public sector – we accountants are recognized as being intimately tied to the development and maintenance of sound financial infrastructures and of trustworthy, sustainable institutions. There is no doubt that a strong accountancy profession is fundamental to the economic success of every nation. The issues are common to countries throughout the globe, so it is right that we address them globally, as we do, through the International Federation of Accountants, as well as by acting locally, through national institutes and through firms such as yours.

Our response is important not only for the future of the accountancy profession but also as part of our responsibility to the future of the societies in which we live and work. Ours is a profession of people. What unites us is not simply shared technical expertise, but rather a shared commitment of people: professional accountants, to a common set of values, common objectives and a mission to serve the public interest.

Yes, we do need to address competitive pressures, for example, by maintaining our competency through Continuing Professional Development, by demonstrating our commitment to quality and to transparency, by delivering relevant and needed services and by being market oriented as professionals and by leveraging our strengths through associations such as the one which you have formed. But even more, we need to stay true to our core purpose of serving the public interest. Preparers of accounts must safeguard the integrity of financial statements. Practicing firms must meet both the challenges of running a business, thereby attracting high quality people into the profession, and safeguarding the quality, integrity and value of the audit. Accountants in the public sector must safeguard integrity in governments’ relationships with their citizens.

Our response to the trends I have talked about rests on three things:

• Making sure that we keep the public interest at the forefront of our activities – whatever sector we work in;
• Emphasizing the importance of ethics in all that we do – and promoting ethics throughout the whole financial reporting chain; and
• Supporting organizational performance by thinking globally – not just about our own businesses, but also in terms of global standards that promote transparent and useful information for decision making.

Public interest

So first, let us consider the public interest. There are three major initiatives, among others, that demonstrate our profession’s commitment to quality and that serve the public interest: the IFAC Member Body Compliance Program; the Forum of Firms and its commitment to quality; and our standard-setting initiatives.

Let me take a moment to tell you about the IFAC Member Body Compliance Program.  This program supports the development of high quality auditing, accounting, ethical, educational and related quality assurance and disciplinary standards in IFAC member bodies throughout the world. The program is intended to guide accounting institutes in the full spectrum of their professional responsibilities and to demonstrate a shared commitment to our profession’s values of integrity, transparency and expertise. As part of the Compliance Program, members and associates provide information on their compliance with IFAC’s membership requirements. This includes promoting and incorporating international standards, issued by IFAC and by the International Accounting Standards Board, into national standards and implementing quality assurance and investigation and discipline programs to monitor compliance with applicable professional standards. Responses to the Compliance Program are posted on the IFAC website once agreed with the member or associate.

The responses provide a valuable global snapshot of the accountancy profession from a standards perspective. Additionally, they help IFAC to gauge where it needs to focus its development work. Lastly, but perhaps most importantly, the responses to the questionnaires demonstrate the global profession’s willingness to be accountable for its actions to meet high standards, to deliver quality and to protect the public interest.  Phase 1 of the programme is complete.  Phase 2, which requires members and associates to complete a self-assessment questionnaire about their best endeavours to comply with IFAC’s membership requirements, is in progress. Almost all have completed their questionnaires and nearly forty are already available for you to review on our website.

I encourage you to review these responses to obtain information on the standard-setting and regulatory structures in countries around the globe and better to understand the extent to which international standards are promoted and followed in each country. This information could be valuable to you as your firms expand their operations.

The second program I want to discuss with you today is the Forum of Firms. 

In addition to the Member Body Compliance Program, IFAC, through the Forum of Firms, is able to promote convergence and adherence to high ethical values. The members of the Forum of Firms, which is comprised of over 20 global networks and associations of public accounting firms, have committed to the use of International Standards on Auditing and of the IFAC Code of Ethics for Professional Accountants for transnational audits. Additionally, these firms have committed to use the IAASB’s International Standard on Quality Control 1, which establishes a high quality standard for the quality control systems within the firms. This commitment to IFAC standards and to the promotion of high quality and consistent performance was reinforced in February 2006 with the approval of a new constitution for the Forum of Firms. The new constitution updates membership requirements to emphasize the firms’ commitment to audit in accordance with the IAASB’s International Standards on Auditing, and all members of the Forum must show that they meet all the requirements to be deemed to be full members. The requirements for membership and the names of all members of the Forum are listed on the Forum of Firms website, which is www.ifac.org/fof.

The Transnational Auditors Committee (TAC) is the executive committee of the Forum of Firms and also a committee of IFAC and is dedicated to meeting the needs of the Forum. Essentially, it assures that the voice of the firms is heard. It identifies audit practice issues and when the issues suggest changes in auditing or assurance standards may be required, it recommends to the appropriate IFAC standard-setting boards that the issue be reviewed. The TAC also provides a forum to discuss "best practices" in areas including quality control, auditing practices, independence, and training and development and acts as a formal conduit for interaction among transnational firms and international regulators and financial institutions with regard to audit quality, systems of quality control, and transparency of international networks. Lastly, the TAC nominates five candidates to serve on each of IFAC’s standard-setting boards (except for the IPSASB). 

I encourage SC International to consider membership of the Forum of Firms, as I believe that it represents a substantial opportunity for networks and associations visibly to demonstrate their commitment to quality to their clients, to regulators and to the public. Further, members of the Forum have found the Forum’s membership framework to be an extremely useful means to promote and monitor consistent high quality audit delivery in each of their member firms.

Let me turn now for a moment to our standard-setting initiatives. IFAC, through its independent standard-setting boards, sets standards in four areas: auditing and assurance, ethics, education and public sector accounting. Time does not permit me to elaborate on the roles of all of these boards or to describe all of the new standards, but I would like to highlight for you now a few of those which are most significant to well informed markets.

In the area of auditing, the International Auditing and Assurance Standards Board (IAASB) sets international standards on auditing and assurance, quality control and related services that are recognized throughout the world. A key objective of the IAASB is supporting international convergence to its International Standards on Auditing (ISAs). So far, more than 100 countries worldwide have adopted ISAs or are using them as the basis for national auditing standards. In addition, I am very pleased to report to you that at its General Assembly meeting, earlier this month, the World Federation of Exchanges announced its endorsement of ISAs. This important endorsement by the World Federation of Exchanges, which represents 57 securities and derivative markets that account for more than 97 percent of world stock market capitalization, provides important recognition of the high quality of the IAASB’s standards and of the reforms that we have implemented over the past three years to protect further the public interest and to enhance the transparency of the IAASB and of our other standard-setting boards.

To strengthen support for convergence at the national level, the IAASB has developed new guidance, for national auditing standards setters that adopt its standards with limited modifications, which was issued in July. While not intended to be a definitive statement on convergence, the document provides guidance on the extent to which modifications to adopted international standards are permitted, while still allowing the national standard setter to assert that the national standards conform to the international standards.

To ensure that its standards are clear and understandable the world over, the IAASB has undertaken a significant project to improve the clarity and structure of its standards. In September, it approved the first three standards redrafted in its clarity drafting convention, which will be released later this year. The IAASB has now undertaken an ambitious timetable to redraft all its standards in the new clarity style, with a provisional effective date for all new standards of December 15, 2008. The new style was developed based on input it received at an international Clarity forum last year and through responses to its 2004 Proposed Policy Statement and Consultation Paper on Clarity. We hope that this new style will not only make the standards more understandable, but also make them better capable of being translated and used in countries throughout the world.

The IAASB is also addressing several critical issues in auditing and assurance. In March 2006, it issued a re-exposure draft designed to enhance the quality of audits of group financial statements, entitled proposed ISA 600 (Revised and Redrafted), The Audit of Group Financial Statements. Following earlier consultations, the IAASB has modified the proposals and reissued the exposure draft to address issues related to the extent to which the group auditor needs to be involved in the audits of components that are audited by other auditors, whether these auditors are independent of the group auditor or belong to the group auditor's national or international firm or network of firms.

We at IFAC are also focused on strengthening the transparency and accountability of the financial reporting of governments and of other public sector entities. Through the International Public Sector Accounting Standards Board (IPSASB), IFAC develops International Public Sector Accounting Standards (IPSASs), which are designed to improve public sector financial management and accountability. We view this as an increasingly important area of IFAC activity. The IPSASB is currently addressing key issues for public sector accounting, including accounting for social policy obligations of governments, non-exchange revenue and budget reporting.

An important IPSASB objective is facilitating convergence with International Financial Reporting Standards, upon which the IPSASs are based, and with statistical bases of financial reporting. Last year, the IPSASB issued exposure drafts further to converge its standards with International Financial Reporting Standards and with statistical reporting bases. The IPSASB is making great strides in its convergence efforts. An increasing number of governments and public sector entities worldwide, including the Organisation for Economic Co-operation and Development, the World Bank and the North Atlantic Treaty Organisation, are using IPSASs. In addition, earlier this year, the United Nations General Assembly adopted a financial management reform program that calls for the adoption of IPSASs by all the organizations within the UN group.

Today, we accept that if we are to achieve convergence, particularly in the area of auditing standards, it’s very important to involve a broad constituency in standard setting in order to ensure that the views of those who use and rely upon those standards are considered. In this context, let me turn now to public interest oversight – which I see as essential to the credibility of standard setting and essential to building confidence in the work of auditors. In February 2005, a new independent Public Interest Oversight Board (PIOB) was created to oversee IFAC’s standard-setting activities in the areas of auditing, ethics and education; and the Member Body Compliance Program. The PIOB, led by Professor Stavros Thomadakis, and comprised of very high quality people, was established by IFAC in cooperation with international regulators and institutions. Its members are nominated by international regulators and other international organizations. In addition, we have obtained the close involvement of investors, regulators, preparers and others in our standard-setting processes through, for example, the Consultative Advisory Groups for each of our standard-setting boards.

The PIOB has approved the standard-setting processes of three standard-setting boards: the IAASB, International Accounting Education Standards Board, and the International Ethics Standards Board for Accountants and the new members of these boards for 2006 and 2007. I should point out that the PIOB does not oversee the IPSASB. That board is subject to different oversight. The PIOB’s oversight has helped to enhance the credibility of IFAC’s standards, build confidence in them by regulators and fuel international convergence. The power of its credentials has led recently to the European Commission committing to appointing two full members to it.

In addition to public interest input and oversight, IFAC also considers the needs of smaller firms and of small and medium enterprises (SMEs) in the development of international standards. We all are well aware that SMEs are, together, the economic engine that fuels growth, jobs, and ultimately individual prosperity and security, in developing as well as in developed countries, in all parts of the world. Here in the European Union, SMEs represent 95.77 percent of the businesses. These figures are mirrored globally, with SMEs representing 97 percent of the total companies in the Asia-Pacific region and 99.7 percent of all employers in the United States. Because of their sheer scale when taken as a whole and the dramatic effect that successful SMEs can have on national and international economies, their issues must be at and remain at the forefront of IFAC’s priorities. Our focus, through the IFAC Small and Medium Practices (SMP) Committee and other groups, is to develop practical guidance that is universally and easily available to accountants worldwide; to make sure that the voices of SMPs and SMEs are heard by standard setting boards; and to provide forums for the exchange of ideas on how we can all better support one another.

