The International Auditing and Assurance Standards Board (IAASB) today released its 2012 Annual Report, Responding to the Needs of an Interconnected World. 

The annual report highlights the IAASB’s work in the public interest to enhance the quality and consistency of practice throughout the world, and thereby strengthen the public’s confidence in the global auditing and assurance profession.

The report covers new and enhanced international standards issued by the IAASB during the year, and the board’s progress on its current standard-setting projects and related initiatives. It also summarizes the IAASB’s outreach activities to obtain input on its deliberations and to keep stakeholders informed of its activities. 

“Meeting the often diverse needs of stakeholders in today’s world means that the IAASB’s efforts must be clear in their objectives, and impactful in their design. This involves acting on opportunities to engage and dialogue with a broad range of stakeholders, and focusing on what truly matters,” said IAASB chairman Prof. Arnold Schilder. “In 2012, the IAASB made progress on topics relevant to supporting global financial stability – such as improving auditor reporting and the development of an audit quality framework – and on topics that serve to enhance the role, relevance, and quality of assurance and related services, and to facilitate adoption and implementation. Our efforts have been, and will continue to be, inspired by the opportunities that arise from these challenging, yet highly relevant, topics.”

The annual report also includes a report from the Prof. Linda de Beer, chairman of the IAASB Consultative Advisory Group (CAG), which outlines the work of the CAG in providing input to the IAASB.

The 2012 IAASB annual report can be downloaded at www.iaasb.org.

About the IAASB

The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC).

About IFAC

IFAC 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. It is comprised of 172 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Today over 175 delegates from 33 professional accountancy organizations in 30 countries convened in Kampala, Uganda, for the seventh annual IFAC Small and Medium Practices (SMP) Forum. Co-hosted with the Institute of Certified Public Accountants of Uganda (ICPAU) and the Pan African Federation of Accountants (PAFA), this year’s event featured a keynote address by Right Honorable Rebecca Kadaga, Speaker of the Parliament of Uganda.

The SMP Forum brings together representatives from the regulatory community, regional and national professional accountancy bodies, standard setters, and thought leaders and experts in their fields to collaborate on solutions to the challenges and pressures facing SMPs, both regionally and globally. This year’s event focused on trends that may impact the growth of small business and the way SMPs deliver their services. In addition to the co-hosts, the event was made possible by the generous support of our gold sponsor, the Association of Chartered Certified Accountants; and silver sponsors, Corpul Expertilor Contabili si Contabililor Autorizati din Romania (CECCAR), Hong Kong Institute of Certified Public Accountants (Hong Kong Institute of CPAs), and Institute of Chartered Accountants in England and Wales (ICAEW).

IFAC CEO Fayez Choudhury noted, “The IFAC SMP Forum is an important event that allows us to learn how we can best support professional accountancy organizations in the development of their SMP members globally. The focus on innovative solutions to the unique challenges SMPs face is essential for helping SMPs to continue to adapt and create value. With this event, we aim to facilitate capacity development, which has long been a focus for IFAC, through the sharing of ideas and best practices on a global platform.”

Naru Thakkar, president of ICPAU, and Dr. Mussa J. Assad, president of PAFA, said, “We are proud to host this year’s SMP Forum with IFAC, as supporting the development of SMPs is at the core of our mission and values. Africa has sustained continued growth over the last fifteen years despite economic volatility and crisis elsewhere in the world. While parts of Africa have seen explosive growth and other areas are still developing, the accountancy profession is crucial to providing a sound financial infrastructure to support both.”

IFAC SMP Committee Chair Giancarlo Attolini added, “The world is changing and standard setters, practitioners, and regulators are responding. There are vast opportunities for SMPs, including internationalization and expanded business lines. Now is the time to position SMPs for growth so that by the time the economic recovery gains more momentum globally, SMPs and the small businesses they serve can lead the way.”

