The International Federation of Accountants (IFAC), the worldwide organization for the accountancy profession, has issued its 2005 annual report. The report highlights the work of IFAC and its independent standard-setting boards in building an investment climate of trust and details the standards, guidance and other services delivered over the past year to protect the public interest.

"Our most notable accomplishments in 2005 included the strengthening of our standard-setting processes; the development of good practice guidance to help developing nations build accounting capacity; and the release of an updated international Code of Ethics for Professional Accountants," states IFAC President Graham Ward. "The Code, which becomes effective June 30, 2006, applies to all professional accountants, including those in public practice, business, industry, and the public sector."

One of the most significant events of 2005 was the formal establishment of the Public Interest Oversight Board (PIOB). The work of the PIOB is detailed in its first public report, which may be downloaded from http://www.ipiob.org. Other significant IFAC achievements included the establishment and expansion of Consultative Advisory Groups for IFAC standard-setting boards to ensure that there is sufficient public interest input; progress on the development of a global electronic knowledge resource for professional accountants in business; and the successful implementation of Part 1 of the IFAC Member Body Compliance Program, which provides comprehensive information about the regulatory and standard-setting frameworks in countries around the world.

The report also highlights IFAC activities to support the work of small- and medium-sized accounting practices as well as the increased recognition by governments and international organizations of the benefits of International Public Sector Accounting Standards in enhancing the accountability of government financial reporting. The report, which includes messages from the IFAC President, IFAC Chief Executive and the Chair of the PIOB, can be downloaded at http://www.ifac.org/about. Print copies can be obtained by sending an email with your postal address to pr@ifac.org.

IFAC is 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 over 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.

Thank you very much for inviting me to speak to you today. It is a great pleasure to have the opportunity to be back here in Dubai for this conference. A significant proportion – well over 50 percent – of the members of IFAC’s 160 member organizations is employed in business. The more I meet with groups like this one, the more aware I am of the fundamental, but diverse, support our profession provides to thousands, actually millions, of businesses of every size, in every country around the world.

The Institute of Management Accountants (IMA) has long been a leader of and champion for professional accountants in business and industry. The IMA also has a long history of support of and participation in the international profession. It has been an active member of IFAC since 1980, and its representatives have served on the IFAC Professional Accountants in Business (PAIB) Committee, which is dedicated to supporting and raising awareness of the vital role that you play. Specifically, I would like to recognize Bradley Kaplan, who joined the IFAC PAIB Committee in January 2006, and William Brower, who served on the committee from 2001 to 2005. The service of these and of other volunteer members of IFAC boards and committees is vital to achieving our objectives and to supporting professional accountants in all sectors of the economy worldwide.

The diversity of our profession is, I believe, one of our unrecognized strengths. Because professional accountants in business work in a wide variety of roles, at every level of organizations across all industry sectors, we collectively have a perspective that extends well beyond “the numbers.” Professional accountants in business – or PAIBs as we call them at IFAC – understand the drivers behind a business, and therefore play a fundamental role in contributing to the creation of shareholder value. Few other professionals have such a diverse and significant role in the day-to-day operations of businesses and other organizations.

So what then are the challenges that PAIBs face and how can we best meet them to enhance our effectiveness?

The first is mastering change.

Whether we are management accountants or accountants in public practice or any other field, our value to society and our effectiveness is determined in great part by our ability to address the changing environment in which we operate. The last twenty years have witnessed a massive transformation in business organizations, driven by intense competition, the globalization of markets, and the continual need to redefine strategies, structures and processes. Changes in political regimes, new conceptions of management controls, the impact of globalizing forces on commercial affairs, shifts in notions of effective knowledge management, of governance and of ethics, and technological advances have affected all areas of the profession and, notably, management accounting.

Let’s consider for a moment the changing nature of the finance function and the impact on professional accountants in business. In efficiently providing the goods and services that society wants, high performing organizations competing globally demand a unified service delivery model based on achieving a common technology platform, common business processes and common data. To deliver this, finance function initiatives include global strategies for centralizing process-based activities under the shared services and/or outsourcing umbrellas. This involves dealing with challenges such as process improvement and possible relocation to lower cost regions.

The trend calls for smaller finance functions, but more effective PAIBs. “World-class” organizations have a finance cost well below one percent of revenue. On the supply-side, firms such as IBM and Accenture have expanded their business process outsourcing up the value chain to include more strategic activities, and there is ongoing high demand from companies for outsourcing their routine accounting services to external, and often overseas, service providers. As well as achieving greater process quality and efficiency, and cost reduction, reorientation of the finance organization has the potential also to support value creation in organizations. A key objective is to deliver enhanced analysis, insight, and involvement in decision making. To be successful, to remain relevant and to be considered vital in the value creation of organizations, PAIBs need to challenge their roles and participation in organizations and be prepared to review and change structures, accountabilities and incentives. Above all, we may need to dig deeper to understand what customers of finance require from the finance organization and how business partnering can be most effective in a variety of contexts. This is true whether we work in a large corporation or a small or medium enterprise. 

Another major challenge that PAIBs must address is globalization and its impact on organizations.

