Attention to the social, environmental and economic effects on business performance is increasing from investors, governments, customers, and society in general. As a result, professional accountants in business (PAIBs) are among those who are being called on to take a more active role in sustainable development. To help PAIBs better understand how they can advance, measure and report on sustainable development, the Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) has published two new information papers on the topic.

The first information paper, Why Sustainability Counts for Professional Accountants in Business, provides an overview of enterprise sustainability and sets out the business case for addressing the risks and opportunities of sustainable development at the enterprise level. It also discusses the ways in which professional accountants in business, especially those working for organizations with significant environmental or social impacts, will be involved with the measurement, recording and interpretation of sustainability-related information.

Professional Accountants in Business - At the Heart of Sustainability?, the second paper, provides first-hand commentary from eleven senior professionals working in various enterprises around the world on the role of PAIBs and the challenges they face in promoting and implementing sustainable development strategies. The comments are based on interviews conducted by Mr. Robert Bruce, a leading accountancy journalist based in the United Kingdom. While recognizing that the role of PAIBs in sustainability will vary based on the organization employing them and the nature of their role, there was significant agreement that this was a field in which PAIBs should become more educated and more involved.

These two IFAC papers represent a significant international step in the education process. "Sustainability is an important topic that is moving up fast on the agendas of professional accountants in business," states Bill Connell, Chair of the PAIB Committee. "These information papers explain what is meant by sustainability, its importance to professional accountants in business, the roles they should play, and how they should operate within the management team." Mr. Connell added, "Professional accountancy bodies need to ensure that the topic is addressed in both the pre- and post-qualification of professional accountants."

The two information papers can be downloaded free-of-charge from the IFAC online bookstore at https://www.ifac.org/store. The PAIB Committee serves IFAC member bodies and the more than one million professional accountants worldwide who work in commerce, industry, the public sector, education, and the not-for-profit sector. Its aim is to enhance the profession by encouraging and facilitating the global development and exchange of knowledge and best practices.

IFAC is the worldwide 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's current membership consists of approximately 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets international standards on ethics, auditing and assurance, education, and public sector accounting. Through its Professional Accountants in Business Committee, IFAC also issues guidance to encourage high-quality performance by professional accountants in business.

In recent years, global guidance and regulations have focused on the development and strengthening of internal control systems as a means of minimizing business risk and protecting shareholder investments. A new publication, Internal Controls - A Review of Current Developments, released today by the International Federation of Accountants' (IFAC) Professional Accountants in Business (PAIB) Committee, summarizes key internal control frameworks, highlights recent legislative and other initiatives, and discusses the role of internal control in enhancing corporate governance.

"Professional accountants play an important role in supporting the internal control systems of their organizations. This new paper describes much of the current thinking on internal control from countries around the world and is the first step in the PAIB Committee's program to develop practical guidance on internal control," states PAIB Committee Chair Bill Connell.

The paper finds that current views on internal controls support a principles- and market-based approach in which organizations make a commitment to develop internal control systems particular to their own specific internal and external environments. It also identifies the importance of the tone at the top and the culture and ethical framework throughout the organization to the effective implementation of an internal control system.

This paper follows on the findings of the 2004 report, Enterprise Governance - Getting the Balance Right, jointly published by IFAC and the Chartered Institute of Management Accountants in the United Kingdom, which found that companies must balance conformance with rules and organizational performance. Internal Controls - A Review of Current Developments can be downloaded from the IFAC online bookstore at https://www.ifac.org/store.

The PAIB Committee serves IFAC member bodies and the more than one million professional accountants worldwide who work in commerce, industry, the public sector, education, and the not-for-profit sector. Its aim is to enhance the profession by encouraging and facilitating the global development and exchange of knowledge and best practices.

IFAC is the worldwide 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's current membership consists of approximately 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets international standards on ethics, auditing and assurance, education, and public sector accounting. Through its Professional Accountants in Business Committee, IFAC also issues guidance to encourage high-quality performance by professional accountants in business.