For more information on the IFAC SMP Forum, including the agenda and speakers, see www.ifac.org/2013SMPForum. Presentations will be made available in the week following the event. A Trainers’ Seminar was also held in conjunction with the Forum for a smaller group of attendees.

About PAFA
The Pan African Federation of Accountants (PAFA) was established to accelerate the development of the accountancy profession in Africa and strengthen the voice of the profession within Africa and worldwide. PAFA believes that good governance, accountability, good financial management, and transparency are principal pillars in the acceleration of economic development and reduction of poverty.

About ICPAU
The Institute of Certified Public Accountants of Uganda (ICPAU) is the national body for professional accountants in Uganda. It currently offers two qualifications: the professional qualification  (CPA Uganda) and the accounting technician certificate (ATC). These qualifications are based on IAESB standards thus providing graduates with an excellent foundation of core accountancy skills that meet international benchmarks. ICPAU’s focus is to produce individuals who exhibit professional excellence and integrity, who are committed to service and good governance, and who are socially responsive to the environment in which they operate. 

About IFAC
IFAC 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. It is comprised of 172 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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The International Federation of Accountants today announced that the Chartered Global Management Accountant (CGMA) designation—a joint venture of the American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA)—has been awarded the top sponsorship for the 2014 World Congress of Accountants by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC).

Held every four years, the World Congress of Accountants (WCOA) is among the most prestigious events in the profession and attracts more than 5,000 global delegates each time it meets. WCOA 2014, hosted by the CNDCEC, will take place November 10-13 in Rome’s Auditorium Parco della Musica. The theme—2020 Vision: Learning from the Past, Building the Future—will explore the pivotal role of accounting amid rapid economic, political, and social change. Delegates will discuss and debate best practices of the future and how accountants can lead the way in driving innovative and successful organizations.

“We are very excited by CGMA’s Imperial Sponsorship of WCOA 2014 and commend CNDCEC for its efforts in securing it,” said IFAC CEO Fayezul Choudhury. “The World Congress provides a unique opportunity for accountants from around the world to network, interact, and share knowledge. We appreciate CIMA’s and AICPA’s support for the Congress’ goals of fostering global unity and collegiality among professional accountants.”

In a joint statement on behalf of CGMA, Barry Melancon, CPA, CGMA, president and CEO of the AICPA, and Charles Tilley, FCMA, CGMA, chief executive of CIMA, said, “We are honored to sponsor the World Congress of Accountants next year and look forward to showcasing the unique perspective that CGMA designation holders bring to business. Professional accountants in business are on the front lines of the future, navigating the challenges of complexity and uncertainty to guide their organizations toward sustainable market opportunity. We believe our growing community of CGMA designation holders have the skill set of the future.”

About IFAC
IFAC 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 172 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

About CNDCEC
CNDCEC represents the accountancy profession in Italy. It is a public entity regulated by law, under the supervision of the Ministry of Justice. CNDCEC is one of the founding members of IFAC, FEE (Fédération des Experts Comptables Européens) as well as of other Regional and sectoral international Organizations. It has oversight powers over 140 local chapters.

The main fields of activity of the Italian accountancy profession are: accounting, taxation, auditing, corporate governance, management consulting, and insolvency.

About CIMA
The Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body of Management Accountants, with more than 203,000 members and students operating in 173 countries, working at the heart of business. CIMA members and students work in industry, commerce, the public sector and not-for-profit organizations.

About AICPA
The American Institute of Certified Public Accountants (AICPA) is the world’s largest association representing the accounting profession, with nearly 386,000 members in 128 countries and a 125-year heritage. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.

About CGMA
The AICPA and CIMA launched the CGMA designation in January 2012 to elevate the profession of management accounting and establish global criteria for quality. The CGMA designation distinguishes accounting professionals who have achieved demanding levels of education and experience and provides organizations the consistency and confidence they need to operate across borders, around the world. There are more than 128,000 CGMA designation holders globally and they are helping shape 95 of the world’s top 100 brands. 