A number of well-documented and profound shifts affect organizations and the accountants they employ – from economic liberalization, relocating of economic activity to other geographies such as China and India, and within geographies, to technological advances and significant demographic changes. To make any business a global business means more than finding new customers or suppliers in other countries. It requires an openness to change among the owners and the management team. This change requires taking well-informed risks, opening up the firm or company’s culture and making a serious commitment to ongoing learning. It is for this latter reason that IFAC’s International Accounting Education Standards Board has mandated a requirement for all professional accountants, including obviously those in business, to undertake continuing professional development. None of this change happens spontaneously, but requires planning and clear leadership. Hence, the planning of these internal changes should be part of the planning for international activities.

This is especially true for small and medium enterprises. Compared to larger firms, small and medium enterprises are generally less well-equipped to face increases in international trade. As a result of their lower average productivity, many SMEs have found it difficult to compete. Also, given their limited resources, they have found it more difficult to take advantage of the removal of tariff barriers. This does not mean, however, that it is impossible for SMEs to enter the international market place and to do so effectively. They must be prepared to look for new partners, to identify and focus on their market strengths, and to acquire information and expertise about overseas’ markets and cultures.

Recognizing the extent to which SMEs contribute to economic growth and stability around the world, IFAC has focused particular attention on this area. Through the establishments of a Small and Medium Practices Committee last year, we are considering how our organization can best meet the needs of SMPs and SMEs. One of the primary areas we are addressing is international standards and their impact on SMEs. The SMP Committee has provided input to the International Accounting Standards Board SME project, expressing our support for standards that are relevant, simple, and appropriate to the work of SMPs and SMEs. We have also been on the public record recently emphasizing the urgency and importance of financial reporting standards that fit this description. The SMP Committee also works closely with the International Auditing and Assurance Standards Board to ensure that the views of SMPs and SMEs are considered as auditing standards are developed, to ensure that auditing standards too avoid the imposition of requirements that have unwarranted compliance costs. At our upcoming IFAC Board meeting on June 1-2, we will be asking the Board to give the “go-ahead” for a new SME implementation guide to International Standards on Auditing. We view this as a significant project designed to help SMPs and SMEs address the growing challenges of globalization.

In addition, this month the IFAC PAIB Committee will issue an information paper on business planning for SMEs. Many business failures can be attributed to the lack of a sound business plan. The publication is designed to assist SMEs and their SMP advisors in understanding their own businesses, enabling them to evaluate both the potential of the business and the associated risks. The document will include the principles of business planning, a checklist and a sample business plan. It will be available for download free-of-charge from the IFAC website: www.ifac.org.

A third major challenge for professional accountants in business is building trust.

As organizations expand their global activities to exploit competitive opportunities, businesses large and small are coming under increasing scrutiny. Organizations will only be able to build the trust of a range of stakeholders through greater openness, transparency and accountability. The challenge then for professional accountants in business is to serve as an ethical gatekeeper – to be a champion of integrity, transparency, and objectivity – the three core values of IFAC. IFAC’s Code of Ethics for Professional Accountants, which is applicable to all accountants, including those in business, industry, government, academia, and public practice, embraces these core values.

The IFAC Board has recognized that PAIBs are the front-line professionals who could and should be a brake on inappropriate actions taken by their organizations, with that break extending, in some situations, to whistleblowing. Acknowledging that is it often extremely difficult for a PAIB, in isolation, to know what is the appropriate action in a particular situation, the International Ethics Standards Board for Accountants has begun a project to provide greater guidance for accountants in business and in practice with respect to whistleblowing. You can expect to see more guidance in this general area in 2007.

This new guidance will also help professional accountants in business carry out one of your most important responsibilities: setting the tone at the top in your organization. Earlier this year the PAIB 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 publication draws greater attention to the need for corporate codes of conduct and provides practical guidance on the scope and implementation of such codes. The goal of the 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 the professional accountant’s role 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, on organizational and management challenges, and on implementing a code of conduct in a global organization.

Effective codes of conduct are a vital component of an organization’s control system. This new publication will enable professional accountants, who are largely responsible for internal control and risk management, to work with senior management to develop such codes, which, in turn, will support the control, direction and evaluation of their organizations’ performance. 

This leads me to a fourth area of challenge for PAIBs: decision making in their organizations.

The scope of the role of PAIBs in supporting and enabling better decision making is driven by a recurring issue in all organizations: that of ensuring decision making is not too heavily based on heuristics – “instinct,” “common sense,” “rules of thumb” and “gut feeling.”

Bad decisions are usually traceable to the way the decisions were made. Management accounting may be seen as a counter to what has been described as “bounded management rationality,” as an antidote to excessive confidence, as it enables decisions to be based on more than instinct. Research over the past few decades has helped us to understand better the manner in which humans make decisions. This can assist in determining how to present information in a manner that is easier to process and understand – for example, it is clear that size ordering, as opposed, say, to alphabetic ordering, of a set of numbers enables the reader to see and recall patterns very much more readily. Similarly, this research also helps us to understand the systematic ways in which we make inappropriate decisions, though mis-weighting recent events or low frequency, high impact events, or through myopia, to give some examples.

