Following corporate collapses and failures in a number of countries in the early part of the century, there was a decline in confidence in financial reporting and in the accountancy profession. As a result, regulation of the profession increased in many countries in an attempt to restore public and investor confidence in financial reporting.
In response to these events, in November 2003, the Council of the International Federation of Accountants (IFAC), with support from global regulators, unanimously approved the IFAC Reforms. They were developed through consultations with international regulatory agencies, other international and regional organizations, IFAC member organizations, and the accounting profession.
The reforms were designed to:
- Strengthen standard-setting processes;
- Achieve convergence to high-quality international standards in auditing, professional ethics, and accountancy education, as a means to support effective and efficient capital markets—leading to lower costs of capital, higher investment, greater innovation, and more job opportunities;
- Enhance performance by the accountancy profession;
- Build investor confidence in financial reporting, in the work of auditors, and in financial securities markets worldwide; and
- Ensure that the international accountancy profession is responsive to the public interest.
These proposals aimed to provide increased transparency with respect to IFAC governance and the standard-setting activities IFAC supports, with greater public and regulatory input, within a framework of regulatory monitoring and public interest oversight. The proposals also called for the establishment of a Public Interest Oversight Board (PIOB); regular, ongoing dialogue between regulators and the accountancy profession; and broad-based external participation in international standard-setting activities.
The reforms demonstrated the commitment of IFAC and the entire profession to building public confidence in the quality of audits. The result has been a more collaborative and comprehensive international process for determining how accountants and auditors can best contribute to the integrity of the international financial system.