The American Institute of Certified Public Accountants (AICPA), the American Accounting Association (AAA), and the International Auditing and Assurance Standards Board (IAASB) have joined forces to launch a research initiative that will provide a better understanding of users' perceptions of the financial statement audit and the auditor's report. The research is intended to independently examine the perceptions of users of financial statements in countries around the world. A "Request for Proposal" is being issued this week, soliciting academic research to identify and provide information about such perceptions. The AICPA's Auditing Standards Board (ASB) has a current project to consider whether the auditor's report should be revised. The IAASB recently completed a project in this regard. The new research findings will provide important information that can be used as a basis for any future revisions to the auditor's report.

"Anecdotal evidence points to financial statement users not consistently understanding communications in an unqualified auditor's report, but there's little rigorous evidence to support the anecdotal observations," points out Douglas F. Prawitt, Chair of the ASB's Audit Report Research Task Force and Glen Ardis Professor of Accountancy at Brigham Young University. "This project should provide the required information, as well as anchor any effective modifications necessary to clarify the communication of information to financial statement users."

Mark Beasley, President of the AAA Auditing Section and a professor at North Carolina State University, explains, "We are thinking globally with this project. The plan is for the ASB to select one or more proposals to examine U.S. perceptions and the IAASB to select one or more proposals to examine perceptions internationally. We envision that, once the selected projects are completed, the ASB and IAASB will fund additional research to identify and explore ways in which the auditor's reports might be revised to communicate more clearly and to address identified user misperceptions."

IAASB Technical Director Jim Sylph emphasizes the public interest benefit of the project: "The interests of all stakeholders will be better served if any gaps between users' understanding and the intended meaning of the auditor's report, including the level of assurance that can reasonably be derived from a financial statement audit, can be identified and addressed."

Research proposals must be submitted by October 2, 2006 to Sharon Walker, Technical Manager, Audit and Attest Standards, AICPA, 1211 Avenue of the Americas, New York, NY 10036-8775. The "Request for Proposal" may be downloaded from the IAASB home page at www.iaasb.org. The ASB and IAASB will fund between US$10,000 and $20,000 for each project. Researchers are required to submit a summary of results to the ASB and IAASB by October 1, 2007, with a more detailed report to be provided to the Boards by January 7, 2008. The summary should be tailored toward practitioners, rather than readers of an academic journal. Researchers will have the right to publish the research, so long as the Boards are given appropriate credit for research support provided.

The American Institute of Certified Public Accountants (www.aicpa.org) is the national, professional association of CPAs, with approximately 330,000 members, including CPAs in business and industry, public practice, government, and education. It sets ethical standards for the profession and U.S. auditing standards for audits of private companies; federal, state and local governments; and non-profit organizations. It also develops and grades the Uniform CPA Examination.

The American Accounting Association (https://aaahq.org) promotes worldwide excellence in accounting education, research and practice. Founded in 1916 as the American Association of University Instructors in Accounting, its present name was adopted in 1936. The Association is a voluntary organization of persons interested in accounting education and research.

The IAASB (www.iaasb.org) is an independent standard-setting board within the International Federation of Accountants. Its objective is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes the criteria for its due process and working procedures.

The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) has released its 2006 Articles of Merit, a collection of award-winning international articles on topics such as performance measurement, sustainability and corporate social responsibility, and the changing roles of accounting and finance professionals. This collection includes 10 previously published articles that were selected by the PAIB Committee as part of its annual Articles of Merit Award Program for Distinguished Contribution to Management Accounting.

The winning article for 2006 is "Performance Measures in Supply Chains" by Kim Langfield-Smith and David Smith, which was first published in CPA Australia's Australian Accounting Review. The article examines the benefits and challenges of supply chain management. Other articles of outstanding merit were first published in the American Institute of Certified Public Accountants' Journal of Accountancy; the Chartered Institute of Management Accountants' (UK) Financial Management; CMA Canada's CMA Management, CPA Australia's Australian Accounting Review; the Institute of Chartered Accountants in England and Wales' Performance Measurement, Finance & Management Special Report; and the Institute of Management Accountants' (US) Strategic Finance.