PAIBs can support managers in achieving better outcomes in relation to organization objectives. They assist to define alternatives, collect appropriate information and evaluate cost versus benefit. Numerous tools and techniques are at the PAIB’s disposal to support decisions – such as a range of investment appraisal techniques, net present value, business forecasting, performance management, competitive analysis and performance information. A number of mistakes are made time and time again in organizations, such as the sunk cost trap where sunk costs, although irrelevant to a present decision, have nonetheless been shown in research to be given undue weight in decision making. Another is the oversight of opportunity cost – the next best alternative that is forgone when a decision is made.

In order to make the right decisions, management needs to treat decision making as a distinguishing competence, which is supported by high quality, timely and multi-dimensional information about a company’s business model and performance drivers, and which focuses on the big issues and opportunities, as well as an awareness, not yet adequately accommodated within management accounting, of the realities of human decision-making processes.

Frequent roadblocks to robust strategic decision making include:

• Boards lacking a clear grasp of their organizations’ business model and key performance drivers, or pursuing an inherently flawed business model. People might see accounting profits in the short-term, but nevertheless be destroying value in everyday decision making.
• Decision making not being underpinned by rigorous value and risk analysis. Finance staff and others within management too often get distracted by the natural bias towards the financial reporting cycle and external compliance requirements and expectations, a factor that has become a greater concern as regulatory regimes demand increasing compliance activity.
• For all the talk of strategic management accounting, many accountants in industry have not been able to give sufficient attention to value precursors, the prerequisites for value creation, which are mainly non-financial, such as market sector dynamics and brand health indicators.
• Culture and communication: Let’s not forget that employees play the biggest part in generating shareholder value but, so often, the focus on adding value is blurred and diluted when you get a few levels down in the organizational hierarchy.

To provide guidance on governance issues from both a conformance and performance perspective, the PAIB Committee, in conjunction with the Chartered Institute of Management Accountants in the United Kingdom, published a report, Enterprise Governance – Getting the Balance Right. It explores the emerging concept of enterprise governance, which incorporates organizational performance into a business governance framework, especially in terms of decision making, strategy formulation and execution. The report, which is available on the IFAC website, argues how both perspectives must be in place in order to support high performance in organizations. This publication highlights the role of PAIBs in these processes.

To help professional accountants worldwide meet these and other challenges, IFAC’s PAIB Committee has this year begun developing a series of principles-based good practice guidance statements. This development is one that is happening through the leadership and support of the IMA. The guidance will promote and support consistent and high quality practice across the global community of PAIBs. Covering topics in the areas of management control, costing and corporate finance and financial management, this IFAC guidance will raise understanding of the role of the PAIB. It will recommend objectives in relation to the role of the PAIB, and define key principles, which are widely accepted features of good practice and which support the achievement of the objectives of the PAIB, and will provide practical guidance to support application of the principles.

This leads me to the fifth and final challenge that I will comment on today with respect to professional accountants in business – that is, learning how to manage knowledge.

Managing change means managing knowledge. For professional accountants in business, this may require a fundamental change in how we process and convey information. For example, we must develop a mindset that is open to new ideas, receptive to challenges, and capable of insightful analysis. We should and can, I believe, apply the principles of human information processing to our management and recruitment techniques to strengthen our organizations. This means enabling professional accountants to process information differently and more independently, and to help remove organizational bottlenecks that prevent them from making the types of contributions that can best add value to an organization.

Ours is a profession that is responsible for far more than historical compliance related activities. We cannot forget this. We must focus on building organizational capacity and performance, and on developing a new generation of PAIBs who can not only embrace change but thrive in a world in which it is inevitable.

In conclusion, it is important to recognize that business has a central role in driving economic and social welfare but that it requires high quality information for the effective management of resources and sound corporate governance to achieve these objectives. PAIBs, as the primary providers of business information and reporting, play a crucial role in contributing to the growth and development of business.

Our recent publication, The Roles and Domain of the Professional Accountant in Business, was developed to build understanding of the diverse roles, competencies and value PAIBs contribute to organizations. Pointers from this document include:

• As managers of value, PAIBs should understand that delivering sustained shareholder and stakeholder value (or “best value” as it has sometimes been described in the public sector) is the main goal when assessing alternative options. PAIBs have a key role in developing strategies for managing value and growth, and in moving other functions towards these goals;
• PAIBs have a responsibility to ensure that the organization understands fully its key performance drivers and that these are communicated in internal and external reporting; and
• PAIBs should ensure there is a relentless pursuit of efficiency and effectiveness from the investment base, particularly in areas such as capital expenditure, working capital management, brand management and R&D.

Specifically, the IFAC PAIB Committee’s role is to enhance the role of PAIBs by helping them to think and to act strategically and globally, and to develop the necessary knowledge and competencies to deliver sound decision making in organizations. PAIBs need to be in a position to deal with the increasing complexity of managing business. For example, the move to modular design and platform development to enable organizations to deal with considerably shorter product and service life cycles requires a more sophisticated approach to planning, costing, risk and control.