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More than 70 representatives from over 10 national organizations from former Soviet republics in Europe and Central Asia gathered today in London at a two-day conference convened jointly by the International Federation of Accountants (IFAC), International Auditing and Assurance Standards Board (IAASB), and International Accounting Standards Board (IASB). Titled Adoption and Implementation of International Standards in the Former Soviet Republics in Europe and Central Asia, the event serves as an excellent example of constructive cooperation in the development, adoption, and implementation of high-quality international standards, and in relation to the regulation of the profession.

The event, hosted by the Association of Chartered Certified Accountants (ACCA), brought together organizations with responsibilities relating to the adoption or implementation of International Standards on Auditing (ISAs), issued by the IAASB, and International Financial Reporting Standards (IFRS), issued by the IASB. IFAC members, who play a critical role in the implementation of international standards and the development of professional accountants, also provided updates on key projects relating to the IFAC Statements of Membership Obligations.

“Standard setters, regulators, users, and the profession have a shared objective of high-quality financial reporting and auditing in the public interest, and therefore each group has a role to play in achieving this objective,” said Dan Montgomery, deputy chair of the IAASB. “The interest and cooperation of the organizations represented demonstrate how important it is for the IAASB, IASB, and IFAC to act on opportunities to support global adoption and effective implementation of international standards.”

“High-quality financial reporting continues to be critical for investment and decision making,” said Ian Mackintosh, vice chair of the IASB. “This event highlights the continued commitment of those responsible for adopting IFRS, including IFRS for Small- and Medium-Sized Entities (SMEs), and provides a forum for international standard setters and national stakeholders to discuss matters of relevance to their jurisdiction and regulatory frameworks.”

The event included meetings with national professional accountancy organizations and the three organizing bodies regarding experiences with the application of IFRS, ISA adoption and implementation, and quality assurance requirements, as well as the status of initiatives to translate IFRS and ISAs on an ongoing basis. Discussions also provided feedback on methods of implementing IFRSs, the IFRS for SMEs, and the changing role of professional accountancy organizations.

Representatives from Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan attended the event. Delegates included IFAC members and associates, professional accountancy organizations, national standard setters, ministries of finance, regulators and securities market authorities, national banks, and other key stakeholders.

About IFAC
IFAC 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. It is comprised of 172 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

About IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.

About IASB
The IASB was established in 2001 and is the standard-setting body of the IFRS Foundation, an independent, private sector, not-for-profit organization. The IASB is committed to developing, in the public interest, a single set of high quality global accounting standards that provide high quality transparent and comparable information in general purpose financial statements. In pursuit of this objective the IASB conducts extensive public consultations and seeks the co-operation of international and national bodies around the world. The IASB has 16 full-time members drawn from 11 countries and a variety of professional backgrounds. Board members are appointed by and accountable to the Trustees of the IFRS Foundation, who are required to select the best available combination of technical expertise and diversity of international business and market experience. In their work the Trustees are accountable to a Monitoring Board of public authorities. For more information visit www.ifrs.org.

More than 150 attendees from 14 ASEAN and other nations gathered this week at a symposium, ASEAN Capital Markets—The Importance of a Strong Financial Reporting Environment, to discuss strategies for building investor confidence through a strong financial reporting infrastructure that supports the integrity of the ASEAN capital markets.

The event was organized by the Global Public Policy Committee (GPPC) and the International Federation of Accountants (IFAC), and supported by the Institute of Certified Public Accountants of Singapore (ICPAS), US-ASEAN Business Council (USABC), and Asian Corporate Governance Association (ACGA).

The symposium was opened by Mrs. Josephine Teo, Minister of State, Singapore Ministry of Finance and Ministry of Transport. Attendees included senior government officials and policy makers, senior company executives, company directors and audit committee members, investors, audit regulators, and leaders of the accounting and auditing profession.