In July, the SMP Committee organized a forum in Hong Kong to discuss the challenges and opportunities facing SMEs and SMPs. Over 130 participants from 35 countries attended the conference and their deliberations identified two significant challenges facing SMEs and SMPs: SMEs need financial reporting standards that are appropriate for their users’ needs and reduce the associated cost of compliance; and, in an increasingly globalized economy, SMPs should continue to explore new ways to support the growth and accountability of SMEs.

To help to address these challenges, IFAC’s SMP Committee is taking a two-pronged approach to helping SMEs and SMPs to converge and comply with international auditing and accounting standards, helping to shape the form and content of international standards and providing practical assistance to SMPs and SMEs that have to use them. It is developing a guide to International Standards on Auditing for SMEs and a web-based knowledge resource for SMPs. Additionally, the SMP Committee continues to respond to exposure drafts of international standard setters where an SMP or SME focus is needed.

I emphasize that all IFAC exposure drafts are posted on the IFAC website and it is very important to us to get comments from firms like those you represent. Please do take the time to respond to the EDs.

Reporting shifts

I would like to return now to the second trend that I described in the beginning of my remarks. Recalling the East/West shift, relationship-based business, rather than transactional based business, poses its own issues. At present, financial statements report transactions and the results of transactions. In future, companies will also have to report on their relationships, probably through narrative reporting.

The International Accounting Standards Board has undertaken a project to consider a possible role in improving the quality of the management commentary. Last October, it issued a discussion paper that offers recommendations on how the IASB might promote the wider adoption of best practice in the interests of investors and of others who use financial reports.

Accounting for sustainability is another area that will gather more impetus. It involves recognizing the intangible costs and benefits of decisions as well as the tangible, for example, how decisions taken today will affect future performance and outcomes. Conventionally, we account in financial statements for the revenues and expenses that fall to or on the organization. Accounting for sustainability involves seeking to account for costs and benefits – including non-financial effects – that fall on other members of society.

To encourage the involvement of the profession in this issue, IFAC has established a Sustainability Experts Advisory Panel, which serves in an advisory capacity to both our Professional Accountants in Business (PAIB) Committee and the International Auditing and Assurance Standards Board. The PAIB Committee plans to raise awareness of the issue and to provide good practice guidance for professional accountants in business in this area. As part of this process, it will be coordinating and encouraging member body research and representation. In addition, IFAC is addressing sustainability on a global level through its representation on the Global Reporting Initiative.

Developing credible accounting measures on sustainability is, conceptually, extremely difficult but must be tackled. Coupling this driver with the East/West shift, will traditional accounting measures become the appendices to narrative reports, not the main information for analysis and reaction?

Ethics and the whole financial reporting chain

My second point focuses on ethics. Serving the public interest is grounded in our professional ethics. That will not change.

Our profession is built upon and committed to sustainability and stability, consistency and credibility, and independence and integrity. These are enduring values which are the hallmarks of a profession. They must be upheld and enforced by professional accountancy firms if the public interest is to be well-served. And they should underpin our future response to the global trends I mentioned.

All IFAC staff and volunteers embrace and promote the values we stand for – integrity, transparency and expertise. These values are reflected in our strategic plan, in our professional standards and in our decision-making processes, as well as in IFAC’s Code of Ethics for Professional Accountants, which is applicable to all professional accountants in business, practice and government and upon which many national codes of professional conduct and ethics are based. Last June, IFAC’s International Ethics Standards Board for Accountants issued an updated Code of Ethics, which reinforces the five fundamental principles of professional ethics: integrity, objectivity, professional competence and due care, confidentiality and professional behavior. These are personal qualities that today’s and tomorrow’s accountants must have.

In future it will become even more important for us to take up the challenge of promoting the importance of ethics throughout the financial reporting supply chain. Because, as was highlighted in the IFAC-initiated independent report on Rebuilding Public Confidence in Financial Reporting, prepared by a Task Force chaired by John Crow, a former Governor of the Bank of Canada and a former Chairman of the Central Bank Governors of the Group of Ten Countries, and published three years ago: failure to recognize the primacy of integrity was a major contributor to the financial scandals of recent years. A key recommendation of the report was that effective corporate ethics codes need to be in place and actively monitored. So often in the past, we have heard that finance directors have acted as the only conscience of the board when, of course, without underestimating the importance of the finance director, ethical behavior should be at the heart of the board and of the company as a whole.

So while one cannot over-emphasize that the tone for an organization needs to be set at the top, there is a key role for all professional accountants in business to help in practical ways to promote ethical values throughout an organization. Members of firms such as yours should, I believe, encourage your clients to recognize and to act on this responsibility.

Before I move on from ethics, I want to emphasize that a fundamental role of the International Ethics Standards Board for Accountants is to ensure that the Code remains relevant. As part of this process, in July, the Ethics Standards Board issued a revision to the Code of Ethics to update the definition of a network firm. This update provides important guidance to firms in the area of independence and includes information on the application of the definition. The Ethics Standards Board is also currently addressing issues such as audit independence and whistle-blowing and is in the process of developing new guidance for professional accountants in government and in business.

Additionally, IFAC’s International Accounting Education Standards Board has released new guidance on ethics. Last month, it proposed a new International Education Practice Statement (IEPS), Approaches to Developing and Maintaining Professional Values, Ethics and Attitudes, designed to assist IFAC member bodies in developing ethics education and continuing professional development programs for their members. There is no doubt that ethics education programs enhance professional accountants’ ethical judgment and their decision making.

Organizational performance – thinking globally

My third point is on supporting organizational performance by thinking globally.

We have a duty to our profession throughout the world, including both developed and developing nations, and to ourselves to deliver:

• The enduring values I’ve talked about – our commitment to the public interest and to professional ethics;
• The benefits of global standards, with accountancy as the international language of business; and
• Trust in the capital markets.

We are well-placed to act, bringing benefits now and for future generations.

Our profession is regarded as one of the main conduits to fighting financial corruption. And it is no secret that many developing economies have a problem on this front, often driven by those in developed nations who, for example, offer bribes to gain advantage, but too often driven by poverty. For example, the misappropriation of aid funds has been raised as part of last June’s G8 discussions. So we need to build strong professions that can help to ensure that the right funds are directed to the right places.

IFAC’s Developing Nations Committee is working at an international level, with organizations such as the World Bank and the United Nations Conference on Trade and Development, to build responsible accountancy professions in developing nations and to support the development of the financial infrastructures within which our profession will operate. Towards that end, this past September IFAC, together with the World Bank and the African Development Bank, sponsored a Learning Workshop in Nairobi for government leaders, donor agencies and representatives of the accountancy profession, among others, as a first step in determining a plan of action to help African nations further to develop stable economies.

As a result of an extensive consultative process, the Committee is also preparing a country-specific approach to supporting developing nations, helping both those countries where there is no established profession and those that have only begun to build the professional, financial and regulatory architecture necessary to support economic growth.

In addition, to assist in the establishment and development of professional accountancy bodies – which is viewed as a critical first step in creating a sound and viable financial infrastructure – we have released good practice guidance on the roles and responsibilities of a professional body, education and examination, and on capacity development. This guidance addresses a range of situations, including where the accountancy profession does not exist in a country, where the profession exists and there is a desire to establish a professional accountancy body, and where an existing professional body requires further development and enhancement. The guide also includes suggested areas for priority action based on short-, medium- and long-term goals and projects.

In Conclusion

The future of our profession does rest on staying relevant, up to date and market oriented. But most fundamentally, it depends on demonstrating professionalism, acting in the public interest and not losing sight of our core purpose as custodians of transparency and integrity in financial reporting. It needs to be focused on ethics as the foundation of that purpose and acting and thinking globally, at a local level, to fulfill that purpose.

These objectives are at the heart of IFAC’s work and are, I believe, embraced in SC’s strategic plan. Our profession needs to be respected and influential today, if we are to be so in the future.

All of us here have a role to play in building confidence in financial information and financial infrastructure. Yet we also have a role to play in communicating how those infrastructures work to protect the public interest. Clear information about the financial reporting process needs to be presented to those who rely on – or want to rely on – the information that results from it. Additionally, clear information about the economic policy framework, the regulatory environment, and economic developments is essential to sound business decisions. Thus, while I urge you to continue to take actions in this area, it is equally important to communicate those actions to the public who, ultimately, will benefit from them.

If we continue to commit to putting the public interest first and to living our profession’s values of integrity, transparency and expertise, the future of the accountancy profession is bright: For professional accountants in public practice, this means that you will be recognized fully for the role you play: as auditors, in facilitating fair, well-informed capital markets; and as professional advisors, in creating wealth. 

If we fail to commit to the public interest and to sound values, we will lose public confidence and no longer have an accountancy profession or accountancy firms that we would recognize as such.

It is a stark choice. I believe that we will make the right choice, together. Working together as a global profession we will live those values of integrity, transparency and expertise. Working together with regulators, investors and other stakeholders, we will command justified public confidence.

As we look to the future, it is evident that the quality of information expected by investors and needed by public and private sector decision makers will become even more critical to the development not only of national market economies, but to the global economy as well. Thus, ensuring high-quality financial reporting is an area where there is no room for compromise. We must all continue to be as proactive as possible and make an ongoing commitment to high-quality financial reporting. Nor can we afford to compromise in any other service area. Acting with integrity, transparency and competency must be the supreme driving force for all accountants. It is good for business and good for society. It is what distinguishes our profession from all others and enables us to contribute to worldwide stability and prosperity.

If I leave you today with only one message, it is that you should never forget this role that you play in the global arena.

Thank you very much for your attention.

Good afternoon. It is a pleasure for me to be here today with you in the inauguration of the National Congress on Auditing.

On a personal note, it is always a marvelous opportunity to visit Spain, the country where my grandfather was born, and for this reason it is especially close to my heart. It is amazing how the places of our origins forge and inspire a sense of identity and affection.

It is also a joy for me to have the possibility to visit such a special and admirable city such as Bilbao.

In fact, I think that it is particularly symbolic that we are meeting, exchanging opinions, analyzing the future of the accounting profession, its challenges and the answers that it must have to those challenges, in a city that knew how to correctly redefine itself when it was necessary. Bilbao re-won and strengthened its vitality by centering on culture and converting itself into a city dedicated to services and also by turning itself over to environmental and urban renewal. I believe that Bilbao offers a brilliant example of how to face tendencies and adapt to the context, difficulties and changes.

We can see this city in the same light as its country, together with all of their citizens, as a model of interpretation to think about the challenges facing the accounting profession and also to take advantage of the opportunities presented to us.

I want to thank the Instituto de Censores Jurados de Cuentas and in particular it’s President, Don José María Gassó, for the invitation extended to me and allowing me to be here today in contact with all of you.

The slogan for this plenary session is “the profession on a new horizon.” This implies that the profession is moving. And when we are moving, we are always exposed to the vicissitudes of the road.

There can always be a stone in the road. One can trip over it if distracted. One can stop and let him or herself be detained by the obstacle. One can see the rock as a purposeful threat. One can simply overcome that obstacle or one can pause above it and use it as an opportunity to extend his or her vision of the horizon and also to build a bridge to move even farther. In any case, the difference is not the stone, but rather the attitude of the person.