To help PAIBs obtain access to information that can help them meet these challenges, the PAIB Committee has spearheaded the development of an electronic knowledge resource center. It is a unique web project that aims to publicize and consolidate the valuable information produced by IFAC member bodies for the benefits of professional accountants worldwide. It will enable member bodies to offer their professional accountants access to increased, relevant and high quality information resources, including helping them to deal with ethical leadership and public interest challenges such as corporate responsibility.

The challenges for both IFAC and its member bodies, such as the IMA, are to sustain the relevance of professional accountants in business, to continually investigate and adopt new concepts and new learning models, and to increase awareness of the PAIB’s capabilities. There are awareness gaps in which IFAC is making a significant impact, for example, in improving accounting information in the public sector, and highlighting the role of PAIBs in driving economic activity and their contribution to the governance agenda. This is coupled with IFAC’s role in supporting trust and credibility in both the wider accounting profession and in capital markets, which is central to its mission of protecting the public interest.

Over the past few years, IFAC has stressed its public interest objective. While some might think that objective is confined to public practice and auditing, that is a very narrow conception of what is in the public interest. The public interest is served when organizations produce products and services that have a value greater than the resources consumed in production. Economic growth and development is in the public interest. So when we talk about the public interest, PAIBs are included in that. 

IFAC’s leadership, its Board and the members of the IFAC PAIB Committee all recognize the role of PAIBs in protecting the public interest and in contributing to economic growth and stability. Through their daily work in organizations around the world, PAIBs contribute to the growth of their businesses and organizations and to greater economic prosperity for all. This must be why the late management guru, Peter Drucker, declared in the Harvard Business Review, that “The most exciting and innovative work in management today is found in accounting.” I believe that assertion still holds true, as I am sure do all of you.

Thank you for your attention. This speech will be posted on your website and on IFAC’s within 24 hours if you would like to read it, and I would welcome any comments you may have.

Alta Prinsloo and James Gunn have been named Deputy Directors of the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). In announcing the appointments, IFAC Chief Executive Ian Ball said the promotion of Ms. Prinsloo and Mr. Gunn, both of whom currently serve as senior technical managers to the IAASB, recognizes the high level of expertise, broad-based experience, and depth of knowledge that they bring to the newly created positions. Both individuals assumed their new positions on May 1, 2006 and continue to report to James Sylph, IFAC Technical Director.

Ms. Prinsloo joined the IAASB staff team in September 2002 from the South African Institute of Chartered Accountants. As IAASB Deputy Director, she will provide technical direction on the development of the Board's standards. In addition, she will oversee the publication of IAASB pronouncements in electronic and print formats and ensure that IAASB initiatives and related information are appropriately communicated through the Board's website (www.iaasb.org) and other outlets. She will also provide administrative support to the IAASB Consultative Advisory Group and act as point of contact between the IAASB and the International Organization of Supreme Audit Institutions.

Mr. Gunn was seconded from his firm, KPMG, to assist the IAASB between November 2000 and May 2001. He joined the IAASB on a permanent basis in September 2002. As Deputy Director, he will oversee and coordinate all IAASB standard-setting projects, including the Clarity project, which is designed to enhance the readability and understandability of IAASB pronouncements. He will also monitor auditing standard activities of key national standard setters and administer the annual meeting that the IAASB hosts with those bodies.

About the IAASB

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

* Note to Editors The Public Interest Oversight Board was formally established in February 2005 to oversee IFAC's auditing and assurance, ethics, and education standard-setting activities as well as the IFAC Member Body Compliance Program. The objective of the PIOB is to increase confidence of investors and others that such activities, including the setting of standards by the IAASB, are properly responsive to the public interest. PIOB members are nominated by international institutions and regulatory bodies.

The International Federation of Accountants (IFAC) has appointed Richard Fleck as the independent Chair of the Consultative Advisory Group (CAG) to the International Ethics Standards Board for Accountants (IESBA). Mr. Fleck was elected by members of the CAG and his appointment, which is for a three-year term, beginning May 2006, was approved by the Public Interest Oversight Board (PIOB).*

"We are delighted by Mr. Fleck's appointment to this very significant role. His experience and leadership will be invaluable to the CAG as it provides public interest input to the IESBA," states IFAC President Graham Ward.

The CAG, which includes representatives of organizations** that have an interest in international ethics issues, provides technical advice and input on the strategic direction of the IESBA. The IESBA establishes, independently and under its own authority, the IFAC Code of Ethics for Professional Accountants and other ethical standards and guidance for use by professional accountants around the world. The PIOB oversees the standard-setting activities of the IESBA to ensure that they are properly responsive to the public interest.

Commenting on the appointment, Professor Stavros Thomadakis, Chair of the PIOB, stated: "We welcome Mr. Fleck's appointment as the first independent chair of the IESBA CAG. This major step completes the CAG structure contemplated for this important element of IFAC reform. It will also further strengthen the due process applied to setting international ethical standards and guidance."

