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Mar 25, 2009
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IFAC President Robert L. Bunting Calls for Convergence of Standards and Resistance to Knee-Jerk Regulation, in Accepting Award at LMU
Robert L. Bunting, President of the International Federation of Accountants (IFAC), was recognized for his contributions to accounting ethics, governance, and the public interest by the Loyola Marymount University's (LMU) College of Business Administration in Los Angeles on March 17. In accepting the award from Dr. Lawrence Kalbers of the Center for Accounting Ethics, Governance, and the Public Interest, he offered some views on ways to solve the current worldwide financial crisis and discussed the role that the international accounting community must play in the global recovery.
Featured as a guest of the school's Distinguished Speaker Series, Mr. Bunting told students, faculty, and members of the general public, "It is important for regulators to resist knee-jerk reactions, scapegoats, and silver bullets as they seek to shift the direction of national regulation in the midst of our current financial crisis." He emphasized that "regulation must be pragmatic and cost effective" and its cost must not exceed the benefit to the public. In particular, he cautioned regulators about the unintended burdens that regulations can place on small and medium enterprises, which are vital to global economic growth.
Among the subjects Mr. Bunting covered was "fair-value accounting," which he feels has come under undue criticism for its unreliability in shallow, illiquid markets. He believes that this kind of assessment only deflects attention from the more meaningful aspects of the world's current financial woes.
He also spoke about the disadvantages of a practice under consideration in some quarters: mandatory audit firm rotation. "While firm rotation might seem to remove any bias that may be attached to past decisions, it makes no sense at all," he emphasized adding, "In most parts of the world there are not enough choices to allow for this without forcing companies to choose audit firms that have no expertise in their industry."
He explained that a number of countries have experimented with-and subsequently abandoned-the concept as almost impossible to implement. Yet, it is being considered as a remedy to the Satyam scandal in India. Mr. Bunting pointed out that it would not be a pragmatic solution and would certainly set the country apart from nearly all of its trading partners- and represent a step backwards from the creation of a true global economic community.
"We must resist a retreat back into a national focus, with such manifestations as protectionism, national carve-outs of standards and regulations, and other short-sighted political solutions," Mr. Bunting warned. He suggested strengthening the Financial Stability Forum, which brings together national bodies of sector-specific regulators, central bankers, and industry supervisors, and the International Federation of Independent Audit Regulators, a newer organization, to deal with the consequences of the increasingly integrated global economy.
Mr. Bunting added, "IFAC has experience in understanding how to make an international organization work, and we are ready and willing to help any groups, especially those who do not have experience in the standard-setting arena."
Robert L. Bunting was elected president of IFAC in November 2008 and has been an IFAC Board member since 2005. He is a past Chairman of the American Institute of Certified Public Accountants.
IFAC (www.ifac.org) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 122 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce. In addition to setting international auditing and assurance standards through The International Auditing and Assurance Standards Board (IAASB), IFAC sets ethics, education, and public sector accounting standards through its independent standard-setting boards. It also issues guidance to encourage high-quality performance by professional accountants in business.