I will begin by giving you good news: today, society is convinced, more than ever, that the accounting profession and, in particular, auditing is essential for the proper functioning of the capital and financial markets and for the proper functioning of the economy. Today, there is a clear conviction that auditing is a key link in the chain in the production of financial information and therefore has an important function in the public interest.

The great challenge unfolding for us all is to intelligently define the conditions, so that quality is given, and given efficiently.

The audit directive has provided a reasonable regulatory framework for Europe. Among the definitions adopted by the directive throughout the member states, I would like to point out the decision to adopt the international auditing standards, once they will have been developed following the due process, with public oversight and transparency, and have been generally accepted internationally, contributing to the high level of credibility and quality of the annual or consolidated accounts and will have added to the European public interest.

IFAC, through the International Audit and Assurance Standards Board (IAASB), has been working impeccably so that all of the above mentioned conditions are achieved and the standards adopted by the European Commission.

The decision has been taken to accelerate the Clarity Project to finish it before the end of 2008, instead of 2011, as was estimated in the original plan.

The Consultative Advisory Group of the IAASB has been made stronger to permit a fluid and significant contribution on behalf of the users of the standards.

IFAC has successfully implemented the reform and the Public Interest Oversight Board (PIOB) is achieving its duty to oversee the public interest activities of IFAC. In March of this year, the PIOB approved the due process and the work processes of the different standards setting boards, among them the International Audit and Assurance Standards Board. In May, the Public Interest Oversight Board issued its first public interest report, in which in reference to the transparency and the quality of the nominating process for the members of the standards setting boards of IFAC, it reported that, “The PIOB concluded that the IFAC Nominating Committee had operated with a high level of professionalism and had sought to make high quality choices with a sense of fairness, balance, and objectivity.”

A few days ago, in the conference of the Fédération des Experts Comptables Européens, Commissioner Charlie McCreevy communicated his satisfaction, which of course is shared by IFAC, for the recent understanding about governance issues of the International Auditing and Assurance Standards Board and the Public Interest Oversight Board and has expressed that this will allow the Commission to move closer to the adoption of ISAs. He also confirmed that he thinks that the two EU observers should become full members of the Public Interest Oversight Board. 3

Therefore, all of the conditions are being fulfilled to seal the adoption of the International Standards on Auditing on the behalf of the European Commission. And this is very good news for Europe and for the rest of the world.

In relation to the auditing standards, in particular, with respect to their use by small and medium enterprises, I think it is worth mentioning that IFAC, through the Small and Medium Practices Committee, estimates that for the middle of 2007 they will publish a Guide for the application of the International Standards on Auditing for the audits of small and medium enterprises. It will be without a doubt very useful, considering the number and the importance of these businesses in all economies of the world. It will facilitate a practical implementation of the principle that an audit is an audit and that it is not convenient to consider the existence of different sets of auditing standards according to the size of the entities being audited.

The auditing directive leaves considerable room with respect to other areas for the decisions of the member states in the transition process of national legislation and ruling.

I would like to refer today to two of these areas: public oversight, in particular, quality control, and the independence of the auditor.

The European Directive establishes that each member state should organize an effective system of public oversight of auditors and auditing firms and define, for this, certain principles.

The principal objective of the oversight mechanism should be to protect the public interest. The key element of the oversight function is independence with respect to the accounting profession, whether it is achieved exclusively through the resources of the oversight body or through monitoring and directing of activities of other organizations, including professional organizations.

In this area, it is fundamental maintain sight of the primary objective, the reason for being. As I said in the beginning, the quality of the audit is a key factor for the confidence in financial information and of the capital and financial market system as a whole. Public oversight is an important way of assuring the quality of audits.

Quality is ultimately the final and principal objective. It is clear that as much the profession, as the oversight body, coincide in this central objective. In this issue, there are no conflicting interests, but rather the contrary is true, the interests coincide.

The understanding of this reality is fundamental at the time of designing the oversight system and delineating the relationship between the overseer and the overseen. 

It is clear, then, that in this concurrence of objective, it is not the mere fulfillment of requirements and formalities, but rather the true implanting of a culture of quality, that will signify the measure of success for all: auditors and supervisors. The great beneficiary will be the public that uses auditor services.

In this sense it is interesting to remember that the IFAC Statement of Membership Obligation (SMO) 1, related to quality control, establishes that each member body, in this case the Instituto de Censores Jurados de Cuentas de España, should assure the existence of an mandatory quality control program and that when these functions are managed, as in this case, by an independent government body, it should assist in the implementation in all that is appropriate and should obtain an understanding of the scope of such a program, in such a way so that if all the aspects included in said SMOs are not satisfied, the professional organization should establish a complementary program that covers all the missing parts.

This is a very good demonstration that there are not different objectives, but rather a shared final objective.

The principles and standards included in the SMO 1 constitute a very good base for the design of the quality control program and can be very useful in the development and implementation phases that, in the processes of transitioning the auditing directive to legislation and local rules, will be faced next.

The current sections of the IFAC Code of Ethics related to independence were issued in November 2001. The facts and the circumstances present since then have driven many jurisdictions to perform actions tending to restore credibility in financial information, of which many refer concretely to the independence requirements of the auditor. Hence, the International Ethics Standards Board for Accountants decided to confront the revision of the corresponding section of the Code to determine which of the requirements should be revised. A forum was held in October 2005 to obtain the comments and input for this project. The topic has been considered high priority, it is being intensely worked on, and with out a doubt an exposure draft will be issued in December of this year.

The objective of this rule, based in principles and developed under the approach of threats and safeguards, updated now based on experience and the new market demands can constitute a clear international reference.

If on the one hand, IFAC’s requirement of its member bodies is that they not apply requirements less strict that the contents of the IFAC Code, then the ideal certainly is world wide convergence in this area as well.

To conclude, I would like to refer briefly to the accounting standards.

Just as the rest of the European Union, Spain has adopted the International Financial Reporting Standards (IFRSs) for the consolidated financial statements of listed entities.

It is my understanding that it is in the process of defining the applicable standards for the rest of the cases. It is also my understanding that a consensus also exists, which of course I share, that these standards should be harmonized with the IFRSs.

Being as it is, allow me to make a suggestion. Think seriously about the possibility of adopting IFRSs, in your case, introducing some exception if a founded justification exists, and avoid the elaboration of your own a set of standards, as harmonized as it may be. What’s more, the greater the degree of harmonization attempted to achieve, the less sense it makes to have the superposition of sets of standards.

Under this same focus, the adoption of standards issued by the International Accounting Standards Board (IASB) for small and medium enterprises should also be considered, those that it is assumed will be consistent with the applicable IFRS to entities that should have public accounts.

This not only unmistakably will assure consistency, but also will facilitate the future process with respect to changes in the international standards. In addition, it would allow for savings in resources that could be used in incrementing and strengthening the participation of Spain in the elaboration process of international standards, whether it is intervening directly in the IASB, having an active and opportune participation in the analysis of drafts, or contributing with proposals to be integrated in the work agenda of the IASB.

As you may have been able to appreciate from the examples I mentioned today, IFAC continues working intensely to promote the global adoption of the international standards, to facilitate and improve the applicability of the standards to small and medium enterprises, to contribute to the development and the strength of the accounting profession around the world, and to improve the quality of financial and auditing information.

We want to do accomplish this with the collaboration of our member bodies. We want to ensure the existences of adequate channels for participation so that our activities can benefit from all cultures and take the best from each.

Global convergence does not imply cultural change. Ortega y Gasset says that “culture is a set of solutions that society gives to the problems of the era it lives.” If convergence helps a culture have better solutions, this does not mean that the culture has to change, it only implies adapting.

Spain can not be absent from this process. The Instituto de Censores Jurados de Cuentas de España has a great deal to add to the global profession. Each country has its unique values and talents, which if they are not added, are lost.

In relation to my last point, it pleases me to inform you that the Executive Committee of IFAC has designated Carmen Rodríguez as member of the IESBA and this designation has been approved by the PIOB.

I am convinced that Spain is in the conditions, and I would even say that it has the obligation, to continue increasing its presence in the international environment.

As far as all of you, I want to encourage you to continue working with your sights on the new horizon, looking at the market and its needs, identifying and designing more efficient methods to serve your clients, preparing to act with new technology and to take the leadership in the preparation and revision of non-financial information and in the new forms of accessing and using information, convinced of the value that you can add and the contribution that you can make to the integral development of the society you live in. 

Thank you, Eamonn, for inviting me to make a few remarks this evening. It is a privilege to be here with you and your President, Pádraig Ó Feinneadha, to speak before such a distinguished group of professionals. Indeed, I truly appreciate this opportunity discuss a topic that increasingly has made its way into boardrooms, classrooms, lunchrooms, and even to our dinner table: that is the topic of Ethics in Business. Ethics, as we know from the lessons we learned from Enron, WorldCom, Tyco and other companies around the world, is a driver both of business stability and business success. Without a strong ethical foundation, companies and their management are more likely now, than ever before, to find their customer base eroded and their profit margins narrowed.

What is to prevent ethical lapses on the part of company management and those that support management, such as lawyers, investment managers and professional accountants: both in public practice and those who work as CFOs or internal auditors? I think there are three fundamental ways to prevent it: Company management must:

• Establish realistic business objectives;
• Develop a transparent business culture; and
• Promote and enforce a corporate code of ethics among their employees and require their service providers to do the same.

Let me comment briefly on these areas, beginning with the need to establish realistic business objectives, before I turn to the accounting profession’s ethical roles and responsibilities.

Last year, a study entitled, The Ethical Enterprise, A Global Study of Business Ethics, reported that the number one factor likely to cause people to compromise ethical standards was pressure to meet unrealistic business objectives and deadlines. Recognizing this, management must strive to balance business objectives with the reality of their resources and, along the way, they must continually remind employees that ethics is sacrosanct. An Ethics Department or resource center should be available to assist employees when they are confronted with ethical dilemmas. We are quick to provide technical resources to our employees, to assist them in expeditiously and correctly carrying out their work; we must apply the same strategy to ethics.

Secondly, we must develop a transparent business culture. Again, this is an area where there is no room for compromise. An open and transparent corporate culture breeds honesty and respect on the part of employees. Corporate secrets, on the other hand, arouse suspicions and create unhealthy corporate cultures. Without transparency, the credibility of the organization can also be compromised.

Thirdly, it is vital that every company, no matter how large or small, no matter what the industry or area of practice, develop and promote a corporate code of ethics. The value of that code will be significantly enhanced if the code is consistently enforced. In fact, this was exactly the recommendation made in the 2003 report of the Task Force on Rebuilding Public Confidence in Financial Reporting, chaired by John Crow: a former Chairman of the Central Bank Governors of the Group of Ten countries. The Task Force emphasized the need for management to develop an ethical “tone at the top” and to reinforce this tone with an ethical code of conduct that is widely promoted throughout the company and regularly enforced. Those recommendations, supported by regulators, standard setters and others, are now resulting in significant changes in corporate culture. Ethics and values are, I believe, finally getting the attention that is necessary.