The moderated panel discussions included: “Setting the Scene: The ASEAN Community and its Capital Markets,” “A Strong Financial Reporting Infrastructure: Vital for a Growing Economy and Strong Capital Market,” “The Future of Audit,” “Independent Oversight of Auditors,” and “Corporate Governance in the ASEAN Region.” An overriding theme was the importance of high-quality financial reporting, which is essential for investor confidence and economic growth.

“The discussions today highlighted the important contributions of all participants in the financial reporting supply chain to the quality of financial information,” said IFAC President Warren Allen. “It is essential that all participants—including companies, the accounting and auditing profession, and the regulatory community—embrace a process of continuous improvement.”

Economic integration is one of the key strategic goals of ASEAN. At the 22nd ASEAN Summit in Brunei in April, the formation of the ASEAN Economic Community by 2015 was highlighted as an important goal—and one that is expected to increase opportunities for ASEAN member states to prosper.

“Today's symposium provides an important platform for the profession and other stakeholders to exchange views on the particular financial reporting challenges and opportunities here in the ASEAN region,” noted Beth Brooke, Global Vice Chair of Public Policy, Ernst & Young. “This ASEAN perspective and voice is vital to the global debate on how best to promote investor confidence in financial reporting and audit.”

“As the national accountancy body, ICPAS is pleased to have worked with IFAC and the GPPC to organize this symposium and bring various stakeholders from ASEAN and further afield to Singapore. The symposium’s topics on building a strong financial reporting infrastructure, raising audit quality, and promoting corporate governance are aligned with our Institute’s goals to advance and promote the accountancy profession. In particular, the discussion on financial reporting ecosystems provided valuable ideas on how the various stakeholders can establish stronger integrated ASEAN capital markets,” said Dr Ernest Kan, President of ICPAS.

“ACGA was happy to support the ASEAN Capital Markets Symposium,” said Jamie Allen, Secretary General. “Robust auditing, financial reporting, and corporate governance standards go hand in hand and are important for ASEAN economic integration.”

USABC Vice President Marc Mealy noted, “The USABC is pleased to be part of this initiative by the accounting profession to support ASEAN's efforts to become more of a global investment asset class by strengthening its regional financial reporting and corporate governance benchmarks and standards.”

About IFAC
IFAC 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 172 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

About the GPPC
The GPPC is the global forum from the six largest international accounting networks: BDO, Deloitte, Ernst & Young, Grant Thornton, KPMG and PwC.  Its public interest objective is to enhance quality in auditing and financial reporting.

About the Institute of Certified Public Accountants of Singapore
Established in 1963, Institute of Certified Public Accountants of Singapore (ICPAS) is the national accountancy body that develops, supports and enhances the integrity, status and interests of the profession.

The Certified Public Accountant Singapore (CPA Singapore) is a professional in accountancy, finance and business distinguished by their technical expertise, integrity and professionalism, in addition to a recognised accountancy qualification and relevant work experience. CPAs Singapore serve every corner of the world in every industry. Many of them helm some of the most prominent local and international corporations.

ICPAS accords the CPA Singapore designation. Working closely alongside businesses, ICPAS connects its membership to an unmatched range of information resources, events, professional development and networking opportunities. Presently, there are more than 26,000 members making their strides in businesses across all industries in Singapore and around the world.

ICPAS’ international outlook and connections are reflected in its membership of regional and international professional organisations like the ASEAN Federation of Accountants (AFA), the Asia-Oceania Tax Consultants’ Association (AOTCA), the International Federation of Accountants (IFAC) and International Innovation Network (IIN).

The International Public Sector Accounting Standards Board (IPSASB) has released for comment the fourth Exposure Draft (ED) related to its project to develop a Conceptual Framework for the general purpose financial reporting of public sector entities. The Conceptual Framework continues to be the IPSASB’s key strategic objective and is of fundamental importance to the future of global public sector standard setting.

