Good morning, ladies and gentlemen. It is a pleasure to be here with you for this international conference.
I would like to thank USAID and the hosting organizations for inviting me to be here with you in this country of beautiful lakes and hills that has attracted travelers for thousands of years.
The International Federation of Accountants (IFAC), of which I am currently the President, is the global organization for the accountancy profession. IFAC's mission is to develop the accountancy profession globally so that it can effectively serve the public interest and contribute to the development of strong economies.
IFAC sees the accountancy profession and all professional accountants as effective agents for development in our societies. This places the accountancy profession in its true role, and makes the relevance and sustainability of our profession a matter of public interest.
In order to fulfil our mission, we work with our 157 members and associates in more than 120 countries, including the Union of Accountants and Auditors of Kyrgyz Republic, the Chamber of Auditors of the Republic of Kazakhstan and the National Association of Professional Accountants and Auditors of Uzbekistan. We also work with regional organizations and accountancy groupings, such as the Eurasian Council of Certified Accountants and Auditors. Of course, we would also like to work with other professional organizations in Central Asia that want to join our global family and are ready to make the commitment to comply with IFAC's Statements of Membership Obligations.
To achieve our mission, we also work with regulatory bodies, government officials, and representatives of the international donor community.
The presence here today of individuals from each of these backgrounds demonstrates the importance of the focus of this conference: the role of the accountancy profession in economic growth and development worldwide.
Professional accountants play a vital role in every sector of each economy around the world. Professional accountants who work as auditors provide assurance as to the reliability of financial information, which is essential for the proper functioning of capital and credit markets. Professional accountants working in business also contribute to the quality of financial information and promote strong corporate governance and ethics within their organizations. Professional accountants working in government help to ensure that public resources are managed effectively and efficiently.
In each of these areas – serving the markets, their organizations, or the public sector – professional accountants contribute to the development of strong and stable economies. This stability is essential to promoting the long-term growth of nations, to increasing internal and external investment and, ultimately, to generating wealth, improving the lives of citizens, and reducing poverty.
This morning, I would like to share with you my views on how the accountancy profession, working in collaboration with its various stakeholders, can make a meaningful contribution to economic growth and development.
My remarks today will focus on four main areas:
- Adoption and implementation of international standards to support high quality practice;
- The role of education in building a strong accountancy profession;
- The development of guidance and translations to support implementation of international standards; and
- The importance of collaboration – both nationally and internationally – in strengthening the profession and serving the public interest.
Let me begin with convergence.
Within IFAC, there are four independent standard-setting boards that develop international standards in the areas of auditing and assurance, education, ethics, and governmental financial reporting. These standards raise the level of practice and promote reliable and high quality financial reporting worldwide. IFAC’s commitment to convergence also includes promoting the use of the International Financial Reporting Standards (IFRSs), which are developed by the International Accounting Standards Board (IASB).
The adoption and implementation of a common set of high quality international standards by nations around the world is crucial to assuring the quality and uniformity of the profession’s services. It is also vital to operating effectively in a global world.
When an investor in Boston is looking to invest in Bishkek, he needs to understand and have confidence in that company’s financial information. If the financial information is based on a common set of standards that are used internationally, the investor will tend to be more confident about investing.
This helps to increase international investment and to reduce the cost of raising capital and obtaining credit. Therefore, by reducing or eliminating the differences in financial reporting requirements, we can help to eliminate barriers to international investment and trade.
Regarding IFRSs, it is important to keep in mind that towards the end of this year, or the beginning of 2009, the IASB will be issuing the IFRS for SMEs. This simplified set of standards is being designed to be used by entities that, without being entities of public interest, need to present general purposes financial statements. It is important to remember this fact when making a decision regarding the adoption of IFRS.
With respect to International Standards on Auditing (ISAs), which are developed by the International Auditing and Assurance Standards Board (IAASB), we are seeing the fruits of convergence all over the world.
Countries moving toward adoption of ISAs range from China and India to Canada and the United States, where the Auditing Standards Board, which sets auditing standards for private companies, has set convergence with ISAs as an objective.
I understand that the Kyrgyz Republic adopted ISAs several years ago. This was an important step for your country, but it is not the end of the process. Adoption and implementation of international standards is a journey which requires that we continue to move forward, updating and refining the standards as needed to reflect changes in financial reporting and business practices.
Much has changed in your country in recent years and much progress has been made. Significant changes have taken place in the realm of financial reporting and auditing standards, and ISAs in particular have continued to be revised and updated to address the new challenges faced by auditors, both here in the Kyrgyz Republic and globally.
One important area in which the ISAs have significantly changed in just the past two years is in their structure and language. The IAASB is in the final stages of a project to redraft all of the ISAs to improve the clarity of the language and to help facilitate their translation and implementation. It is on target to complete the redrafting of all 35 ISAs as final standards by the end of this year, and the standards will have a common effective date for financial periods beginning on or after December 15, 2009.
The IAASB’s Clarity project represents a major change in the standards since they were last adopted here in the Kyrgyz Republic. Your nation has demonstrated its strong commitment to international involvement by becoming the first in Central Asia to join the World Trade Organization in 1998, and I urge you to continue your active international engagement and continue your convergence activities by adopting and implementing the redrafted ISAs on the recommended effective date. I encourage the same of all countries in Central Asia.
Unlike IFRSs, ISAs can be applied in every case, no matter how big or small the entity is. This means it is not necessary to develop a simplified set of auditing standards for the audits of the SMEs. However, we can, and we should, consider the needs of SMEs in the development of International Standards on Auditing and support SMEs in the application of these standards.