What then is the role of the International Federation of Accountants in promoting strong ethics? First, IFAC’s values of integrity, transparency and expertise, are embraced in all the work carried out by IFAC and by our four independent standard-setting boards. Our board and committee members, for example, all sign declarations indicating their commitment to these values and to act in the best interests of the public.

IFAC’s International Ethics Standards Board for Accountants develops the international Code of Ethics for Professional Accountants, which is applicable to all accountants, including those in business and industry, public practice, the public sector and academia. In June 2005, the Ethics Standards Board released an updated Code of Ethics, which establishes a conceptual framework for all professional accountants to ensure compliance with the five fundamental principles of professional ethics. These principles are integrity, objectivity, professional competence and due care, confidentiality and professional behavior. Under the framework, professional accountants are required to identify threats to these fundamental principles and, if there are threats, to apply safeguards to ensure that the principles are not compromised. The framework applies to all professional accountants: to those in public practice, as well as to those in business and government.

And by the way, the title ‘accountant’ should only apply to members of recognised institutes, to protect and reassure the public that all those known as accountants are bound to follow the IFAC ethics code.

In July 2006, the Ethics Standards Board issued a revision to the Code of Ethics to update the definition of a network firm. This update provides important guidance to firms in the area of independence and includes information on the application of the definition. The Ethics Standards Board is also currently addressing issues such as audit independence and whistle-blowing and is in the process of developing new guidance for professional accountants in government and in business.

Additionally, IFAC’s International Accounting Education Standards Board has released new guidance on ethics. Last month, it proposed a new International Education Practice Statement (IEPS), Approaches to Developing and Maintaining Professional Values, Ethics and Attitudes, designed to assist IFAC member bodies, such as CPA Ireland, in developing ethics education and continuing professional development programs for their members. There is no doubt that ethics education programs enhance professional accountants’ ethical judgment and decision making. The guidance proposed by the Education Standards Board will help member bodies to develop these skills in current and future professional accountants.

The Education Standards Board is now in the process of finalizing an Ethics Education Toolkit to assist member bodies, academic institutions and others in instilling a strong ethical foundation in the accountants of tomorrow. The toolkit will include sample course outlines, teaching notes, case studies, video clips of ethical dilemmas, and a database of ethics education resource materials. It will be available for download from the IFAC website free-of-charge, like all IFAC publications, by the end of the year.

My personal belief is that probity and profitability go hand in hand. Ethical conduct lies at the core of all business. We do business with those we trust; we get business from those who trust us. Ethics, therefore, are a driver of business growth which demands attention from boards and investors alike. Similarly, society accepts those it trusts and ethics are a driver of the social and political acceptability of doing business in corporate form.

The IFAC Professional Accountants in Business (PAIB) Committee is, therefore, expanding the guidance it develops, with a focus on supporting professional accountants in business in providing high quality information and in acting ethically. Earlier this year, the committee issued an exposure draft, Guidance for the Development of a Code of Corporate Conduct, proposing guidance to assist professional accountants and others in establishing and implementing codes of conduct in their organizations. The goal of this proposed new guidance is to support sound corporate governance policies worldwide. The proposed guidance highlights the benefits of an effective code of conduct and identifies professional accountants’ roles in the development, monitoring, reinforcement, and reporting of such codes in their organizations. To assist in the creation of codes of conduct, the guidance includes information on presentation and content, organizational and management challenges, and implementing a code of conduct in a global organization.

Guidance is helpful, but it is important for all of us to keep in mind that it is best to lead by example. Good governance and sound ethics have to be embedded within companies, to grow from within, not be force fed from without. That means leaders, such as yourselves, need to be role models as well as active promoters of sound ethics.

The French Mathematician and philosopher Blaise Pascal said: “The virtue of man ought to be measured not by his extraordinary exertions, but by his everyday conduct.” I believe that these words hold true for every professional accountant worldwide, as well as for all of us in this room tonight. By dedicating ourselves to doing what is right, we will enhance our professional reputation, win public and client trust, and contribute to economic prosperity.

I know that the CPA Institute shares these values, together with the IFAC values of integrity, transparency and expertise. Your participation in the IFAC Member Body Compliance Program, in which you indicate your commitment to and promotion of international auditing, ethics, and accounting standards, makes a very clear statement about the strength of your organization. I am proud to work with you, both institutionally and personally, in our profession’s drive to generate economic growth and stability in every country of the world.

Thank you very much for your attention.

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) is working to improve both the quality and uniformity of financial information reported by public sector entities around the world. In pursuit of this objective, the IPSASB has issued an exposure draft (ED) of a proposed International Public Sector Accounting Standard (IPSAS), ED 30, Impairment of Cash-Generating Assets. The majority of public sector entities globally operate for the purposes of delivering services to citizens.The IPSASB has already addressed assets which are held and operated primarily for the purposes of service delivery when it issued IPSAS 21, Impairment of Non-Cash-Generating Assets, in December 2004. ED 30 deals with cash-generating assets held and operated by public sector entities, which are not Government Business Enterprises.

"IPSAS 21 deals with the impairment of non-cash-generating assets and directed readers to International Accounting Standard 36 for guidance on the impairment of cash-generating assets. However, our constituents indicated that it would be useful if IPSASs included further guidance dealing with the impairment of cash-generating assets. The issuance of this proposed standard responds to that view," says IPSASB Chair Philippe Adhémar.

How to Comment

Comments on the ED are requested by February 28, 2007. It may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to publicsectorpubs@ifac.org. They can also be faxed to the attention of the IPSASB Technical Director 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 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's current membership consists of approximately 160 professional accountancy bodies in 120 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.

Continuing to combat poverty and develop stable economies remain two fundamental and interrelated challenges facing African nations according to participants representing 37 African countries at the Africa Region Learning Workshop held in Nairobi, Kenya on September 28 and 29. Sponsored by the African Development Bank and co-sponsored by the World Bank and the International Federation of Accountants (IFAC), the Workshop attracted over 200 participants, including representatives of the accountancy profession, governments, donor community, and academia. Discussions focused on achieving quality financial reporting, the needs of the accountancy profession in the region, the role of the government in accountancy and accountancy development, and the importance of sustaining good governance and ethics.

Participants contributed pan-African recommendations to:

• Reform and strengthen institutional frameworks for corporate reporting;
• Build accountancy capacity in the private and public sectors, including the development of established educational guidelines for accounting technicians;
• Establish contact and begin development of the accountancy profession in those African countries where the profession is not yet established;
• Assist regional and national professional bodies to access donor funds; and
• Support the "Nairobi Declaration", signed by over 30 professional bodies, which calls for the creation of a Pan-African Federation of Accountants.

"This Workshop represents the first major collaborative effort between IFAC and development agencies to address the development of the accounting profession on the African continent. It is essential that the organizations represented at the Workshop work together to address the recommendations that have been put forth," says Ndung'u Gathinji, Chairman of the IFAC Developing Nations Committee.

One of the major outcomes of the Workshop was the establishment of an Africa Focus Group which will coordinate dissemination and follow-up activities for the recommendations identified at the Workshop. The Africa Focus Group will have representatives from the African Development Bank, the World Bank, IFAC, the Eastern Central and Southern African Federation of Accountants, the Association of Accountancy Bodies of West Africa, and the Fédération Internationale des Experts-Comptables Francophones.

Russell Guthrie, IFAC Director, Quality Assurance and Member Body Relations, commented, "This Workshop is a vital part of IFAC's efforts to support economic development in Africa and to strengthen professional accountancy bodies. IFAC's Developing Nations Committee will be focusing a significant portion of its efforts on mentoring and guiding the establishment and strengthening of professional accountancy bodies in the 33 African countries where IFAC is not currently represented."

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's current membership consists of approximately 160 professional accountancy bodies in 120 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 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) has collaborated with its member organizations to develop IFACnet - A KnowledgeNet for Accountants in Business. This new global resource will provide one-stop access to leading-edge articles, good practice guidance, and tools and techniques for accountants employed in commerce, industry, the public sector, education, and the not-for-profit sector.

"Many of our member bodies develop high quality guidance and other materials that can assist professional accountants in business in keeping up with the changing environment in which they operate, maintaining their skills, and making informed decisions," states IFAC Chief Executive Ian Ball. "This new resource, developed under the leadership of our Professional Accountants in Business (PAIB) Committee, facilitates the sharing of that information among IFAC's 160 member organizations and professional accountants worldwide."

"Users of IFACnet will find relevant information on a wide range of financial and management accounting topics, including strategy, budgeting and planning, corporate governance, risk management, and professional development emphasis," points out Bill Connell, Chair of the IFAC PAIB Committee.

Thirteen accountancy organizations (see below) together with IFAC currently participate in the KnowledgeNet by sharing their electronic resources through IFACnet; others will be coming on board in the coming months. In addition, during the first quarter of 2007, the KnowledgeNet will be expanded to serve the needs of small and medium practices and, by the end of 2007, will offer customized information for broader audiences of accountants.

IFACnet uses advanced technology specifically tailored to the accountancy profession. It carefully indexes, filters and sifts all the best and most relevant items of information available for accountants in business worldwide so they can be delivered on demand to IFACnet.com users. The technology supporting IFACnet has been developed by Indez, a software company based in Glasgow, Scotland. It features an enterprise search engine that is based on patented search technology. There is no fee to use IFACnet, although certain search results may identify documents or publications available for purchase.

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's current membership consists of approximately 160 professional accountancy bodies in 120 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 international standards on ethics, auditing and assurance, education, and public sector accounting. Through its Professional Accountants in Business Committee, IFAC also issues guidance to encourage high-quality performance by professional accountants in business.

Notes:
* Media are invited to use this new resource and comments are welcomed. ** Quotes from Chief Executives and other representatives of accountancy organizations worldwide are attached.

IFAC Member Bodies Providing Resources for IFACnet
American Institute of Certified Public Accountants
Association of Chartered Certified Accountants
Chartered Institute of Management Accountants
CMA Canada
CPA Australia
Hong Kong Institute of Certified Public Accountants
Institute of Certified Public Accountants in Ireland
Institute of Chartered Accountants in England & Wales
Institute of Chartered Accountants in Ireland
Institute of Chartered Accountants of India
Institute of Management Accountants
Koninklijk Nederlands Instituut van Registeraccountants (Royal NIVRA)
Malaysian Institute of Accountants

Chairman, distinguished delegates, ladies and gentlemen. Thank you for your participation in this Africa Region Learning Workshop. I apologize that I cannot be with you personally. My wife was born in Africa and spent her childhood in Africa; I have visited Africa many times. It would have been a great pleasure for both of us to share time with you in Nairobi today.

Please accept my sincere good wishes, and the best wishes of the IFAC leadership, for a successful and productive conference.

The focus of the Learning Workshop – the role of the accountancy profession in contributing to economic growth and development – is of great importance to IFAC, because we want to know how we can best support the profession and developing nations in achieving one fundamental goal – creating a better world for all.

I believe that by working together, exchanging ideas and making a commitment to real change, we can achieve our goal.

Throughout this two-day event, you will discuss some of the most important issues to economic growth and stability on the African continent: promoting the highest ethical conduct; sustaining good corporate governance; strengthening public sector accounting and auditing; meeting the needs of growing small and medium practices; and establishing and developing professional accountancy bodies. I urge you to listen thoughtfully and to determine what you can do personally to make a difference here in Africa.

