Presentation by IFAC senior manager and head of professional accountants in business Stathis Gould at Baruch College’s 6th Annual Symposium on Sustainable Business: Non-Financial and Integrated Reporting in New York. Mr. Gould discusses the role IFAC plays in the global move toward integrated reporting, including IFAC’s participation in the International Integrated Reporting Council (IIRC).

IFAC President Warren Allen was a keynote speaker November 8 at the inaugural IPA National Congress.   

My fellow board members and I are here for a meeting of the International Ethics Standards Board for Accountants, the Ethics Board for short. It is great to be in Sydney, for many of us for the first time.

The Ethics Board is an independent board that sets the ethical standards for all accountants who are affiliated with the International Federation of Accountants, or IFAC. That is 2.5 million accountants in 129 countries around the world and in different lines of work. Virtually all auditors are covered by our ethics standards, but also many other accountants in public practices—such as tax advisors, corporate finance specialists, and IT systems advisors—and many accountants in business.

Twenty-three of the largest international accounting networks, including the Big 4, have also committed to following our ethics standards on transnational audits. This means that virtually all listed companies around the world are audited by a firm that has made the commitment to follow our ethics standards with respect to such audits.

The very first sentence in our Ethics code is: “A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest.” This is not a new idea. When a number of men got together in Edinburgh in 1864 to create the world’s first institute of professional accountants, they had the same idea.

They phrased it slightly differently:

…the Petitioners were induced to form themselves into a Society called the Institute of Accountants in Edinburgh, with a view to unite into one body those at present practicing the profession and to promote the objects which they entertain in common; and that the Petitioners conceive that it would tend to secure in the members of the profession the qualifications which are essential to the proper performance of its duties, and would consequently conduce much to the benefit of the public….. [1]

Their brethren in England were a little bit behind, but in the Charter of the Institute of Chartered Accountants in England and Wales, it was stated that:

That the said societies were not established for the purposes of gain nor do the members thereof derive or seek any pecuniary profit from their membership but the societies aim at the elevation of the profession of public accountants as a whole and the promotion of their efficiency and usefulness by compelling the observance of strict rules of conduct as a condition of membership and by setting up a high standard of professional and general education and knowledge … [and it] would be for the public benefit if the members thereof were incorporated as one body… [which] would … tend to gradually raise [the profession’s] character and thus to secure for the community the existence of a class of persons well qualified to be employed in the responsible and difficult duties often devolving on Public Accountants. [2]

This commitment to serve the public interest is like a strong red thread, running throughout the profession’s history and connecting the past to the present. The public interest is as important today as it was 160 years ago in Edinburgh. Today, it is of course phrased slightly differently.

The Institute of Certified Public Accountants of Rwanda became as associate member of IFAC last year. And the institute’s mission statement starts: “To empower our members and partner with stakeholders to serve the public interest….”

Few other professions have voluntarily and formally taken on such a strong commitment to serve the public interest. Physicians have, obviously, but no other professions really, at least not to the same degree.

This is a very big strength for the accountancy profession, its most important attribute for building goodwill. The general public has the sense—probably very vague and unarticulated—that accountants, and especially auditors, act in the public interest.

This, in my view, helps to explain in large part why auditors and accountants have fared much better than bankers, rating agencies, corporate CEOs, or politicians during and after the financial crisis of the last six years.

Our Code of Ethics is a very robust code:

• It covers all the main ethics issues.
• It is demanding.
• It is regularly updated to address new concerns.
• It is enforced.
• And accountants abide by it—at least the vast majority of them.

But can it really be true that almost all accountants abide by our Code? If so, why didn’t the auditors and the accountants warn about the impending financial crisis? The answer, I believe, is that many people were caught flat-footed—bankers, regulators, policy-makers, and also auditors and accountants.

They were not skeptical enough. They hadn’t experienced anything like it before. They were swept away by the euphoria of the pre-2007 boom. They were in the same situation as most everyone else.

When you informally talk to audit regulators about why auditors failed to see and warn about the financial crisis, these are the kind of explanations they often put forward. The view is that cases of unethical behavior were very few. The failings were of a different kind.

Still there is a problem. The goodwill created by the profession’s commitment to act in the public interest has to be continually reinforced. My personal view is that the profession is currently slowly depleting its long-standing goodwill, not by design but by not forcefully and publicly enough making the case that it is committed to acting in the public interest.

