- present the IFAC Statements of Membership Obligations (SMOs) and look at the changes made during the revision process;
- allow participants to share their experiences with adoption and/or implementation of the international standards in the SMOs, regardless of the development stage of the organization and IFAC membership status; and
- familiarize all participants with the Dashboard Reports and allow them to consider the responsibilities, adoption status, and current priorities for one or more SMOs in their own jurisdiction.
- approaches to adoption and implementation of international standards;
- implementing quality assurance; and
- establishing effective investigation and disciplinary processes.
- clearer definition of obligations;
- greater clarity and improved flow of logic;
- a focus on adoption and implementation, aligned with IFAC’s strategy;
- an applicability framework to guide PAOs with varying levels of responsibility for SMO areas;
- the extension of the scope of external quality assurance review to apply to all audits of financial statements; and
- a clarified process of investigation and discipline with a stronger connection to SMO 1.
- The level of responsibility that the PAO has for each of the seven SMO areas.
- The adoption status (at the country/jurisdiction level) of the international standards relevant to each SMO area.
- The status of progress made by the PAO, as represented in their SMO Action Plan.
by PAO Development Committee
May 13, 2013
at PAO Development Committee Workshop
PAO Development Committee
PAO Development Committee/Pan African Federation of Accountants SMO Workshop Summary
During the Professional Accountancy Organization (PAO) Development Committee meeting in Accra, Ghana, a half-day open workshop session was held to which representatives of Pan African Federation of Accountants (PAFA) member bodies from across the continent were invited. The aim of the session was to:
Following a presentation from IFAC staff, PAO Development Committee members, observers, and guests split into three groups to focus on three different SMO aspects:
The workshop promoted exchange between participants and provide an open forum to share experiences and ideas. Below is a summary of some of the themes of discussion.
Summary of Discussion
Approaches to adoption and implementation of international standards
Responsibility: It is unusual for a PAO to have the responsibility for every standard-setting SMO (3, 4, 5, and 7). Where the responsibility lies elsewhere, understanding the environment, including any relevant legislation and resource challenges, is key to understanding the PAO’s role in supporting the associated processes. Due to the core role of government, challenges to progress on SMO 5 (International Public Sector Accounting Standards, or IPSAS) include a range of financial and political factors that differ significantly from one jurisdiction to the next. In cases where the PAO is not responsible for education and training, the PAO should consider a formal collaboration with the relevant educational institution(s). This can allow efficient sharing of information around the International Education Standards (IES) for timely updates to curriculum and training programs, resulting in the appropriate training of high quality professionals.
Enforcement: Enforcement of a code of ethics may be challenging where PAOs have limited capacity or a limited legal mandate. A consideration may be to work in partnership with a national anticorruption body to make additional resources available and may permit legal enforcement of a code of ethics in the jurisdiction. Working with a public institution also grants a wider audience, enabling key information regarding cases to be communicated in the public interest.
Proactivity: Not all PAOs evolve in a jurisdiction where the support and development of the accountancy profession is a priority for the government and/or other stakeholders. Where legislation related to the accountancy profession does not exist at the national level, PAOs should consider how best to enhance the relevance of the profession and encourage best practice from their members. This may include amending a PAO’s bylaws and rulebook to require members to use international standards in their professional practice. Such a decision must be supported by appropriate training, tools, and guidance.
Communications: Advocacy around the importance of international standards and information-sharing activities aimed at regulators and governments, as well as the public, should be a key part of a PAO’s strategy. Establishing and maintaining dialogue with key players in the political arena can ensure the accountancy profession is on their agenda. Where responsibility for standard setting or key implementation activities lies elsewhere, clearly communicating the assistance a PAO can provide to relevant stakeholders in support of high-quality financial information is essential.
Strategic planning: The ongoing update of standards by the international standard-setting boards requires processes to be in place to ensure timely adoption and implementation at the jurisdiction level. An agreed-to plan allows for objective setting, appropriate allocation of resources, and determination of a realistic timeline for implementation. SMO Action Plans are a tool that can be used for such an organizational planning process.