Mr. Fleck is a partner with Herbert Smith, an international legal practice with 1,100 lawyers in Europe and Asia. His practice experience includes mergers and acquisitions, competition and regulation, insolvency, dispute resolution, and accountancy work. Mr. Fleck is a member of the United Kingdom Financial Reporting Council and Chairman of the UK Auditing Practices Board.

The Chair of the CAG acts as the primary representative of those who use or rely on IESBA standards and guidance and encourages a deeper understanding by the IESBA of the public's needs and expectations. The Chair provides leadership direction to the CAG, overseeing the achievement of the CAG's goals and objectives. As the CAG's liaison with the PIOB, the IESBA and identified key stakeholders, the Chair is also responsible for communicating the views of the CAG to these bodies and conveying the views of these bodies to the CAG.

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. Its current membership consists of over 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 auditing and assurance, ethics, education, and public sector accounting. It also issues guidance to encourage high-quality performance by professional accountants in business.

* Note to Editors

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

** IESBA Consultative Advisory Group Members (As of April 30, 2006)
Auditing Practices Board (United Kingdom)
Basel Committee on Banking Supervision
CFA Institute
Eastern Central and Southern African Federation of Accountants
European Federation of Accountants and Auditors for SMEs
European Federation of Financial Executives' Institutes
Fédération des Experts Comptables Européens
Institute of Internal Auditors
International Auditing and Assurance Standards Board Consultative Advisory Group
International Corporate Governance Network
International Organization of Securities Commissions
International Organization of Supreme Audit Institutions
Public Company Accounting Oversight Board (United States)
World Bank

The Professional Accountants in Business Committee identified a practical business planning guide as a very useful tool for management, principally but not exclusively, operating in the small and medium entities (SMEs) area of the market. This information paper provides practical guidance that will help SMEs to understand their own business and industry, enabling them to better evaluate the business potentials and their associated risks. It will also be useful to small and medium-sized practitioners that are providing professional accounting services to SMEs.

The International Federation of Accountants' (IFAC's) 2006 Handbook of International Auditing, Assurance, and Ethics Pronouncementsis now available in print and in several electronic formats. It includes all pronouncements issued by the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants through December 31, 2005. The handbook includes the following IAASB pronouncements:

• International Standards on Auditing (ISAs);
• International Standards on Review Engagements (ISRE);
• International Standards on Assurance Engagements; and
• International Standards on Related Services.

The 2006 handbook features the following new standards issued by the IAASB in 2005:

• ISA 230 (Revised), Audit Documentation; and
• ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

In addition, the handbook contains the revised Code of Ethics for Professional Accountants, issued by the International Ethics Standards Board for Accountants in June 2005. The updated Code establishes a conceptual framework for all professional accountants to ensure compliance with the five fundamental principles of professional ethics. These are integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. The Code, which becomes effective June 30, 2006, applies to all professional accountants, including those in business and industry, public practice, the public sector, and academia. Two electronic versions of the 2006 handbook are available: a free PDF downloadable version and an online eComPress version. The eComPress version has features designed to make accessing the pronouncements more user-friendly.

• It is fully searchable, so users can readily find the specific guidance they need.
• Its easy-to-use navigation enables users to minimize the time necessary to find relevant information.
• The handbook can be annotated by the user with a unique "Notes" feature, with all the annotations being transcribed automatically to newer editions.
• The publication is compressed and stays compressed, saving disk space and download time.

Used offline, the eComPress version of the handbook is not reliant on the Web and requires no additional software as it comes complete with its own viewer and index. The eComPress version of the handbook can be securely purchased and is immediately downloadable from the IFAC website. Prices for the 2006 Handbook of International Auditing, Assurance, and Ethics Pronouncements are as follows: print - US $100 and eComPress download - US$50. A package discount of US$130 is available when you purchase both the print and eComPress download versions. Downloadable networked versions are also available. Shipping charges apply for printed materials. Visit the IFAC online bookstore at http://www.ifac.org/Store for more information or to place an order. You can also contact IFAC at +1 (212) 471-8722.

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 over 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.

At a meeting held recently in London, more than 30 chief executives of accountancy bodies and regional accountancy organizations around the world expressed support for appropriate, simplified guidance being developed for small and medium entities. They also agreed that a major challenge for the accountancy profession is ensuring that requirements for financial information and assurance are appropriate for both large and small entities in both developed and developing countries. The requirements should be straightforward, clear and brief as possible.

Recognizing that international standards that are right for a large public company may be burdensome for a small enterprise, the International Federation of Accountants (IFAC), together with its member bodies, is urging standard setters and regulators to consider the unique needs of small and medium enterprises (SMEs) in developing their rules and regulations.

"We believe the goals of standard setters like the International Accounting Standards Board (IASB) and the International Auditing and Assurance Standards Board (IAASB) should be to develop succinct, relevant and understandable guidance that eases the compliance burden on SMEs and ensures that benefits exceed costs," states IFAC President Graham Ward. "This essentially means that the costs of preparing, auditing and disseminating financial statements should be proportionate to the information needs of the financial statement users."