Conceptual Framework Exposure Draft 4, Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Presentation in General Purpose Financial Reports, further develops and modifies the conceptual approach highlighted in the Consultation Paper (CP) published in 2012 and reflects the IPSASB’s consideration of the responses to that CP. It builds on the first four chapters of the Conceptual Framework, which were published last January.

The ED describes presentation as the selection, location and organization of information that is displayed and disclosed in General Purpose Financial Reports (GPFRs). GPFRs include both financial statements and other reports providing additional information that enhances, complements, and supplements the financial statements.

The ED also describes display and disclosure, and identifies three presentation decisions—information selection, location, and organization. Presentation decisions are made at two levels:

• High-level decisions that may result in development of a new report, movement of information between reports, or the amalgamation of existing reports; and
• Detailed decisions related to information selection, location, and organization within a report.

Presentation decisions are made:

• In response to the needs of users for information about economic or other phenomena;
• To support the financial reporting objectives; and
• Through application of the qualitative characteristics and constraints on information in financial reports.

Presentation concepts are strongly linked to other parts of the Conceptual Framework and the ED explains those linkages.

“This Exposure Draft is a further step in the development of a Conceptual Framework that reflects public sector circumstances and, when finalized, will underpin IPSASB’s standard-setting activities for many years to come,” said IPSASB Chair Andreas Bergmann. “It proposes presentation concepts applicable to all GPFRs. This is the first time that an international standard setter has developed presentation concepts applicable to both financial statements and additional information and reports that enhance, complement, and supplement the financial statements. Therefore this ED explores new ground and we strongly encourage all stakeholders to submit comments on the proposals in it.”

How to Comment
To access the Exposure Draft and the At-a-Glance document, which provides a summary of the Exposure Draft, or to submit a comment, visit the IPSASB website.

Comments on the Exposure Draft are requested by August 15, 2013. The IPSASB encourages IFAC members, associates, and regional accountancy bodies to promote the availability of this document to their members and employees.

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The International Federation of Accountants (IFAC), the global organization for the accountancy profession with 172 members and associates in 129 countries, today applauded the release of the proposed International Integrated Reporting Framework by the International Integrated Reporting Council (IIRC). The Framework is expected to be a critical tool for businesses as they create integrated reports and drive integrated thinking in their organizations.

Integrated reporting is the next step in the evolution of corporate reporting and communications, helping organizations to communicate a clear and candid picture of their performance to investors.

“The accountancy profession plays a vital facilitating role in bringing integrated reporting to more organizations, and the Framework will help guide organizations and professional accountants in this process,” said IFAC President Warren Allen, who is also a member of the IIRC Council. “Feedback from individual accountants and the profession on the proposed Framework is critical.”

IFAC has been a proactive participant in the development of the Framework, and is a co-founder of the IIRC. In addition to Mr. Allen serving on the IIRC Council, Ian Ball, former IFAC CEO and current principal advisor, chairs the IIRC Working Group. IFAC also has a staff member who has been seconded to the IIRC on a full-time basis.

The IIRC is asking all stakeholders to provide feedback on the International Integrated Reporting Framework during its public consultation period, which closes July 15, 2013. The Framework has been released in English but will also be available soon in additional languages.

About IFAC
IFAC 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. It is comprised of 172 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Investors and other stakeholders want to know what makes companies tick; at the same time, regulators are increasingly requiring companies to report clearly on their business models. In response, the Chartered Institute of Management Accountants (CIMA), the International Federation of Accountants (IFAC), and PwC, at the request of the International Integrated Reporting Council (IIRC), today released a background paper, Business Model, which highlights the business model as being at the heart of integrated reporting.

Currently, there is wide variation in how organizations define their business models and approach to disclosure. This highlights the need for a clear, universally applicable, international definition of a business model. The proposed definition and discussion in the paper aim to bridge the varied interpretations by highlighting common areas and ensuring a consistent application across industries and sectors.

The background paper found that, in a complex financial climate that has seen investors demand greater transparency, reporting on business models is currently inconsistent, incomparable, and incomplete because of a lack of consistent guidance.