The 2006 Articles of Merit, together with past issues, may be downloaded from the IFAC online bookstore: https://www.ifac.org/store. The PAIB Committee serves IFAC member bodies and the more than one million professional accountants worldwide who work in commerce, industry, the public sector, education, and the not-for-profit sector. Its aim is to enhance the profession by encouraging and facilitating the global development and exchange of knowledge and best practices.

IFAC is the worldwide 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's current membership consists of approximately 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets international standards on ethics, auditing and assurance, education, and public sector accounting. Through its Professional Accountants in Business Committee, IFAC also issues guidance to encourage high-quality performance by professional accountants in business.

An important objective of the International Ethics Standards Board for Accountants (IESBA), an independent standard-setting board within the International Federation of Accountants (IFAC), is to provide auditors with clear guidance on matters of independence. In keeping with this commitment, the IESBA has revised the Code of Ethics for Professional Accountants by updating the definition of a network firm. Network firms are required to be independent of an audit client of another firm within the network.

"The revised definition focuses on how networks operate and how they present themselves to third parties," states Richard George, IESBA Chair. "The public has a right to expect that when firms are part of a network the independence requirements apply to the other firms within the network. This revision provides clear guidance for firms and contains additional information on the application of the definition."

The revised definition is consistent with the definition in the European Union's Eighth Company Law Directive. It would classify firms as network firms if the firms belong to a larger structure that is aimed at cooperation and is clearly aimed at profit or cost sharing, or shares common ownership, control or management, common quality control policies and procedures, common business strategy, the use of a common brand-name or a significant part of professional resources. The revised definition is effective for assurance reports dated on or after December 31, 2008. The Code of Ethics for Professional Accountants and the revision can be downloaded from the IFAC online bookstore at https://www.ifac.org/store/Category.tmpl?Category=Ethics.

About the IESBA and IFAC

The IESBA develops ethical standards and guidance for use by professional accountants. It encourages member bodies to adopt high standards of ethics for their members and promotes good ethical practices globally. The Public Interest Oversight Board oversees the activities of the IESBA and, as one element of that oversight, establishes the criteria for its due process and working procedures.

IFAC is the worldwide 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's current membership consists of approximately 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high-quality performance by professional accountants in business.

Earlier this month, over 130 people from 35 countries attended the International Federation of Accountants' (IFAC's) first global forum focused entirely on small- and medium-sized entities (SMEs) and small and medium accounting practices (SMPs). Co-hosted by the Hong Kong Institute of Certified Public Accountants and the Confederation of Asian and Pacific Accountants, the forum provided an opportunity for national and regional accountancy organizations, representatives of SMEs and SMPs, and international standard setters, among others, to discuss the challenges and opportunities facing SMEs and SMPs and programs and initiatives that could best support them.

Participants identified two significant challenges facing SMEs and SMPs: SMEs need financial reporting standards that are appropriate for their users' needs and reduce the associated cost of compliance; and, in an increasingly globalized economy, SMPs should continue to explore new ways to support the growth and accountability of SMEs.

"Small- and medium-sized enterprises drive economic growth, foster innovation and provide employment in developed and developing countries around the world. IFAC fully recognizes this role and is committed to supporting them at an international level," emphasizes IFAC President Graham Ward. "The outcomes of the forum will be considered at the IFAC Board meeting in September so that we can proceed with acting on the recommendations that were presented."

IFAC SMP Committee Chair Sylvie Voghel, who also chaired the forum, outlined IFAC's approach to supporting SMPs. "The SMP Committee is taking a two-pronged approach to helping SMEs and SMPs converge and comply with international auditing and accounting standards. On the one hand, we are helping to shape the form and content of those standards and on the other, we are dedicated to providing practical assistance to SMPs and SMEs that have to use them."

Current projects include publishing an International Standards on Auditing Guide for SMEs and developing a web-based knowledge resource for SMPs. Additionally, IFAC regularly responds to exposure drafts of international standard setters where an SMP or SME focus is needed. For more information about IFAC initiatives to support SMPs and SMEs, visit its website at www.ifac.org. All presentations made at the SMP Forum are also available from the IFAC website through the SMP Committee home page.