IFAC expressed these views in its comments on the IASB Discussion Paper, Preliminary Views on Accounting Standards for Small and Medium-Sized Entities. "Concerns over the high costs of complying with full International Financial Reporting Standards have prompted many countries, particularly those with developing economies, to look at alternatives to international standards or to delegate standard setting to organizations that may not be appropriate for such a role," emphasizes IFAC Chief Executive Ian Ball. "Such actions are not in the public interest and, therefore, it is critical that standard setters be conscious of the effect of compliance costs on small and medium entities."

With SMEs representing 95.77 percent of the businesses in the European Union, over 97 percent of the total companies in the Asia Pacific region, and 99.7 percent of all United States employers, the issue needs to be addressed urgently. The issue is at the forefront of the agendas of IFAC's Developing Nations and Small and Medium Practices (SMP) Committees and is a matter of concern to IFAC's Professional Accountants in Business Committee. The Developing Nations and SMP Committees provide regular input to both the IASB and IAASB to ensure that the SME perspective is considered during the development of international accounting and auditing standards.

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. Its current membership consists of over 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, education, and public sector accounting. It also issues guidance to encourage high-quality performance by professional accountants in business.

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has released an information paper on the experiences of the United States (US) in its transition to accrual accounting, entitled The Road to Accrual Accounting in the United States of America.

"Adoption of accrual-based accounting by public sector entities increases the accountability and transparency of their financial reports and provides better information for planning and management purposes. This paper provides valuable insights for jurisdictions currently in the process of migration from the cash basis to the accrual basis or those considering adoption of the accrual basis," says IPSASB Chairman Philippe Adhémar.

The challenges for entities moving to the accrual basis include both development and implementation issues. They also include the establishment of appropriate institutional arrangements and mechanisms to promote, manage and assist in the transition. The IPSASB paper notes the development of administrative arrangements for formal standards setting at the local, state and federal government levels in the US and highlights key factors shaping the standards-setting structure. It also provides input on the US federal government reporting model.

The paper was prepared by David Bean, Director of Research and Technical Activities at the Governmental Accounting Standards Board (GASB) and technical advisor to the US member on the IPSASB, and staff at the GASB. The Road to Accrual Accounting in the United States of America can be downloaded from the IFAC online bookstore at http://www.ifac.org/store.

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. Its current membership consists of over 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.

Proposals designed to enhance the quality of audits of group financial statements are released today by the International Auditing and Assurance Standards Board (IAASB). The IAASB recently approved, and is now issuing, a re-exposure draft (ED) of the proposed International Standard on Auditing (ISA) 600 (Revised and Redrafted), The Audit of Group Financial Statements. The ED is drafted in the new style designed to enhance the clarity of IAASB pronouncements. Following earlier consultations, the IAASB has modified the proposals and reissued the ED. The primary issues revolve around 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 (unrelated) or belong to the group auditor's national or international firm or network of firms (related auditors). The IAASB is, therefore, seeking reaction on the following two specific matters:

• Previous proposals distinguished between the work that the group auditor needed to do, depending upon whether other auditors were related or not. While this may be a relevant factor, the strength of relationships varies, and the IAASB considers that the distinction is not of itself a sufficient basis for determining the group auditor's work. The IAASB has, therefore, proposed eliminating the distinction in the proposed ISA; this has given rise to substantial changes to some of the proposed requirements. Respondents are asked to indicate whether they are in agreement with the proposal and the effect that it has on the procedures that the group auditor performs in relation to the work of other auditors.
• The proposed ISA is drafted on the basis that a group auditor takes sole responsibility for the audit opinion on the group financial statements. This requires that the group auditor obtain sufficient appropriate audit evidence on which to base such an opinion. Because current group audit practices vary, the IAASB considered it necessary to be reasonably specific about the steps to be taken, and the work effort required, by the group auditor to acquire such evidence when other auditors are involved. Respondents are asked whether this approach is justified.

In addition, respondents are invited to comment on the application of the clarity drafting conventions. John Kellas, Chairman of the IAASB, explains: "Our proposals respond to public expectations for continuous improvement in auditing standards. In particular, a number of regulatory bodies and studies supported the need for this project. The IAASB has shown itself to be prepared to tackle such major audit areas. The project has not been an easy one, but we are confident that the proposed standard will enhance current practice and promote consistency worldwide." In developing the requirements and guidance, the IAASB considered regulatory and standard-setting developments around the world, the interests of small entities, and the expectations of various stakeholders.

How to Comment

Comments on the ED are requested by July 31, 2006. The ED may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org. They can also be faxed to the attention of the IAASB Technical Director at +1-212-286-9570 or mailed to the IAASB Technical Director at 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 the International Federation of Accountants' (IFAC's) website.

About IAASB

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

* Note to Editors The Public Interest Oversight Board was formally established in February 2005 to oversee IFAC's auditing and assurance, ethics, and education standard-setting activities as well as the IFAC Member Body Compliance Program. The objective of the PIOB is to increase confidence of investors and others that such activities, including the setting of standards by the IAASB, are properly responsive to the public interest. PIOB members are nominated by international institutions and regulatory bodies.