With representatives from both the public and private sectors, from more than 50 African nations gathered at this Learning Workshop, there is much to share and much to gain from your discussions. The ultimate goal is that this Learning Workshop will help to improve financial reporting, boost accountancy capacity and sustainability, and contribute to good governance throughout Africa.

I would like to thank the African Development Bank for sponsoring the Learning Workshop and the World Bank for co-sponsoring the event together with IFAC. I would also like to extend my appreciation to the groups that, together with IFAC, have organized the event: the Eastern Central and Southern African Federation of Accountants, the Federation Internationale des Experts-Comptables Francophones and the United Nations Conference on Trade and Development; and to the Institute of Certified Public Accountants of Kenya, who, together with ECSAFA, have been kind enough to host the Learning Workshop in Nairobi. I would especially like to acknowledge and thank Mr. Ndung’u Gathinji, Chief Executive Officer of ECSAFA, Chair of IFAC’s Developing Nations Committee and a member of the IFAC Board. Mr. Gathinji has served on the IFAC Board since 1999 and, during that time, he has helped to lead IFAC’s efforts to support the accountancy profession in developing countries. On behalf of the leadership of IFAC, I would like to thank him for his many years of service to the accountancy profession both in Africa and around the world.

It is through the dedication and commitment of volunteers like Mr. Gathinji and through the support of IFAC’s 163 member bodies in 120 countries, such as the Institute of Chartered Accountants of Kenya, and regional accountancy organizations, such as ECSAFA, that IFAC is able to achieve its mission, which I will state for you now:

To serve the public interest, IFAC will continue to strengthen the worldwide accountancy profession and contribute to the development of strong international economies by establishing and promoting adherence to high-quality professional standards, furthering the international convergence of such standards and speaking out on public interest issues where the profession's expertise is most relevant.

As stated in this mission, it is a primary goal of IFAC to strengthen the accountancy profession worldwide, in both developed and developing countries, and to contribute to the growth and development of strong economies. Because IFAC is a global organization, and because it is predicted that 95 percent of the world’s population growth will occur in developing nations, we have made strengthening the profession in these nations a key objective. Our position is this: we have a fundamental role and responsibility to play in fostering progress in the developing world, in eradicating poverty and in building prosperity. Establishing a sound and viable accountancy profession is a critical step in building a sound financial infrastructure and addressing these issues; it is a critical step in providing the people with access to food, healthcare, education, energy and water. And it is the reason that you are all here today, participating in this Learning Workshop.

IFAC’s goal is to have a member body, with an established accountancy profession, in every country around the globe. There is no doubt that this is a lofty goal, but as we look ahead and see that the growth of the world’s population will largely be in developing economies, I am more and more certain that this goal is one that we cannot compromise or forsake.

IFAC’s Developing Nations Committee is leading our efforts to achieve this goal. The committee is involved in extensive outreach to developing countries and has prepared new guidance, with the input of IFAC member bodies, which was released in December 2005. This new guidance, entitled Establishing and Developing a Professional Accountancy Body, covers the roles and responsibilities of a professional body, education and examination, and capacity development. The guide addresses a variety of situations, including where a formal accountancy profession does not exist in a country, where the profession exists and there is a desire to establish a professional accountancy body, and where an existing professional body requires further development and enhancement. It also includes suggested areas for priority action based on short-, medium- and long-term goals and projects. The guide is available electronically, along with all other IFAC standards and guidance, free-of-charge from the IFAC website: www.ifac.org.

Following on the release of this new guidance, the Developing Nations Committee is in the process of preparing a country-specific approach to supporting developing nations, helping both those countries where there is no established profession and those that have only begun to build the professional, financial and regulatory architecture necessary to support economic growth.

In addition, to further support and provide resources to developing countries, the committee is working closely with the IFAC Member Body Compliance Program, which supports the development of high quality auditing, accounting, ethical, educational and related quality assurance and disciplinary standards in IFAC member bodies throughout the world. The Member Body Compliance Program is intended to guide accounting institutes in the full spectrum of their professional responsibilities, to demonstrate a shared commitment to our profession’s values of integrity, transparency and expertise. I personally believe that the Compliance Program will play a major role in building credibility in the financial reporting process and in the accountancy profession in general.

The Member Body Compliance Program was established to help to support and encourage IFAC members and associates, throughout the world, in their best endeavors to meet our requirements for membership in IFAC. These include promoting and incorporating international standards issued by IFAC and the International Accounting Standards Board into national standards, and also implementing quality assurance and investigation and discipline programs to monitor compliance with applicable professional standards.

Promoting international convergence is fundamental to all IFAC standard-setting activities. We firmly believe that it is in the public interest to have a single set of international standards, of the highest quality, set in the public interest by an international expert body which transparently consults with, and recognizes the legitimate interests of, the international community. This is an important issue for both developed and developing countries, both here in Africa and throughout the world.

Within IFAC, there are four independent standard-setting boards that develop standards that meet these requirements:

• The International Auditing and Assurance Standards Board, which develops international standards on auditing, assurance and quality control;
• The International Ethics Standards Board for Accountants, which establishes IFAC’s international Code of Ethics for Professional Accountants;
• The International Accounting Education Standards Board, which sets standards and guidance on the pre-qualification and continuing professional development of all professional accountants; and
• The International Public Sector Accounting Standards Board, which sets International Public Sector Accounting Standards, designed to improve the transparency and accountability of public sector financial reporting.

Each of these boards is comprised of members representing a broad geographic and professional background and includes representatives of the public. The boards follow a rigorous due process, which includes exposing proposed standards for public comment and obtaining public interest input through consultative advisory groups.

In addition, in February 2005, a Public Interest Oversight Board, comprised of members nominated by international regulators and institutions, was established to oversee IFAC’s auditing and assurance, ethics and education standard setting and the IFAC Member Body Compliance Program. The PIOB was created through the collaborative efforts of the international financial regulatory community, working with IFAC, to ensure that its standards are set in a transparent manner that reflects the public interest. The PIOB has approved the due process and working procedures for the IAASB and the Education and Ethics Standards Boards. It has also approved the nominations to these boards and continues to provide public interest oversight.

An important area of consideration for IFAC’s standard-setting boards, especially the IAASB and the Ethics Standards Board, is addressing the needs of small and medium practices and small- and medium-sized entities. SMEs are vital to the economies of African nations and to the global economy as well. IFAC’s Small and Medium Practices Committee is increasingly active in representing the interests of SMPs to both the IAASB and the International Accounting Standards Board. The committee is providing input to the IASB’s project in the development of financial reporting standards for SMEs. It is also in the process of developing a guide to applying International Standards on Auditing for the audits of SMEs, and it is working to establish an electronic data exchange on SME and SMP issues.

Before closing, I would like to emphasize the values of the people that lead IFAC. All members of IFAC’s Board and IFAC committee chairs have taken an oath, to operate with integrity and in the public interest. We in IFAC do indeed put the international public interest before national interests and commercial gain. We work transparently and welcome your input, your suggestions and your questions at any time. And we are committed to the accountancy profession’s role in contributing to economic growth and stability, both in Africa and throughout our world.

There is no question that the accountancy profession has a unique, critical and practical role to play in building stronger and more stable economies both in Africa and around the globe. However, we cannot accomplish this alone. It is through partnership and cooperation among the public and private sectors, the accountancy profession, donor and development agencies and others that we can build strong financial architectures both in Africa and around the world – architectures that are supported by strong ethical standards, high professional standards and an unwavering commitment to act transparently and to be accountable.

Together, we can build a better world. Together, we can contribute to greater economic growth and stability. And together, we can build a better quality of life for the people of Africa and for the people of the world.

Thank you very much indeed for your attention.

Good morning ladies and gentlemen. It is a pleasure for me to speak to you on this second morning of the Africa Region Learning Workshop. It is an honor for me to have the opportunity to share with you today IFAC’s key priorities related to the development of the worldwide profession.  IFAC, as an international accountancy organization and standard-setter, has a number of key initiatives underway that focus on the growth of the accountancy profession and the needs of the profession in developing nations and transitioning economies. That is the focus of my discussion today; however, I would first like to thank those who have made this Workshop possible. 

The generous sponsorship of the African Development Bank, and our co-sponsor, the World Bank, whose commitment to Africa and to the objectives of this Learning Workshop are greatly appreciated.  ECSAFA, FIDEF and UNCTAD have also made important contributions and provided technical guidance as members of the Organizing Committee.

I would also like to say a special thank you to the staff of IFAC for their efforts in organizing this workshop, assisting with travel arrangements and support your work during the breakout sessions.  They are an excellent team and I am proud of both their professionalism and their friendship.

Most importantly, I would like to recognize the commitment of you, the participants, who represent 37 African countries. As professional accountants, representatives of government, and academia in Africa, your presence here at the Workshop demonstrates the support and commitment you have for development and improvement.

I now would like to turn to IFAC and its focus on development of the profession. With 20 African professional accountancy bodies as its members, IFAC believed it was critical to take an active role in this Learning Workshop. In addition to the secretariat support provided by IFAC staff in organizing the Workshop, IFAC’s Developing Nations Committee and the Compliance Advisory Panel also held meetings here earlier this week in order to participate in these two days.

If there is one thing that is clear to me when I think of Africa is its diversity. With its significant geographic size, its diverse cultures and traditions, and with 53 countries, Africa does face unique challenges. With such diversity come different needs and priorities, but at IFAC we believe that through our common goals we can work together to address key issues and needs that are fundamental for all professional accountancy bodies.

I would like to now share with you some of the specific activities is currently undertaking to meet the challenges facing professional accountancy bodies and practitioners.

The first important initiative was established to strengthen the profession and support implementation of standards – and this resulted in the formation of the Developing Nations Committee.  The Developing Nations Committee objectives include:

• Development and mentoring of existing and potential IFAC members
• Establishing strong working relationships with Donor Community
• Providing input to international standard setters on behalf of developing nations
• Producing guidance to assist in development of professional accountancy bodies

For an example of this type of guidance, the Developing Nations Committee launched new guidance November 2005 on Establishing and Developing a Professional Accountancy Body. The new guidance, available online through the IFAC website or on the CD-Rom included in your conference bag, is designed to assist national and regional accountancy bodies in building capacity around the world.

Based on feedback received in the past several months, we have also learned that it is considered a valuable tool for donor and development agencies in increasing the effectiveness and efficiency of development efforts related to the profession. This guide demonstrates our commitment to building the infrastructure necessary to contribute to economic growth and stability in emerging countries and to enhance performance by the profession globally.  I am also extremely pleased to announce that part of the funding for this event is being used to translate this guidance into French with the assistance of UNCTAD.

Another sign of IFAC’s commitment to Developing Nations is evidenced by a recent IFAC Board decision to establish a pilot program to subsidize the participation of developing nations in IFAC Boards and Committees.  $100,000 has been set aside to provide financial support to candidates from IFAC member bodies in developing nations to attend and participate in IFAC standard setting and other activities.