The accountancy profession should much more actively make the case that:

• it has a strict Code of Ethics;
• it is adhering to it;
• this code is set by an independent body; and
• it welcomes that those accountants who do not comply with the Code are disciplined.

Surely, this is not an easy road to take. On the other hand, not making the case that the profession is committed to acting in the public interest will most likely slowly reduce the public trust in the profession and thus the profession’s standing. It will be weaker when facing problems and criticism.

So I believe that the Ethics Board and the profession should make the case more strongly than we do today that:

• the profession’s Ethics Code is strong; and
• the profession does act in the public interest.

Presentation given by Stathis Gould, IFAC senior technical manager and head of Professional Accountants in Business (PAIB), on the roles and expectations on professional accountants in business during an Association of Chartered Certified Accountants (ACCA) USA chapter meeting that featured delegates from the Shanghai National Accounting Initiative (SNAI). The presentation includes how IFAC supports the significant PAIB sector of the accountancy profession, areas of focus for the IFAC PAIB Committee, and specific initiatives.

IFAC recently convened the first-ever meeting between the issuers and users of risk management and internal control guidelines, including representatives from the Committee of Sponsoring Organizations of the Treadway Commission (COSO), CPA Canada’s Risk Oversight and Governance Board (RGOB), Federation of European Risk Management Associations (FERMA), International Federation of Risk and Insurance Management Associations (IFRIMA), International Organization for Standardization, and Risk Management Society (RIMS).

During the event, Alignment of International Risk Management Guidelines, representatives from participating organizations presented their latest work and future plans, including: 

• Dave Landsittel, COSO
• Gigi Dawe, CPA Canada’s ROGB
• Julia Graham, FERMA and IFRIMA
• Vincent Tophoff, IFAC
• Jan Mattingly, International Organization for Standardization’s TC262 on Risk Management
• Carol Fox, RIMS

The presentations were followed by a panel discussion that reinforced the need for further international collaboration and alignment in the area of risk management and internal control. Participants decided to use the momentum from this meeting to initiate a series of collaboration projects.

IFAC SMP Committee Chair Giancarlo Attolini spoke at CReCER 2013 on the following:

• Importance of SMEs and SMPs
• IFAC SMP Quick Poll
• Role of IFAC SMP Committee
• Implementation Guides

Good afternoon ladies and gentlemen, it is my pleasure to be with you again. I say ‘again’ as there are many familiar faces in the audience from the 2012 CReCER Conference in Nicaragua. For me, this in and of itself is a clear signal of the commitment of stakeholders in Latin America to engage in dialogue on international developments.

At last year’s conference, I noted a number of important challenges in financial reporting and auditing, and in the surrounding environment. For example, today’s financial reporting involves more complexity, more areas of judgment, and more qualitative disclosures; and users have higher expectations than ever before, with many saying “We want to hear more.” Perhaps most importantly, the global financial crisis has triggered questions concerning the quality of audits, their effectiveness, and the role of professional judgment and skepticism – which have given way to fundamental questions to the profession about relevance and trust.

So why change the auditor’s report now? What we learned from research is a positive message: the auditor’s opinion is valued, and users want to hear more from the auditor – more pertinent, and more tailored, information about the specific audit performed on an entity’s financial statements. There is symbolic value in the current report, but little communicative value – and users see the potential for the auditor to provide more value and more transparency. So, now is the time to lay the foundation for the auditor’s report of the future.

Presentation given by IFAC Senior Technical Manager Vincent Tophoff on the integration of risk management and internal control, especially as they relate to the International Organization for Standardization (ISO)'s standard on risk management, ISO 31000 - Risk Management. 

IFAC Senior Technical Manager Vincent Tophoff and Campbell Soup Company Finance Director and Comptroller J. Stephen McNally gave a presentation at the 94th annual Institute of Management Accountants (IMA)'s conference in New Orleans, Louisiana, USA. The presentation outlines some of the pitfalls many organizations face with their current systems of risk management and internal control. Mr. Tophoff and Mr. McNally also discuss the revised Internal Control-Integrated Framework, published in May 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as well as ISO 31000:2009, Risk Management - Principles and Guidelines from the International Organization for Standardization (ISO).

The presentation:

• summarizes the most important pitfalls in current risk management & internal control (RM/IC) practice;
• provides insight into current thinking on risk management and internal control;
• outlines key concepts contained in the most important risk management and internal control guidelines;
• discusses the impact of these developments and approaches for organizations; and
• identifies and discusses other emerging trends related to risk management and internal control.