IFAC is the worldwide 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's current membership consists of approximately 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high-quality performance by professional accountants in business.

The Board of the International Federation of Accountants (IFAC) has approved the reappointment of John Kellas, MA, FCA, as Chair of the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of IFAC. Mr. Kellas has served on the IAASB since October 2000 and as Chair since January 2004 (a position that became full-time on October 1 of that year). His appointment to a second term, beginning January 1, 2007 and ending December 31, 2008, was endorsed by the Public Interest Oversight Board (PIOB), which oversees the IAASB's activities to ensure that they are properly responsive to the public interest.

"We are delighted that John has agreed to accept appointment to a second term as Chair of the IAASB. His leadership has been invaluable over the past three years as he has worked to increase public interest input to the IAASB's standard-setting process, enhance the transparency of that process, and build relationships with national standard setters," states IFAC President Graham Ward.

As Chair of the IAASB, Mr. Kellas will continue to lead the IAASB's efforts to develop high quality International Standards on Auditing and to promote convergence with those standards and their adoption by the European Commission. In addition, he will continue to serve as the primary contact with the IAASB Consultative Advisory Group to ensure that public interest perspectives are fully considered by the IAASB.

"The continuity of the Chairmanship of the IAASB is important at this time as we are in the middle of our major initiative to improve the clarity and effectiveness of our standards. At the same time, the European Commission is considering the adoption of International Standards of Auditing under the revised 8th Directive. We shall therefore be giving close attention to these matters over the next two years, and I look forward to working with the IAASB to bring both to successful conclusions," states John Kellas.

PIOB Chairman Stavros Thomadakis said, "Since the formation of the PIOB in February 2005, we have cooperated closely with John in our oversight of the IAASB. His decision to accept reappointment over this next critical period will ensure that the IAASB continues to focus on important issues that greatly affect the international public interest."

Mr. Kellas served as a member of the United Kingdom Auditing Practices Board from 1991 to 2002. Until his retirement in 2004, he was a partner in KPMG LLP in London, where he headed the Department of Professional Practice from 1990 to 2004.

About the IAASB and IFAC The objective of the IAASB, an independent standard-setting board within IFAC, is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes the criteria for its due process and working procedures.

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. Its current membership consists of approximately 160 professional accountancy bodies in 120 countries, 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 IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

* Notes to Editors The IAASB Consultative Advisory Group (CAG) is independent of the International Federation of Accountants. The objective and the scope of activities of the CAG, with the rules for membership, and operating procedures are set out in its terms of reference. The terms of reference and a complete list of CAG member organizations can be found on the IAASB website. The Public Interest Oversight Board (PIOB) was formally established in February 2005 to oversee IFAC's auditing and assurance, ethics, and education standard-setting activities as well as the IFAC Member Body Compliance Program. The objective of the PIOB is to increase confidence of investors and others that such activities, including the setting of standards by the IAASB, are properly responsive to the public interest. PIOB members are nominated by international institutions and regulatory bodies.

The Board of the International Federation of Accountants (IFAC) has announced an extension to the contract of Chief Executive Ian Ball through December 2009. Mr. Ball assumed the position of Chief Executive in June 2002. During his tenure, he has helped to shape and implement the reforms that have strengthened IFAC standard-setting processes and has worked to enhance IFAC's relationships with international regulatory organizations as well as IFAC's member bodies, regional accountancy organizations and accounting firms.

"We are delighted that Ian will continue to provide IFAC with his leadership at this very important time for the international profession," states IFAC President Graham Ward. "He has done much to encourage a deeper understanding by key stakeholders and the public of the role of IFAC and its member organizations in promoting quality performance by accountants worldwide."

Looking ahead to some of the future challenges to be addressed by IFAC, Ian Ball commented: "Alongside our key objective of achieving convergence to international standards, we will be focusing increased attention on building accountancy capacity worldwide, developing and promoting the important role of professional accountants in business, and promoting sound governmental financial management and financial reporting. These activities are critical both to IFAC's mission of serving the public interest by strengthening the profession and to contributing to the development of strong and stable international economies."