Another important IFAC initiative grew from IFAC’s recognition that - even with globalization and its undeniable impact on every country in the world - it is Small and Medium Enterprises (SMEs) that drive the growth of national economies.  They drive job growth, wealth creation and stability.  It is a fact in the United States, in the European Union and a fact in Africa.  And it is our profession’s Small and Medium Practitioners (SMPs) that provide professional services to these companies. 

The SMP Committee, formed in 2005, is a vigorous force within IFAC. Its members, from both developed and developing countries, seek to identify and address the most challenging issues facing SMEs and SMPs.

In July, the committee organized a forum in Hong Kong to discuss the challenges and opportunities facing SMEs and SMPs. Over 130 participants from 35 countries attended the conference, and their deliberations identified two significant challenges facing SMEs and SMPs: SMEs need financial reporting standards that are appropriate for their users’ needs and reduce the associated cost of compliance; and, in an increasingly globalized economy, SMPs should continue to explore new ways to support the growth and accountability of SMEs.

To help address these challenges, IFAC’s SMP Committee is taking a two-pronged approach to helping SMEs and SMPs converge and comply with international auditing and accounting standards – this approach includes helping to shape the form and content of international standards and providing practical assistance to SMPs and SMEs that have to use such standards.

For example, the SMPC is developing a guide to International Standards on Auditing for SMEs and a web-based knowledge resource for SMPs. Additionally, IFAC continues to respond to exposure drafts of international standard setters where an SMP or SME focus is needed.

In addition to the SMP and Developing Nations activities, are IFAC’s efforts to encourage quality in all that we do as a profession.  Quality, for each professional accountant, begins with education and so I will mention some of the work of our Education Board.

IFAC’s International Accounting Education Standards Board seeks to bring consistency to accountancy education, training and certification around the world. Our global environment does, I believe, demand this kind of consistency. How else can we assure the public that a professional accountant practicing in the United Kingdom or France is as qualified as one practicing in Kenya or Senegal?

The Education Board has issued the International Education Standards which address the vital topics of education prior to qualification, the minimum education requirements to become a member of the professional body, the final assessment of professional competence and capabilities, the specific competence requirements for auditors and continuing professional education.

Another area of focus for the Education Board is ethics education.  Last month, the Education Standards Board issued an information paper entitled Approaches to the Development and Maintenance of Professional Values, Ethics and Attitudes in Accounting Education Programs. The paper, which was the result of a wide-ranging research project into ethics education in the worldwide accountancy profession, is designed to stimulate discussion and debate on the subject of ethics education.

This information paper served as the basis for the Education Standards Board to develop a proposed International Education Practice Statement entitled Approaches to Developing and Maintaining Professional Values, Ethics and Attitudes. The proposed practice statement provides guidance to IFAC member bodies on how to achieve good practice in developing and maintaining professional values, ethics and attitudes in accordance with International Education Standards and suggests that member bodies may adopt an approach to ethics education based on the IAESB’s Ethics Education Framework. In addition, since ethics education is a lifelong commitment that begins when an individual begins training to become an accountant, and continues throughout a professional accountant’s career, the proposed new practice statement also provides guidance for member bodies on ethics education through continuing professional development.

In addition to the information paper and the practice statement, the Education Standards Board is preparing a toolkit on ethics education to assist member bodies, academic institutions and others in instilling a strong ethical foundation in the accountants of tomorrow.

Underpinning all of these activities is IFAC’s Member Body Compliance Program.  IFAC has established a rigorous Member Body Compliance Program to provide clear quality benchmarks for professional accountancy bodies and to require the identification of required actions which all assist our members in continuously improving standards, quality control and support to members of profession.   Through this program, IFAC seeks to contribute to the quality of financial reporting and thus to building sound market economies by facilitating convergence to international standards. Indeed, making best endeavors to converge national and international standards is a requirement for IFAC member bodies as set out in IFAC’s Statements of Membership Obligations (SMOs). The SMOs, which also require member bodies to implement quality assurance and investigation and discipline programs, form the basis of IFAC’s Member Body Compliance Program.  These are the requirements for IFAC members and we are also prepared to take actions, and indeed have taken actions, to suspended or expel bodies that do not participate in the program or demonstrate persistent non compliance, I want to emphasize that the program is focused on encouragement and improvement and making progress.

Part 1 of the Compliance Program, a fact-based questionnaire to assess the regulatory and standard-setting frameworks in the home countries of each of IFAC’s members and associates, is now complete. This portion of the program provides information on the roles and responsibilities of IFAC members – which vary from jurisdiction to jurisdiction.  Responses from all active members and associates have been posted on the IFAC website.

Part 2, the SMO Self-Assessment Questionnaire, was launched last December and approximately 35 responses been published with more to follow during this year.  The responses from these questionnaires are important for several reasons: they provide a global snapshot of the accountancy profession from both a regulatory and standards perspective. Additionally, they can be used to help IFAC gauge where it needs to focus its efforts to support the development of the profession and to work to achieve convergence.

Lastly, but perhaps most importantly, the responses to the questionnaires will lead into Part 3 of the program – Development of Actions Plans.  Member bodies will be required to develop action plans to close any gaps between current practice and the SMO requirements.  These action plans will demonstrate the international accountancy profession’s willingness to be accountable for its actions to meet high standards, to deliver quality and to protect the public interest – all important responsibilities in the changing and complex environment in which we all work.

I now want to make a few comments about IFAC membership.  One of IFAC’s objectives is to have a high quality professional accountancy body in every country in the world.  As you can see from this map where countries without representation are indicated with light colors, we have important work to do in Central and South America, in Central Asia, in Southeast Asia.

And we have the most work to do in Africa – there are over 30 countries where the profession is not represented within IFAC.  This represents both an opportunity and a challenge.  This is not an easy task or one we can accomplish on our own.  We need the sustained efforts of governments, professional bodies, educational institutions and donor assistance to make this objective a reality.

There is good news – several African professional bodies are making good progress and are actively working on their application and related compliance questionnaire requirements. We hope to consider a number of applications from the African continent during 2007.  We look to the Developing Nations Committee, existing IFAC members and our regional accountancy bodies to mentor potential members.

I would like to emphasize that the IFAC membership requirements have been significantly strengthened in the past three years through the Member Body Compliance Program, which is overseen by the Public Interest Oversight Board for IFAC.  Generally, the application process can take between 6 to 9 months.  This includes preparation of the application and related compliance questionnaires, obtaining sponsorship from an IFAC member, having the application reviewed by staff, the Developing Nations Committee and the Compliance Advisory Panel – all this must take place before a recommendation is made to the IFAC Board and Council in November each year. The staff and the CAP have made a policy decision that only those applications submitted by May 31 each year will be considered for recommendation to the Council in November of that calendar year. We therefore strongly suggest that applicants submit materials in January or February to permit adequate time for these review processes.  Normally, professional bodies will join IFAC as Associates with an agreed action plan based on our Statements of Membership Obligations.  Associates are expected to demonstrate clear progress on these action plans and would generally be considered for full membership during a period of one to three years based on progress on the action plan.

We also recognize that there are countries where the profession is not appropriately organized, or where the profession does not yet really exist.  We are committed, through our Developing Nations Committee, to support the capacity building needed in these countries and to eventually mentor them through the membership process at the appropriate time.

Later this morning you will hear from Honorable Henry Obwocha on the Role of Government.  I just want to mention here that IFAC clearly recognizes the vital role the profession has to play in the public sector.  In Africa, as in many countries, the public sector accounts for more than 50% of annual GDP and therefore public sector accountability and transparency is an important priority.  IFAC’s work to strengthen public sector financial reporting and financial management is accomplished largely through the International Public Sector Accounting Standards Board, known as the IPSASB.

The IPSASB develops International Public Sector Accounting Standards, which are designed to improve public sector financial management and accountability.

To enhance government’s credibility, both nationally and overseas, governments need to report their financial position and performance and their cash flows in a transparent and high quality manner. Such information is vital to the efficient operations of government and can assure the public that government resources are managed effectively.  These efforts should be supported by a sufficient number of professional accountants working in the public sector.

It is important to keep in mind that the need for high quality professionals and information from governments is as important as it is for business and industry. Without a financial structure that engenders confidence, a government’s infrastructures may crumble and with them, the ability to support its citizens.

So this is a brief description of some of the work that IFAC is doing to assist our members and all professional accountants and we welcome your participation and support. And, we also recognize that our work involves listening and learning and indeed that is the purpose of these two days. 

Let me conclude my remarks by reminding you of the vital role of the professional accountants in supporting economic growth.  The bedrock of our international commercial system is high quality finan­cial information: information based on ethics and integrity, on high quality international accounting and auditing standards and on the work and sound judgment of both internal and external professional accountants. Credible and reliable financial information is fundamental to investment. It builds investor confidence which, in turn, facilitates business development, contributes to job growth and leads to indi­vidual financial prosperity.

Fundamental to achieving this growth and prosperity is achieving our goal of having an IFAC member body in each country of the world – and to transform the map of Africa today with IFAC members into the map of Africa IFAC members of tomorrow.

Chairman, Presidents, fellow accountants, ladies and gentlemen. Good afternoon. It is a great pleasure to be here in Mangochi in the Warm Heart of Africa to address the 7^th Congress of the Eastern Central and Southern African Federation of Accountants. Thank you for your kind invitation

Africa has a special place in my heart, because my wife, Ann, was born in Africa and spent her childhood in Africa:  Egypt, Ethiopia, Kenya, Morocco and Nigeria.  I myself lived in South Africa on an international secondment with my firm and have visited eight other African countries.

The theme for this Congress – Africa’s response to globalization – is  especially relevant; it keeps us focused on understanding the challenges resulting from globalization, the opportunities presented to Africa for increased economic development and growth and the role of the accountancy profession in that process. My comments today are focused, therefore, not simply on IFAC’s response to globalization, but more specifically, on IFAC’s role in assisting African countries – and indeed all developing countries – in addressing the challenges of globalization in order to create a better world for their citizens.

I would like to thank the Society of Accountants in Malawi, its President, Mr Jimmy Lipunga, its Council and its Executive Director, Mr. Hennox Mazengera, for hosting this Congress and for inviting me to speak with you today.

In addition, I would like to recognize ECSAFA President, Mr. Butler Phirie, and ECSAFA Chief Executive, Mr. Ndung’u Gathinji, who is also a long-standing and highly respected member of the IFAC Board. Their dedication and service to ECSAFA and to our international profession as a whole is to be commended.

Regional accountancy organizations, such as ECSAFA, often serve as a vital link between international standard setters and regulators; and members of our profession. As exemplified by ECSAFA, they promote international standards; provide training, education and networking resources; and support development efforts. ECSAFA has been especially supportive of the IFAC Member Body Compliance Program, a landmark program initiated in 2004 to provide comprehensive and measurable information on the progress made by IFAC members and associates in adopting international standards. I will speak more about the Member Body Compliance Program in a few minutes.

ECSAFA has a long history of working closely with IFAC and for this I am very grateful. Since its founding in 1989, ECSAFA has worked at a regional level to support the development of a high quality accountancy profession and to promote convergence to international standards. Thank you.