Charles Tilley, chief executive of CIMA said:

“Corporate reporting plays an essential role in the effective functioning of the market economy. Corporate reports have become more complex yet provide less insight to investors on how value is created or destroyed. Integrated reporting will involve a change in mind-set for many organizations as they think about how to better communicate strategy, performance, and prospects. High-quality business model reporting is critical to helping investors better understand performance in terms of the impact external factors have on an organization, and how organizations create value that is sustainable over time.”

Mark O’Sullivan, director, PwC, commented:

“A previous review of narrative reporting practices which are summarized in this background paper shows that very few companies clearly articulate their business model—what they do, what they rely on, and what sets them apart from the competitors. PwC research found that 77% of the FTSE 350 mention business models in their accounts, but only 40% provide insightful detail about those models. And only 8% integrate business model reporting with strategy and business risks.

“This information is critical if investors are going to form a view of how they create and sustain value. The pace of technological change and growing complexity of business relationships will only increase the demand for insights into strategy and business models. It will also challenge the relevance, reliability, and timeliness of the information businesses use to back up reporting of their performance and prospects.”

Ian Ball, IFAC principal advisor and chair of the IIRC Working Group, commented:

“An understanding of the business model is at the center of integrated reporting. Being able to communicate effectively on an organization’s capitals, business activities, products and services, and the outcomes they generate is essential if a company is to communicate how it creates value over time. The concept of the business model is also critical to understanding other areas of integrated reporting, such as the concepts of materiality and capitals.”

The paper comes in advance of the IIRC’s International Integrated Reporting Framework due to be released for comment on April 16, 2013.

In addition to providing the background and the context to how business model reporting should be undertaken in an integrated report, the background paper suggests content for business model reporting to be presented in the proposed framework.

About CIMA
The Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body of Management Accountants, with over 203,000 members and students operating in 173 countries, working at the heart of business. CIMA members and students work in industry, commerce, the public sector and not-for-profit organizations. CIMA works closely with employers and sponsors leading-edge research, constantly updating its qualification, professional experience requirements and continuing professional development to ensure it remains the employers’ choice when recruiting financially-trained business leaders.

About IFAC
IFAC 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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

About PwC
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information.

Additional insights into reporting–including business models–can be found at:

PwC paper on Business models
https://www.pwc.co.uk/reporting-assurance/publications/business-models-back-to-basics.jhtml

PwC research on reporting–including business models
https://www.pwc.co.uk/audit-assurance/publications/trust-through-transparency.jhtml

Contact:
Laura Wilker
Head of Communications, IFAC
+1-212-471-8707
laurawilker@ifac.org

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The International Ethics Standards Board for Accountants (IESBA) today released strengthened provisions in its Code of Ethics for Professional Accountants (the Code) to address conflicts of interest and a breach of a requirement of the Code. It also released amendments to the definition of the term “engagement team” in the Code.

Conflicts of Interest

Recognizing the ethical questions and challenges that can arise from conflicts of interest, the IESBA has revised the Code to establish more specific requirements and provide more comprehensive guidance to support professional accountants in identifying, evaluating, and managing such conflicts. The revisions affect professional accountants both in public practice and in business, taking into account the different circumstances in which they work. There is now a clearer explanation of what a conflict of interest means under the Code. The changes also are aimed at better enabling professional accountants to identify potential conflicts of interest early for timely action to be taken by the affected parties. Importantly, the new requirements are intended to stimulate professional accountants to evaluate whether they can remain objective in those circumstances and abide by the other fundamental ethical principles in the Code.