IFAC is the worldwide 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's current membership consists of over 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high-quality performance by professional accountants in business.

At its meeting last week in Beijing, China, the Board of the International Federation of Accountants (IFAC) took actions to support small and medium enterprises, approved Kuala Lumpur as the site for the 2010 World Congress of Accountants, and made progress on other initiatives designed to support professional accountants in business and developing nations and to facilitate convergence to international standards. In addition, IFAC President Graham Ward and Deputy President Fermi­n del Valle made presentations at a CICPA Forum on governance and the development of accounting firms.

"This was the IFAC Board's first meeting in China and it was significant for several reasons," states Graham Ward. "It recognized China's growing role in the international marketplace, its recent decision to converge to International Financial Reporting Standards and International Standards on Auditing (ISAs), and its increasingly active role within IFAC."

Prior to the Board meeting, the Chinese Institute of Certified Public Accountants (CICPA) hosted a forum on governance and the development of accounting firms. Both IFAC President Graham Ward and Deputy President Fermi­n del Valle were speakers at this event. In addition, during the IFAC Board meeting, Mr. Li Rongcan, Director General, Department of Planning and Finance, Ministry of Commerce of the People's Republic of China, and Mr. Liu Yuting, Director General, Accounting Regulatory Department, Ministry of Finance, People's Republic of China, addressed Board members on the development of Chinese accounting standard setting, the importance of convergence, and the trade policy of China.

"This type of interaction is vital to understanding how IFAC can best support nations like China in the development of the profession," states Graham Ward.

Supporting SMEs Recognizing the challenges faced by small and medium practices (SMPs) in applying ISAs to the audits of small and medium enterprises (SMEs), the IFAC Board approved a project to develop guidance materials on ISAs for use in SME audit engagements. This new guidance will be based on ISAs effective as of December 31, 2006 and is scheduled for publication in early 2007.

World Congress The Board selected Kuala Lumpur, Malaysia as the site of the next World Congress of Accountants after an extensive on-site review of five potential sites recommended by national accountancy bodies. The support of the national profession along with the location, quality of facilities, and infrastructure, including transportation, were all factors in the final determination.

Other Initiatives In addition to the above, the Board expressed support of the following:

• The development of a new web-based resource, the IFAC KnowledgeNet for Professional Accountants in Business, which will be launched on October 2 in conjunction with the next meeting of IFAC's Professional Accountants in Business Committee;
• The work of the Developing Nations Committee, especially its project to organize a global forum in Africa in September to discuss how IFAC, members of the profession, international funding agencies and others can work together to develop accountancy capacity; and
• The International Auditing and Assurance Standards Board's "Clarity Project," designed to enhance the readability and understandability of International Standards on Auditing.

For more information about these and other IFAC initiatives, view the IFAC website at www.ifac.org.

IFAC is the worldwide 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's current membership consists of over 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high-quality performance by professional accountants in business.

The International Federation of Accountants' (IFAC's) Professional Accountants in Business (PAIB) Committee has released a new information paper that provides guidance on developing a business plan for small and medium entities (SMEs), including how to develop a corporate values statement and manage business risks. The principles and practices in the paper, entitled Business Planning Guide: Practical Application for SMEs, were designed primarily, but not exclusively, for management operating in SMEs and for the small- and medium-sized accounting practices (SMPs) that service them. It was prepared in collaboration with the Malaysian Institute of Accountants (MIA).

"The publication provides comprehensive guidance to assist SMEs and their SMP advisors in the business planning processes and features critical success factors to help them effectively manage their technological, human and financial resources. We would like to thank the MIA for their contribution to the development of the document," states PAIB Committee Chair Bill Connell.

The paper describes how the business plan may serve as a performance tool on an ongoing basis and support a business in obtaining external funding. It also includes a checklist and a practical example of the structure of a business plan. The information paper can be downloaded from the IFAC online bookstore at https://www.ifac.org/store.

IFAC is the worldwide 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's current membership consists of over 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high-quality performance by professional accountants in business.