It is through the commitment of the volunteer members of IFAC boards and committees, the support of our 163 member bodies in 120 countries, such as the Society of Accountants in Malawi, and of regional accountancy organizations, such as ECSAFA, that IFAC is able to achieve its mission, which I will state for you now:

To serve the public interest, IFAC will continue to strengthen the worldwide accountancy profession and contribute to the development of strong international economies by establishing and promoting adherence to high-quality professional standards, furthering the international convergence of such standards and speaking out on public interest issues where the profession's expertise is most relevant.

IFAC’s mission is to strengthen the accountancy profession in all sectors and all nations worldwide. To accomplish this, IFAC is focused on five key areas:

• Strengthening national accountancy bodies in countries around the world;
• Developing an internationally recognized single set of standards and promoting convergence to those standards;
• Focusing on ethics and ethical conduct;
• Supporting all sectors of the profession, including professional accountants in business, in government, and small and medium practices; and
• In all things we do, protecting the public interest.

IFAC has as a primary goal to strengthen the accountancy profession in both developed and developing countries worldwide and to contribute to the growth and development of strong economies. Because IFAC is a global organization, and because it is predicted that 95 percent of the world’s population growth will occur in developing nations, we have made strengthening the profession in these nations a key objective. Our position is this: we have a fundamental role and responsibility to play in fostering progress in the developing world, in eradicating poverty and in building prosperity. Establishing a sound and viable accountancy profession is a critical step in building a sound financial infrastructure and addressing these issues; it is a critical step in providing the people with access to food, healthcare, education, energy and water.

IFAC’s goal is to have a member body, with an established accountancy profession, in every country around the globe. This includes all African nations. There is no doubt that this is a lofty goal, but as we look ahead and see that the growth of the world’s population will largely be in developing economies, I am more and more certain that this goal is one that we cannot compromise or forsake. Without an established accountancy profession, I believe that we cannot succeed in helping African countries, or any others, in reaping the benefits of globalization.  IFAC is engaged in a number of initiatives to achieve this goal.

Next week, together with the Fédération Internationale des Experts-Comptables Francophones and the United Nations Conference on Trade and Development, IFAC and ECSAFA are organizing an Africa Region Learning Workshop, on the accountancy profession’s role in economic development, in Nairobi, Kenya. This Learning Workshop, which is sponsored by the African Development Bank and co-sponsored by the World Bank and IFAC, will bring together representatives of nearly all 53 African nations; donor agencies; national, regional and international accountancy bodies; the private sector; and other interested parties to discuss how to address the challenges and opportunities facing the accountancy profession in Africa. At this important conference, in which some of you here today will participate, we will discuss critical issues such as sustaining good corporate governance; strengthening public sector accounting and auditing; meeting the needs of growing small and medium practices; and developing and promoting ethical conduct. Most importantly, we will have the opportunity to build and to strengthen partnerships, in other words, determining how we can work together, effectively and efficiently, to achieve sustainable economic development in African countries. Globalization has, I believe, made this goal attainable.

IFAC’s Developing Nations Committee, which Mr. Gathinji has led excellently since its creation, is leading our efforts to represent the interests of developing nations and to seek resources and development assistance. The committee is involved in extensive outreach to developing countries and has prepared guidance entitled Establishing and Developing a Professional Accountancy Body. This publication covers the roles and responsibilities of a professional body, education and examination and capacity development. The guide addresses a variety of situations, including where a formal accountancy profession does not exist in a country, where the profession exists and there is a desire to establish a professional accountancy body and where an existing professional body requires further development and enhancement. It also includes suggested areas for priority action based on short-, medium- and long-term goals and projects. The guide is available electronically, along with all other IFAC standards and guidance, free-of-charge from the IFAC website: www.ifac.org.

The Developing Nations Committee is now in the process of preparing a country-specific approach to supporting developing nations, helping both those countries where there is no established profession and those that have only begun to build the professional, financial and regulatory architecture necessary to support economic growth.

In addition, further to support and provide resources to developing countries, the Developing Nations Committee works closely with the IFAC Member Body Compliance Program.

The Member Body Compliance Program was established to help support and encourage IFAC members and associates, throughout the world, in their best endeavors to meet the requirements for membership in IFAC. These include promoting and incorporating international standards issued by IFAC and by the International Accounting Standards Board into national standards; and implementing quality assurance and investigation and discipline programs to monitor compliance with applicable professional standards.

Part 1 of the Compliance Program, a fact-based questionnaire to assess the regulatory and standard-setting frameworks of IFAC member bodies, is now complete. Responses have been submitted by all active IFAC members and associates – including all 23 IFAC member bodies in Africa. These responses are now posted on the IFAC website and I encourage you to review them. I would like to thank ECSAFA very much indeed for its support of the Member Body Compliance Program.

Part 2, the SMO Self-Assessment Questionnaire, was launched last December and member and associate responses have begun to be posted on the IFAC website. The responses provide a valuable global snapshot of the accountancy profession from a standards perspective. Additionally, they help IFAC to gauge where it needs to focus its development work. Lastly, but perhaps most importantly, the responses to the questionnaires demonstrate the global profession’s willingness to be accountable for its actions to meet high standards, to deliver quality and to protect the public interest – all important responsibilities in this era of globalization and in this complex environment in which we all work.

Responses to the Compliance program will also assist IFAC in understanding where further assistance or development is needed. Action plans will be developed by IFAC members and associates, with assistance from the Compliance staff. During this phase of the program, the Compliance Advisory Panel, which oversees the Compliance Program, will provide feedback to the IFAC standard-setting boards and to the Developing Nations Committee to enable them to develop necessary tools, guidance and resources to assist members and associates in successfully completing the required actions.

The Member Body Compliance Program has as a primary objective to encourage and support member bodies in convergence to international standards set by IFAC’s independent standard-setting boards and by the International Accounting Standards Board.

It is important, I believe, to recognize that, as globalization takes hold, markets have the potential of becoming more integrated and developing countries have greater potential to increase investment and, thereby, to raise the quality of life of their citizens. To achieve these potentials, it is vital that the accountancy profession adheres to high quality standards. It is only through adherence to such standards that accountants can build confidence in the financial reporting process and create an investment climate of trust.

I would like to comment for just a few minutes on IFAC’s standard-setting activities and to emphasize that these activities are conducted by independent standard-setting boards with substantial public interest input.

The International Auditing and Assurance Standards Board (IAASB) sets international standards on auditing and assurance, quality control and related services. To ensure that its standards are clear and understandable the world over, the IAASB has undertaken a significant project to improve the clarity and structure of its standards. Beginning in October 2005, it issued four exposure drafts of proposed standards re-drafted using its new drafting style. It plans to have an aggressive timetable for updating all its standards in this new clarity style. The new style was developed based on input it received at an international Clarity forum last year and through responses to its 2004 Proposed Policy Statement and Consultation Paper on Clarity. We hope that this new style will not only make the standards more understandable, but also make them better capable of being translated and used in countries throughout the world.

In developing its international standards, the IAASB works with national auditing standard setters, from around the globe, that share the common goals of: promulgating high quality standards and reaching consensus at an early stage in their development. In July, the IAASB issued new guidance for national auditing standard setters that adopt its international standards with limited modifications. While not intended to be a definitive statement on convergence, the document provides guidance on the extent to which modifications to adopted international standards are permitted, while still allowing the national standard setter to assert that the national standards conform to the international standards. I urge all of you who hold a leadership position in an accountancy institute, or with a standard setter, to review this document, which is available in the IAASB homepage at www.ifac.org/IAASB.

The IAASB is also addressing critical issues in auditing and assurance. In March 2006, it issued a re-exposure draft designed to enhance the quality of audits of group financial statements, entitled Proposed International Standard on Auditing (ISA) 600 (Revised and Redrafted), The Audit of Group Financial Statements. Following earlier consultations, the IAASB has modified the proposals and reissued the exposure draft to address issues related to the extent to which the group auditor needs to be involved in the audits of components that are audited by other auditors, whether these auditors are independent of the group auditor or belong to the group auditor's national or international firm or network of firms.

Another area that the IAASB is addressing is related party transactions. The involvement of related parties, such as directors, owners, and management, in major corporate scandals has prompted the IAASB to review its current auditing standard on the subject. As a result of its review, in January the IAASB issued an exposure draft, proposed ISA 550 (Revised), Related Parties. The exposure draft proposed requirements for auditors regarding the audit of related party relationships and transactions. The proposed standard would place new emphasis on evaluating the effects of related party relationships and transactions on the financial statements, even in circumstances where the financial reporting framework does not establish related party accounting or disclosure requirements.

An essential element of credible financial information is a foundation in ethics and integrity. To build credibility in financial systems and to contribute to sound economic systems, we at IFAC promote our values of integrity, transparency and expertise to all professional accountants around the globe.

Here in Africa, there are many organizations that are promoting strong ethics and good governance as part of their work to eradicate poverty; to place the African countries, both individually and collectively, on a path of sustainable growth and development; and to halt the marginalization of Africa in the globalization process and enhance its full and beneficial integration into the global economy.

NEPAD, the New Partnership for Africa’s Development, is one organization that has made progress in achieving these goals. Indeed, one of the specific priorities of NEPAD is the promotion of democracy and good political, economic and corporate governance.

I had the sincere pleasure, in March 2005, of meeting the NEPAD Chairman, Mr. Reuel Khoza, at the IFAC Board meeting in Cape Town, South Africa. During that meeting, Mr. Khoza addressed the IFAC Board and emphasized the importance of sound corporate governance policies, good accounting and auditing and the need for professional accountants in business to be the conscience of businesses worldwide. He also urged IFAC to do more in these areas in order to eliminate corruption and eradicate poverty.

The need for individuals in government and business to operate with integrity and transparency is absolutely vital to creating the kind of institutions that operate efficiently and create stability. In turn, this brings investment and the opportunity to create prosperity among the public at large. Our profession should be at the forefront of this effort, leading and educating by example.

One way that we can lead is through the development and implementation of high standards of ethical conduct. The IFAC Code of Ethics for Professional Accountants, which is applicable to all accountants worldwide, including those in business and industry, public practice, the public sector and academia, reinforces our profession’s core values of integrity, transparency and expertise. The Code, which is developed by IFAC’s International Ethics Standards Board for Accountants, has been adopted by more than a dozen IFAC members here in Africa, including our member bodies in Botswana, Cameroon, Kenya, Lesotho, Malawi, Namibia, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe and our two member bodies in South Africa. I would like to commend these institutes for their commitment to international convergence and to the adoption of high ethical standards.

IFAC’s Ethics Standards Board is currently engaged in ongoing work to ensure that all professional accountants – whether they work in public practice, business or government – have clear, relevant and high quality ethical guidance. The board has undertaken projects to address issues such as audit independence and whistle-blowing and is in the process of developing new guidance for professional accountants in government and in business. In addition, in July 2006, the Ethics Standards Board revised the Code of Ethics by updating the definition of a network firm. Network firms are required to be independent of an audit client of another firm within the network. The updated definition focuses on how networks operate and how they present themselves to third parties.

IFAC’s International Accounting Education Standards Board is focused on ethics and conduct, among other issues, and seeks to bring consistency to accountancy education, training and certification around the world. Our global environment does, I believe, demand this kind of consistency. How else can we assure the public that a professional accountant practicing in the United Kingdom is as qualified as one practicing in, say, Kenya?