Implementing quality assurance
Quality review program: When establishing a quality review program , consider assessing existing internal quality review programs for larger firms and, depending on their effectiveness, placing some reliance on those programs when conducting specific reviews. For smaller firms, a robust quality review program can be monitored and supported by the PAO, which can feed findings into development programs. Peer review is typically ineffective in small jurisdictions where the profession is close-knit and, therefore, finding independent professionals is a challenge. Regional quality assurance systems can be a solution where capacity doesn’t exist at the national level.
Stakeholder engagement: Achieving buy-in from all stakeholders is crucial. A relationship with the auditor general can ensure high-level awareness of the results of all audits. At the early stages of the program’s implementation, when dealing with a firm that falls short of requirements, sensitizing those that will be affected, rather than seeking to instantly punish, can prove most effective. Public reporting of findings at the country level to highlight key themes from reviews, for example, can also help with this process.
Continuing professional development (CPD): Due to the importance of members in practice undertaking relevant CPD, a number of PAOs have introduced percentage-based mandatory practice-related CPD as a condition of annual practicing license renewal. More generally, PAOs should ensure that a wide range of CPD training and resources are available for members to update their knowledge and skills—this is particularly vital to assist small- and medium-sized practitioners (SMPs) who may not have capacity for in-house training.
Establishing effective investigation and disciplinary processes
Advocacy and communication: Relationships should be built and maintained with government and other regulators to publicize the role of the PAO in investigating and disciplining its members. In jurisdictions where PAO membership is not mandatory to practice, it can be of crucial importance to ensure the public understands requirements and how to access quality professionals. Penalties for practicing without a license should be significant enough to act as a deterrent. Decisions regarding publication of names of individuals found to be practicing without a license or violating other regulations should be tied to the severity of each case.
Committee composition: Legislation can negatively affect an effective investigation and disciplinary process, since smaller jurisdictions can struggle to maintain the committee composition required by law. Where appropriate, credibility of disciplinary or appeals tribunals can be enhanced through the appointment of ministry or high court officials, or by their involvement in selecting committee members, such as the chair. Public members and legal representation, in addition to the presence of accountants on the committee, can enhance objectivity and transparency.
Cooperation with regulators: Agreements with regulatory authorities can ensure appropriate flow of information around cases. Where there is overlap in the processes of a PAO and those of an independent or audit regulator, a formal relationship can help avoid duplication and may lessen administrative burden on the PAO.
The IFAC Member Body Compliance Program
The IFAC Member Body Compliance Program is one of continuous development and improvement for PAOs—IFAC members and associates. It is based on the IFAC Statements of Membership Obligations (SMOs), which serve as a technical framework for PAOs to set strategic objectives. The program operates with oversight and advice from the IFAC Compliance Advisory Panel (CAP) and is subject to Public Interest Oversight Board (PIOB) review. IFAC member body development staff and the PAO Development Committee work with PAOs to support their progress in addressing the SMOs.
The Revised SMOs
The IFAC SMOs were revised and ratified by the IFAC Council in November 2012 to use “plain English” principles and express member bodies’ obligations more clearly. At a high level, the revisions include:
IFAC members and associates are required to address the SMOs by developing, executing, reviewing, and regularly updating their SMO Action Plan.
SMO Progress Reports
Dasboard Reports are prepared by IFAC staff based on an evaluation of information presented by the IFAC member or associate in their SMO Action Plan. Dashboard Reports provide a high-level snapshot of the status of a PAO and its jurisdiction at a point in time. To evaluate and monitor progress made by IFAC members and associates, Dashboard Reports use three interrelated indicators.
Dashboard Reports, in addition to addressing these three areas, also provide background information on the IFAC member or associate, including its size, sectors of the profession served, and a general indication of available resources and capacity.