I am honoured to be here with you today to share in this celebration of your 100^th anniversary. Both personally, and on behalf of IFAC’s Board, committees, and staff, I offer you our sincerest congratulations on this important milestone. I would also like to thank the Consiglio Nazionale dei Ragionieri e Periti Commerciali, its President, William Santorelli and its Vice President, Francesco Distefano for inviting me to participate in this historic event by making some brief remarks about IFAC and the role of the international profession.

There can be no more appropriate place to discuss the international accountancy profession and to celebrate its history than here in Italy, the birthplace of Luca Pacioli who is credited with founding our great profession during the 14^th century. Pacioli was a man of diverse backgrounds and talents: he was a tutor, a professor of mathematics, an author and a Franciscan Friar.  He associated with the common merchants, devising bookkeeping methods that could assist them with their businesses and, at the same time, counted Leonardo Di Vinci amongst his friends. A true Renaissance man, Pacioli continues to be a model for our profession today. Like Pacioli, our lives as professional accountants result in us working with individuals in all paths of life. We are continually challenged to understand business’s changing needs, to deliver credible financial information and to adopt the vision necessary to serve the public interest effectively in the years ahead.

The CNRPC is dedicated to helping professional accountants  to meet these goals. As an active member of the International Federation of Accountants for a dozen years, CNRPC has demonstrated its commitment to the development of a high quality accountancy profession both here inItalyand internationally. And we are very grateful to the leaders of your organization for sharing IFAC’s mission to protect the public interest. I would like to recognize and to thank those Italian representatives currently serving on our boards and committees,  whose support enables IFAC to achieve its mission and objectives: Dr. Roberto D’Imperio, a member of the IFAC Board and his technical advisor Gianfrancesco Padoan; Prof. Roberto Tizzano, a member of the International Auditing and Assurance Standards Board; Prof. Stefano Pozzoli, a public member of the International Public Sector Accounting Standards Board; and Lino De Vecchi, Deputy Chair of our Small and Medium Practices Committee. I would also like to thank Angelo Casò, who retired from the IFAC Board last November after more than five years of service on the Board and four years as Chair of the SMP Committee. These outstanding professional accountants, like the great Italian Pacioli, possess the leadership, integrity and vision necessary further to develop our profession and to serve the public interest.

Today, I would like to speak to you briefly about recent IFAC initiatives – initiatives that are themselves designed further to strengthen our accountancy profession and its ability to contribute to economic growth and stability worldwide.

IFAC’s activities are driven by a mission that reflects our broad vision to consider the public’s welfare. Our mission is:

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.

In striving to meet this mission, IFAC has taken significant steps in four key areas, working closely with its 160 member organizations:

• Strengthening our standard setting and promoting ethical conduct;
• Achieving convergence with international standards;
• Reaching out to and supporting developing nations, professional accountants in business and small and medium practices and enterprises; and
• Strengthening the financial reporting supply chain.

Our initiatives in each of these areas are central to our mission to serve and to protect the public interest. Let me begin with standard setting. IFAC sets international auditing and assurance, ethics, education and public sector accounting standards. Over the past year, we have continued to increase public interest input into these processes through Consultative Advisory Groups and other means and enhanced the transparency of those processes by including more information on the IFAC website (www.ifac.org). Time does not permit me to outline all of our standard setting initiatives but I would like to highlight a few of the most significant ones for you now.

In the area of auditing standards, the International Auditing and Assurance Standards Board has undertaken a significant project to improve the clarity and structure of its standards. Last October, the IAASB issued four exposure drafts of proposed standards re-drafted using its new drafting style. This new style was developed based on input it received at a forum in July last year and through responses to its 2004 Proposed Policy Statement and Consultation Paper on Clarity. These proposed new standards are the first to be issued as part of an ambitious program to make IAASB standards more understandable and capable of being translated and to facilitate international convergence.

In addition to focusing on clarity, last year the IAASB released a new international standard on audit documentation, designed to enhance auditor performance and audit quality by establishing stricter requirements for audit documentation. Beginning with this standard, the IAASB staff is preparing a “Basis for Conclusions” for each new international standard to increase understanding about the development of the standards – in particular, how the IAASB has responded to input received. We hope that you find this to be helpful.

Other current IAASB projects are the development of standards on the audit of group financial statements and related parties issues. In January, the IAASB issued an exposure draft of a proposed revised International Standard on Auditing that would require the auditor to perform a minimum set of procedures to identify related party transactions and transactions not identified or disclosed by management.  I view this exposure draft as being particularly important.

In the area of ethics, IFAC’s International Ethics Standards Board for Accountants has updated the Code of Ethics for Professional Accountants, further emphasizing the five fundamental values, which are integrity, objectivity, professional competence and due care, confidentiality and professional behavior. The development of the updated Code is part of an ongoing effort to ensure that all professional accountants – whether they work in public practice, business or government – have clear, relevant and high quality ethical guidance.

The Ethics Standards Board is also 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.

IFAC’s International Accounting Education Standards Board is also focused on ethics, among other issues. It is in the process of developing a tool kit and an International Education Guideline to assist member bodies, academic institutions and others in instilling a strong ethical foundation in the accountants of tomorrow. The guideline will offer recommendations for good practice models of ethics education, while the tool kit will provide practical tools – such as sample course outlines, teaching notes and case studies – to be used by member bodies and educators. The tool kit and proposed guideline are expected to be available later this month.