Last month, the Education Standards Board issued an information paper entitled Approaches to the Development and Maintenance of Professional Values, Ethics and Attitudes in Accounting Education Programs. The paper, which was the result of a wide-ranging research project into ethics education in our worldwide accountancy profession, is designed to stimulate discussion and debate on the subject of ethics education.

This information paper served as the basis for the Education Standards Board to develop a proposed International Education Practice Statement, entitled Approaches to Developing and Maintaining Professional Values, Ethics and Attitudes. The proposed practice statement provides guidance to IFAC member bodies on how to achieve good practice in developing and maintaining professional values, ethics and attitudes in accordance with International Education Standards and suggests that member bodies may adopt an approach to ethics education based on the IAESB’s Ethics Education Framework. In addition, since ethics education is a lifelong commitment, that starts when an individual begins training to become an accountant, and continues throughout a professional accountant’s career, the proposed new practice statement also provides guidance for member bodies on ethics education through continuing professional development. Comments on this exposure draft are requested by December 15, 2006, and I encourage you to review it and to provide your comments.

In addition to the information paper and the practice statement, the Education Standards Board is preparing a toolkit on ethics education to assist member bodies, academic institutions and others in instilling a strong ethical foundation in the accountants of tomorrow.

The Education Standards Board is also addressing issues such as auditor competence and the information technology training needs of professional accountants. In June, the Board released a new International Education Standard (IES) 8, Competence Requirements for Audit Professionals, that requires all IFAC member bodies to ensure that professional accountants acquire and maintain the specific capabilities required to work as competent audit professionals. Under the new standard, IFAC member bodies will need to modify their policies and procedures to ensure that audit professionals meet the requirements of IES 8, which includes having advanced level knowledge of auditing and financial reporting; relevant information technology knowledge; and the professional skills and professional values, ethics and attitudes expected from audit professionals. The new standard also establishes requirements for the education and development programs of new audit professionals, including that they undertake a period of practical experience in audit and that they undergo an assessment of capabilities and competence.

In August, the Education Standards Board also issued an exposure draft of a proposed International Education Practice Statement, entitled Information Technology for Professional Accountants. Information technology is one of the critical areas for all of us in this globalized world. The proposed practice statement provides details of the knowledge and skills required of professional accountants in the IT environment to prepare them to use information technology, to work in the information technology environment and to rely on information technology.

Another important aspect of IFAC’s work is its program to strengthen public sector financial reporting and financial management. This is accomplished largely through the International Public Sector Accounting Standards Board, known as the IPSASB. The IPSASB develops International Public Sector Accounting Standards, which are designed to improve public sector financial management and accountability. It is currently addressing key issues for public sector accounting, including accounting for social policy obligations of governments, non-exchange revenue and budget reporting.

The IPSASB recently released a proposed standard on accounting for non-exchange revenue. Many public sector entities derive most of their revenue from non-exchange transactions – including taxes and transfers, such as grants, appropriations, donations and fines. The exposure draft proposes requirements for the recognition, measurement and disclosure of revenue from non-exchange transactions and contributions from owners and also includes definitions of: taxes, a taxable event, expenses paid through the tax system and tax expenditures.

A new information paper on the United States’ experience in making the transition to the accrual basis of accounting has also been released recently by the IPSASB. The paper identifies the benefits of this and highlights the challenges in developing and implementing an accrual based accounting system. We believe that this paper will be useful for governments considering implementation of the accrual basis.

The IPSASB is also currently developing proposed new International Public Sector Accounting Standards (IPSASs) on impairment of cash-generating assets and accounting for employee benefits – two important areas of public sector financial reporting.

An important IPSASB objective is facilitating convergence with International Financial Reporting Standards, upon which the IPSASs are based, and with statistical bases of financial reporting. Last year, the IPSASB issued exposure drafts further to converge its standards with International Financial Reporting Standards and with statistical reporting bases. The IPSASB is making great strides in its convergence efforts. An increasing number of entities worldwide, including the World Bank and NATO, are using IPSASs. In addition, in June of this year, the United Nations General Assembly approved a package of financial management reforms that called for UN agencies to use IPSASs for its financial statements.

To enhance government’s credibility, both nationally and overseas, governments need to report their financial position and performance and their cash flows in a transparent and high quality manner. Such information is vital to the efficient operation of government and can assure the public that government resources are managed effectively. It is important to keep in mind that the need for high quality information from governments is as important as it is for business and industry. Without a financial structure that engenders confidence, a government’s infrastructures may crumble and with them, its ability to support its citizens.

IFAC is committed to ensuring that all professional accountants, in every country of the world, both developed and developing, have the tools that they need to deliver high quality work. IFAC’s Professional Accountants in Business (PAIB) Committee is addressing the key issues facing accountants in business, including internal control, sustainability, and business planning. Last month, the committee released a new information paper, Internal Controls – A Review of Current Developments, that summarizes key internal control frameworks, highlights recent legislative and other initiatives, and discusses the role of internal control in enhancing corporate governance. The paper finds that current views on internal controls support a principles- and market-based approach in which organizations make a commitment to develop internal control systems particular to their own specific internal and external environments. It also identifies the importance of the tone at the top and the culture and the ethical framework throughout the organization to the effective implementation of an internal control system.

Also last month, the PAIB Committee released two new publications on a growing issue of concern in our globalized work – the environmental and social impact of the operations of businesses and organizations. These two publications explore the role of the professional accountant in business in sustainability reporting. The first paper, Why Sustainability Counts for Professional Accountants in Business, provides an overview of enterprise sustainability and sets out the business case for addressing sustainable development at the enterprise level in terms of the risks that sustainable development poses and the opportunities which it brings. It also seeks to identify the main sustainability related roles which the professional accountant in business might occupy: today, tomorrow or at some point in the future. The paper was published simultaneously with an information paper, entitled Professional Accountants in Business – At the Heart of Sustainability, in which high profile professional accountants in business explain how sustainability issues affect them.

To support small- and medium-sized entities (SMEs) and their small and medium practice (SMP) advisors in developing business plans, in May the PAIB Committee released new guidance entitled Business Planning Guide: Practical Application for SMEs. The new guide includes information on how to develop a corporate values statement and to manage business risks. In addition, it describes how the business plan may serve as a performance tool on an ongoing basis and support a business in obtaining external funding.

SMPs and SMEs are an important part of our globalized world and a vital part of national and international economies around the world. SMPs and SMEs are particularly relevant to developing economies. Yet they often find it very difficult to obtain the financial and other resources necessary for them to grow. According to the United Nations Economic Commission for Africa’s Economic Report on Africa 2004: Unlocking Africa's Trade Potential in the Global Economy Overview, “Africa desperately needs to create national … small business institutions that coordinate comprehensive programs for SME support.”

Programs to support SME growth and development are essential, because SMEs are vital to the economies of African nations. In his March 2006 speech to an International Finance Corporate conference, the Hon. Henry Obwocha, Kenyan Minister for Planning and National Development, who will be a featured speaker at the Africa Region Learning Workshop next week, provided some illuminating statistics on the vital importance of SMEs to national economies. He pointed out that in South Africa, for example, SMEs account for 55 percent of all jobs. And in his home country of Kenya, SMEs employed 5.1 million people and accounted for about 18 percent of GDP in 2003.

Here in Malawi, you have recognized the importance of SMEs to national economies and answered the call to provide them with resources through the establishment in 2002 of the Malawi Poverty Reduction Strategy. The strategy is supporting the growth and development of SMEs by providing financial, information and development training, among other resources.

IFAC is also actively working to support SMPs and other professional accountants that provide services to SMEs. The IFAC SMP Committee, formed in 2005, is a vigorous force both within IFAC and in representing the interests of SMEs and SMPs to international standard setters. Its members, from both developed and developing countries, seek to identify and address the most challenging issues facing SMEs.

In July, the committee organized a forum in Hong Kong to discuss the challenges and opportunities facing SMEs and SMPs. Over 130 participants from 35 countries attended the conference and their deliberations identified two significant challenges facing SMEs and SMPs: SMEs need financial reporting standards that are appropriate for their users’ needs and reduce the associated cost of compliance; and, in an increasingly globalized economy, SMPs should continue to explore new ways to support the growth and accountability of SMEs.

To help to address these challenges, IFAC’s SMP Committee is taking a two-pronged approach to helping SMEs and SMPs converge and comply with international auditing and accounting standards, helping to shape the form and content of international standards and providing practical assistance to SMPs and SMEs that have to use them. It is developing a guide to International Standards on Auditing for SMEs and a web-based knowledge resource for SMPs. Additionally, IFAC continues to respond to exposure drafts of international standard setters where an SMP or SME focus is needed.

In addition to working with professional accountants in business and small and medium practices, IFAC has built and maintained a key partnership with the Forum of Firms, which represents over 20 global networks and associations of public accounting firms. The members of the Forum of Firms have committed to the use of ISAs and of the IFAC Code of Ethics for transnational audits. Additionally, these firms have committed to use the IAASB’s International Standard on Quality Control 1, which establishes a high quality standard for the quality control systems within the firms. This commitment, to IFAC standards and to the promotion of high quality and consistent performance, was reinforced in February 2006 with the approval by the IFAC Board of a new constitution for the Forum of Firms. The new constitution updates membership requirements to emphasize the firms’ commitment to audit in accordance with the IAASB’s International Standards on Auditing and all members of the Forum must show that they meet all the requirements to be deemed to be full members.

The Forum of Firms supports and actively participates in IFAC’s auditing, ethics and education standard-setting processes. The Forum also engages in dialogue with regulators and those that oversee standard setting. For instance, representatives of the Forum have attended and made presentations to meetings of the Public Interest Oversight Board, which oversees IFAC’s auditing and assurance, ethics and education standard setting and the IFAC Member Body Compliance Program. The PIOB was established in February 2005 through the collaborative efforts of the international financial regulatory community, working with IFAC, to ensure that its standards are set in a transparent manner that reflects the public interest. It is chaired by Professor Stavros Thomadakis, a former Chairman of the Hellenic Capital Market Commission, and is comprised of members nominated by international regulators and institutions. The PIOB has approved the due process and working procedures for the IAASB and the Education and Ethics standards boards. It has also approved the nominations to these boards and continues to provide public interest oversight. More information on the work of the PIOB is available on its website.

In summary, uncompromising individual values, strong institutional standards and appropriate oversight are all critical to the development of a trusted and reliable accountancy profession – one that is capable of and recognized for protecting the public interest and one that contributes to building an investment climate of trust. To leverage the opportunities made possible by globalization, the development of such a profession is a crucial first step.

To effectively support and sustain economic development and growth, however, a strong accountancy profession is not enough. We must promote sound governance by all business and governmental entities. We must promote high ethical standards by all those in the financial reporting supply chain. We must be willing to form new partnerships to seek regional and international cooperation in building the financial architectures necessary to achieve worldwide trust. And lastly, we must encourage the design of public policies that maximize the potential benefits from globalization and support human rights.

I truly believe that in this way, together, we can create greater economic stability here in Africa. We can, together, turn pessimism to optimism. We can, together, turn despair, where it exists, into hope. And we can, together, over time, give each and every African a better life.

Thank you very much indeed for your attention.