The International Ethics Standards Board for Accountants (IESBA), an independent standard-setting board within the International Federation of Accountants (IFAC), has issued an exposure draft updating and strengthening the independence requirements contained in the IFAC Code of Ethics for Professional Accountants. The last substantive revisions to the Code were made in November 2001.

The changing environment in the past few years has led the IESBA to consider what revisions to auditor independence requirements might be needed. Over the two-year development period of the exposure draft, the IESBA consulted with interested stakeholders, including regulators, standard setters, leaders of accountancy organizations, and members of the profession. "Auditor independence is a critical cornerstone of financial reporting," states Richard George, IESBA Chair. "We believe that the proposed changes to the Code contain important provisions that we consider are appropriate to protect the public interest." Significant proposed modifications to the Code include:

• Expanding the applicability of partner rotation requirements;
• Updating requirements related to the provision of non-assurance services, including setting out additional guidance on the provision of tax services to audit clients; and
• Extending the independence requirements to the audits of a wider range of entities of significant public interest.

How to Comment
Comments on the exposure draft are requested by April 30, 2007. The exposure draft may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to edcomments@ifac.org. They can also be faxed to the attention of the IESBA Senior Technical Manager at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on IFAC's website.

About the IESBA and IFAC
The IESBA develops ethical standards and guidance for use by professional accountants. It encourages member bodies of IFAC 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 is comprised of 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international standards of ethics through the IESBA, IFAC, through its independent standard-setting boards, sets auditing and assurance, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

At its most recent meeting in London in December, the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), approved new proposals to enhance the written representations that auditors request from management, those charged with governance and others, as well as five new exposure drafts written in accordance with its new clarity drafting conventions.

Written Representations

The proposals, which are incorporated in proposed International Standard on Auditing (ISA) 580 (Revised and Redrafted), Written Representations, provide for general written representations regarding the financial statements, including internal control, and the completeness of information made available to the auditor, and for written representations about specific assertions in the financial statements. "The aim of this project was to improve the quality and appropriateness of written representations sought by the auditor and, in particular, to deal with concerns about whether auditors may over-rely on representations at the expense of other evidence," explains John Kellas, IAASB Chairman.

New Clarity Exposure Drafts

As part of its comprehensive program to enhance the clarity of international standards, the IAASB has also issued the following exposure drafts of proposed ISAs:

• ISA 230 (Redrafted), Audit Documentation;
• ISA 540 (Revised and Redrafted), Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures;
• ISA 560 (Redrafted), Subsequent Events;
• ISA 610 (Redrafted), The Auditor's Consideration of the Internal Audit Function; and
• ISA 720 (Redrafted), The Auditor's Responsibility in Relation to Other Information in Documents Containing Audited Financial Statements.

Proposed ISA 540 (Revised and Redrafted) is a combination of ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures (Other Than Those Involving Fair Value Measurements and Disclosures) and ISA 545, Auditing Fair Value Measurements and Disclosures. The IAASB approved ISA 540 (Revised) in September 2006 as a basis for applying the clarity drafting conventions. As part of the redrafting of ISA 540 (Revised), the IAASB decided that the similarities between estimates and fair value information could be emphasized, and redundancy eliminated, by combining ISA 540 (Revised) and ISA 545 within the proposed revised and redrafted ISA 540.

"The proposed ISA 540 (Revised and Redrafted) will reinforce best practice and cause the auditor to give appropriate attention to areas of accounting judgment, such as assumptions, and to possible bias. The other proposed redrafted standards contain clear requirements and easy to understand application guidance," notes Mr. Kellas.

The exposure drafts form part of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the new drafting conventions, which were developed after extensive consultation with interested parties, such as the IAASB's Consultative Advisory Group and national auditing standard setters, and public consultation. Key elements of the new drafting conventions include: basing each standard on the objective of the auditor with respect to the subject matter of the standard; separating the requirements that the auditor is required to follow from guidance on their application; eliminating the present tense to describe actions by the auditor, which raised ambiguity about whether such actions were required; and other structural and drafting improvements to enhance the overall readability and understandability of the standards. Standards redrafted in this way are described as "redrafted." If further revision has been undertaken, a standard is described as "revised and redrafted."

How to Comment

Comments on the exposure drafts of proposed redrafted ISAs 230, 560, 610 and 720 are requested by March 31, 2007. Comments on the exposure drafts of proposed ISAs 540 (Revised and Redrafted) and 580 (Revised and Redrafted) are requested by April 30, 2007. The exposure drafts may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org. They can also be faxed to the attention of the Executive Director, Professional Standards at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted of IFAC's website.

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 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 is comprised of 155 members and associates in 118 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.

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has released a new standard on reporting revenue from non-exchange transactions. This new standard will contribute greatly to enhancing the transparency of financial reporting by governments and other public sector entities. Taxes and transfers are the major source of revenue for most governments and other public sector entities. However, internationally agreed requirements for financial reporting of these revenues have not previously been developed.

IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers), addresses a range of matters critical to government financial reporting of tax revenue, including the basis on which a wide range of taxes should be recognized and measured. It also deals with the other major source of non-exchange revenue for public sector entities - transfers, which include grants from other governments and international organizations, gifts and donations. In addition, the IPSAS establishes requirements on how conditions and restrictions on the use of transferred resources are to be reflected in the financial statements.