As part of its effort to help ensure that there are competent professional accountants worldwide, the Education Standards Board is developing new guidance on the training of audit professionals. The Board is also in the process of updating International Education Guideline 11, Information Technology for Professional Accountants, to reflect changes in the information technology field, and it plans to release an exposure draft in the near future.

Through the International Public Sector Accounting Standards Board, IFAC develops Standards which are designed to improve public sector financial management and accountability. This is an area that we cannot afford to overlook and IFAC views it as an increasingly important area of activity. The IPSASB is currently addressing key issues for public sector accounting, including accounting for non-exchange revenue, heritage assets and budget reporting.

The IPSASB’s recent consultation paper on accounting for heritage assets, such as museum collections, historic buildings and nature reserves, will be very relevant toItaly, a country  that has such significant heritage assets.

In consultation with IFAC boards and committees, and other relevant interested parties, IFAC staff are further developing the concept of “international convergence.” The objective is to develop guidance to accompany IFAC’s Statements of Membership Obligations (SMOs), which require IFAC members and associates to use their best endeavors to incorporate international standards, set by IFAC and by the International Accounting Standards Board, into their national standards. 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.

The Compliance 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, to demonstrate a shared commitment to our profession’s values of integrity, transparency and expertise.

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 from more than 130 member bodies, including the CNRPC, have been posted on the IFAC website, and the remaining responses are in the process of being agreed and posted.

Part 2, the SMO Self-Assessment Questionnaire, was launched last December and member body responses will be posted beginning in the second half of this year. The responses from these questionnaires will  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 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.

This focus on 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. The IAASB and  IFAC’s Education and Ethics Standards Boards develop standards that do meet these requirements. The independent international Public Interest Oversight Board, formed in February 2005, oversees these standard-setting activities as well as the IFAC Member Body Compliance Program. Last September, the PIOB approved the due process and working procedures for these standard-setting boards and in December,  it approved IFAC’s nominations of members of them .

In order to achieve its goal of developing a high quality profession that meets the public interest, IFAC must ensure that it supports the roles of all professional accountants. For this reason, over the past year, we have reached out to accountants in developing nations, to those in small and medium practices and to professional accountants in business. IFAC’s Small and Medium Practices Committee is increasingly active in representing the interests ofSMPs to both theIAASB and the International Accounting Standards Board. The committee is providing input to theIASB’s project considering the development of financial reporting standards for SMEs. It is also planning to develop guidance materials forSMPs, especially in relation to the application of ISAs to the audit of SMEs and to establish an electronic data exchange on SME andSMPissues.

Our Developing Nations Committee is also focused on the goal of high quality in the public interest. As a result of an extensive consultative process, the committee is 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, last year the committee released new good practice guidance on the roles and responsibilities of a professional body, education and examination and 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.

I believe that tools such as this new guidance are a key way that the accountancy profession can support economic growth and stability, which in turn can reduce poverty and improve the quality of life for citizens of developing nations.

IFAC is also working to help member bodies to meet the unique needs of professional accountants in business. These accountants hold a wide range of positions in companies inItalyand around the globe and are often the gatekeepers of financial information, and thus, of public trust. Recognizing this very critical role, our Professional Accountants in Business (PAIB) Committee has undertaken several initiatives to provide accountants in business with good practice guidance, including the forthcoming launch of an electronic resource center to provide one-stop access to current information on issues faced by this constituency.

Recognizing the critical role of ethical values and standards on protecting the public interest, the PAIB Committee has 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 exposure draft may be downloaded from the IFAC website. The goal of this proposed new guidance is to support sound corporate governance policies worldwide.

Accounting and auditing firms play an important role in the financial reporting supply chain through the provision of assurance about the financial reports of the companies they audit. It is important, however, to keep in mind that accounting firms are only one part of that chain, which also includes accountants within businesses, analysts, lawyers, senior management and boards of directors. It is for this reason that IFAC’s Board agreed to begin a new initiative on enhancing the quality of the financial reporting supply chain. The project will identify investor expectations and needs and include practical suggestions for enhancements that the global accountancy profession can provide by direct action and those where it will need to engage with others to create change. Among the issues being considered in the new study are corporate management and governance, regulatory developments, auditor independence and rotation and the expectations around the board’s and auditor’s responsibility for the detection of fraud.

As IFAC looks to the future, we are aware that the profession’s reputation rests squarely on its ability to protect the public interest and to improve the transparency of financial markets. Ensuring high-quality financial reporting is an area where there is no room for compromise. The CNRPC and the accountancy profession here inItalyhave been vital participants in the development of the international accountancy profession. We are most grateful for your very active role in strengthening our profession and for your continued support for IFAC. Inspired by Pacioli, we need to keep in mind that together, we can make a difference. Together, we can serve the public effectively and strengthen capital markets. Together, we can contribute to stability and prosperity both here inItalyand worldwide.

Thank you very much for your attention.