To support small and medium accounting practices (SMPs) and others in applying ISAs to the audit of SMEs, last December IFAC released new implementation guidance entitled Guide to Using ISAs in the Audit of Small- and Medium-sized Entities. The guide, developed by the Canadian Institute of Chartered Accountants on IFAC’s behalf, is an example of collaboration at its best.
This new guide, which is available free from our website, provides an analysis of all ISAs issued as of December 31, 2006 and their requirements in the context of an SME audit. In just the first six months since the guide was issued, more than 11,000 copies were downloaded from our website, showing the clear interest in and need for such guidance.
IFAC is already planning an update to the guide once the IAASB’s Clarity project has been completed to include the newly redrafted ISAs.
Although adoption of international standards is essential both for improving the quality of the profession’s services and to promoting external investment, adoption alone is not enough. The standards must also be effectively implemented and consistently applied by all practitioners.
We at IFAC recognize that implementing a new set of standards presents challenges, which can only be effectively addressed through education, training, and continuing professional development.
Through their participation in the CAP/CIPA certification program, countries in Central Asia have shown that they take education and training seriously. The CAP/CIPA program is an important symbol of collaboration among Russian-speaking nations, and it provides a good foundation for education and certification of professional accountants throughout this region.
Within IFAC, the International Accounting Education Standards Board (IAESB) develops standards and guidance for education and training of all professional accountants. This Board has issued eight International Education Standards (IESs) and a number of guidance papers that are focused on enhancing the professional knowledge, values, skills, and ethics of all professional accountants and accounting students.
One standard in particular, IES 8, Competence Requirements for Audit Professionals, prescribes the competence requirements for audit professionals involved in transnational audits.
This standard, which became effective on July 1 of this year, requires that audit professionals have an advanced level of knowledge about audit and financial reporting, have relevant knowledge regarding information technology, and possess the skills, values, ethics and attitudes expected from audit professionals. Additionally, the standard mandates that professional accountants taking on the role of an audit professional undertake a period of practical experience in audit and undergo an assessment of capabilities and competence before they assume such a role.
All of these requirements are essential to adequately prepare auditors to fulfil their public interest responsibilities to the financial markets and to the investing public, not to mention to the companies they audit.
Achieving full convergence to and implementation of international standards requires developing high quality translations of international standards into the many languages of the world.
IFAC believes that promoting high quality practice and supporting convergence requires that professional accountants have translations of the standards in their languages. To increase the accessibility of our standards to accountants and others worldwide, in March IFAC issued a consultation paper that set out our proposed strategy to move to one quality translation of IFAC standards per language. This new process is designed to facilitate the ability of member bodies and other qualified organizations to translate IFAC standards and to ensure the timeliness and quality of such translations. IFAC welcomes the active participation of all our members, associates and other interested parties in the process of developing translations of our standards. We recognize, however, that there is a need to coordinate translations activities. IFAC’s proposed translations policy is designed to eliminate duplicate efforts and ensure that a single, high quality translation of our standards in each language has the authority of international consensus. After considering the comments received, we are planning to approve the final policy on translations at the next IFAC Board Meeting, in September.
An example of success in developing translations collaboratively is the IFAC developing nations toolkit. Entitled Establishing and Developing a Professional Accountancy Body, this good practice guidance is designed to support the establishment and further development of strong national professional accountancy bodies. It addresses the roles and responsibilities of a professional accountancy body, education for accountants, and capacity development. In collaboration with our member bodies, this guidance has been translated into Spanish, French and Russian, and an Arabic translation is currently being developed. You may find this toolkit to be of particular benefit as you work toward continuing adoption and implementation of international standards, as it provides case studies from IFAC member bodies on their experiences in implementing IFRSs.
The purpose of the guide is to promote the formation and ongoing development of strong professional accountancy bodies, which serve as the foundation of the accountancy profession nationally, regionally and globally.
Strong national accountancy bodies play many important roles, including representing the needs of the profession in their country and acting in the public interest. Professional bodies support the delivery of high quality services by their members by assisting in the implementation of international standards and, in this way, contributing to the achievement of global convergence. They also provide input, from a national perspective, to the development of international standards, helping to ensure that national concerns are addressed in the standard-setting process. In addition, professional bodies can participate in the regulation of the profession by having mechanisms in place to monitor their members’ compliance with ethical and practice standards and by providing input to reform processes to strengthen the profession and broader financial systems.
You may have noticed that in each of the areas I mentioned collaboration is key to making progress.
In developing and emerging nations, where the needs are sometimes great and the resources scarce, collaboration is vital to developing both the accountancy profession and the nation as a whole. As leaders of the accountancy profession, regulatory bodies, and government, those of you here today have an important role in promoting collaboration here in the Kyrgyz Republic, throughout Central Asia, and globally.
I firmly believe that it is only through collaboration and cooperation that we can continue to build a strong and dynamic accountancy profession that protects the public interest, delivers value to its customers and stakeholders, and contributes to the development of the economy.
The accountancy profession must continue to collaborate in moving forward to build a better future for itself. This requires that we both identify and design more efficient ways to deliver our services and that we generate new services that better respond to the changing demands of the market, for example, by taking a lead role in areas such as corporate social responsibility, which includes environmental sustainability as well as social economic performance.
I firmly believe that sustainability will be increasingly important to long-term business performance in the future and that professional accountants will play an even greater role in sustainability and corporate social responsibility, particularly, in preparing and in auditing reports.
As a united global profession, we must continue to be players, not spectators, in the development of our countries. We can and must continue to take the initiative in collaborating to build an even better future.
Thank you very much for your attention.