"IPSAS 23 is the culmination of four and a half years of intense work, debate and consultation by the IPSASB, which specifically solicited the input of experts in the field of governmental financial reporting throughout the world," states Philippe Adhémar, IPSASB Chair. "This new standard also represents a major achievement for the IPSASB in addressing public sector specific issues at a global level and in establishing an international benchmark for the financial reporting of taxes and transfers. Compliance with IPSAS 23 will enhance the quality, comparability and transparency of financial reporting by public sector entities around the world."

IPSAS 23 can be downloaded from the IFAC online bookstore: http://www.ifac.org/store. It will also be included in the 2007 edition of the Handbook of International Public Sector Pronouncements.

About IFAC

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 is comprised of 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international public sector financial reporting standards through the IPSASB, IFAC, through its independent standard-setting boards, sets ethics, auditing and assurance, and education standards. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has released a new International Public Sector Accounting Standard (IPSAS) designed to improve the quality and uniformity of financial information reported by public sector entities around the world.

IPSAS 22, Disclosure of Financial Information about the General Government Sector, establishes requirements for governments that choose to disclose information about the general government sector and that prepare their financial statements under the accrual basis of accounting. The new standard permits governments to disaggregate their consolidated financial statements in accordance with the sectors established in the statistical bases of financial reporting. This is significant because it will allow governments to distinguish the financial position, performance and cash flows of the general government sector, which is comprised of government controlled entities that are primarily engaged in non-market activities. It was developed in consultation with the International Task Force on Harmonization of Public Sector Accounting, whose goal is to harmonize the statistical and financial reporting requirements of governments.

"In many jurisdictions, governments prepare budgets and have their performance assessed on the basis of statistical requirements," states Philippe Adhémar, IPSASB Chair. "This IPSAS will enable governments to disclose the operations of the general government sector, which will provide a higher level of transparency to the public. It is also a useful bridge between the world of accountants and national accounts statisticians."

Because this information is not required in many jurisdictions, the IPSAS is a voluntary disclosure standard. IPSAS 22 can be downloaded from the IFAC online bookstore: http://www.ifac.org/store. It will also be included in the 2007 edition of the Handbook of International Public Sector Accounting Pronouncements.

About IFAC

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 is comprised of 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international public sector financial reporting standards through the IPSASB, IFAC, through its independent standard-setting boards, sets ethics, auditing and assurance, and education standards. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Federation of Accountants (IFAC) has released a new information paper that explores the needs of users and preparers of the financial reports of micro-entities. Entitled Micro-Entity Financial Reporting: Perspectives of Preparers and Users, the paper comprises a review of the existing research on the topic, a survey of the legal status of micro-entities in different countries, and the various definitions that exist in different jurisdictions.The International Federation of Accountants (IFAC) has released a new information paper that explores the needs of users and preparers of the financial reports of micro-entities. Entitled Micro-Entity Financial Reporting: Perspectives of Preparers and Users, the paper comprises a review of the existing research on the topic, a survey of the legal status of micro-entities in different countries, and the various definitions that exist in different jurisdictions.

The research was prompted by a concern that the International Accounting Standards Board's (IASB) proposed accounting standard for SMEs, International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs)*, may not be suited to micro-entities, which for the purpose of this study are defined as those with less than ten employees. The IASB's proposed IFRS for SMEs is expected to be released as an exposure draft in late December 2006 or January 2007.

Key challenges and findings with respect to micro-entities include the following:

• The cost/burden implications of new regulation on the smallest entities;
• The issue of enforcing such regulations;
• The increasing demands of users of micro-entity reports; and
• Issues of literacy and training in some developing countries.

The research contained in the paper was undertaken by Dr. Suki Sian of the Cardiff Business School, Wales and Professor Clare Roberts of the University of Aberdeen, Scotland. In their findings, the researchers state, "Very little research has been previously conducted looking specifically at micro-entities as these tend to be subsumed in the term SME. Furthermore much of the published literature is restricted to studies conducted in developed countries and does not reflect the very different environment in which micro-entities operate in developing, emerging or transition economies." They conclude that "This gap in the literature indicates that this is an area that is ripe for further in-depth examination and research."

IFAC is considering undertaking further research in this area, in particular, to investigate whether the proposed IFRS for SMEs is likely to meet the needs of users of financial reports of micro-entities. IFAC is also encouraging its member bodies and regional accountancy organizations to respond to the IASB's exposure draft on IFRS for SMEs.

Micro-Entity Financial Reporting: Perspectives of Preparers and Users may be downloaded free-of-charge from the IFAC website.

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. It is comprised of 155 members and associates in 118 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 standards on auditing and assurance, ethics, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

* Note to Editors: For more information on the IASB's International Financial Reporting Standard for Small and Medium-Sized Entities, see the IFRS Foundation website.

This information paper considers the experiences of the United States of America in its movement to accrual accounting. It outlines the development of administrative arrangements for formal standards setting over 70 years at the local, state and federal government levels in the US and highlights key factors shaping the standards setting structure.