Breach of a Requirement of the Code

Reflecting its view that any breach of a provision of the Code is a matter that must be treated very seriously, the IESBA has strengthened the Code with respect to a professional accountant’s actions when encountering such a breach. In particular, the revisions to the Code establish a robust framework for addressing a breach of an independence requirement in the Code. They include requiring a firm to:

• Terminate, suspend, or eliminate the interest or relationship that caused the breach;
• Evaluate the significance of the breach and determine whether action can be taken and is appropriate in the circumstances to satisfactorily address the consequences of the breach;
• Communicate all breaches with those charged with governance and obtain their concurrence that action can be, or has been, taken to satisfactorily address the consequences of the breach; and
• Document, among other matters, the action taken and all the matters discussed with those charged with governance.

Definition of Engagement Team

In conjunction with the International Auditing and Assurance Standards Board (IAASB)’s release today of its International Standard on Auditing (ISA) 610 (Revised 2013), Using the Work of Internal Auditors, the IESBA is also releasing amendments to the definition of “engagement team” in the Code. The amendments clarify the relationship between internal auditors providing direct assistance on an external audit (“direct assistance”) and the meaning of an engagement team under the Code.

“A hallmark of professional accountants is their acceptance of their duty to act in the public interest,” said IESBA Chair Jörgen Holmquist. “The changes to the Code addressing conflicts of interest and a breach of a requirement of the Code raise the bar even higher and will, I believe, contribute to further strengthening of public trust in the profession.” He also added, “In relation to the engagement team definition, while the amendments to the definition address a perception that the Code and the revised ISA are in conflict with respect to direct assistance, it is important to make clear that the board is not requiring or encouraging external auditors to use direct assistance.”

The changes will be effective in 2014; see the individual pronouncements for details. Early adoption is permitted. The revised pronouncements will be printed in the 2013 Handbook of the Code of Ethics for Professional Accountants due out in the second quarter.

About the IESBA
The IESBA is an independent standard-setting board that develops and issues, in the public interest, high-quality ethical standards and other pronouncements for professional accountants worldwide. Through its activities, the IESBA develops the Code of Ethics for Professional Accountants, which establishes ethical requirements for professional accountants. The structures and processes that support the operations of the IESBA are facilitated by IFAC. Please visit www.ethicsboard.org for more information.

About IFAC
IFAC 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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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In follow-up to its 2012 release of stronger standards dealing with the external auditor’s use of an internal audit function’s work, the International Auditing and Assurance Standards Board (IAASB) today issued new requirements and guidance that address the auditor’s responsibilities if using internal auditors to provide direct assistance under the direction, supervision, and review of the external auditor for purposes of the audit (“direct assistance”).

International Standard on Auditing (ISA) 610 (Revised 2013), Using the Work of Internal Auditors, now includes guidance to external auditors when determining whether they can use direct assistance from internal auditors, and if so, in which areas and to what extent. The material addressing direct assistance does not apply if the external auditor is prohibited by law or regulation from obtaining direct assistance.

“The new requirements and guidance not only clarify the scope of the standard, which we have already heard is an essential improvement, but also clearly set out the conditions, limits, and safeguards necessary so that direct assistance is used only in appropriate circumstances,” said Prof. Arnold Schilder, IAASB chairman.

In conjunction with ISA 610 (Revised 2013), the International Ethics Standards Board for Accountants (IESBA) today also released amendments to the definition of engagement team in its Code of Ethics for Professional Accountants (IESBA Code). The amendments clarify the relationship between internal auditors providing direct assistance and the meaning of an engagement team under the IESBA Code.

“The ISA does not require or encourage the external auditor to use, or to consider using, internal auditors to provide direct assistance, nor does it override relevant law or regulation. However, where direct assistance is permitted, the standard provides a robust framework for the external auditor’s judgments,” noted James Gunn, IAASB technical director. “The external auditor can therefore look to where there may be potential benefits from direct assistance, while understanding the limits to using such assistance and being able to take the necessary steps to avoid over or undue use, in line with the external auditor’s sole responsibility for the audit opinion expressed.”

The material in ISA 610 (Revised 2013) pertaining to direct assistance is effective for audits of financial statements for periods ending on or after December 15, 2014.

About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC).

About IFAC
IFAC 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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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