Leaders of accountancy institutes worldwide met in Istanbul, Turkey on November 9-13 to participate in the International Federation of Accountants' (IFAC) Board and Council meetings. The reins of the organization were turned over to new IFAC President Juan José Fermín del Valle of Argentina, and the Council approved the nomination of Robert L. Bunting of the United States as Deputy President. Each of these individuals will serve in their respective capacity through November 2008. In addition, the Council approved the appointment of five new members to the IFAC Board and the reappointment of three Board members to a second term.

Newly elected IFAC President Fermín del Valle emphasized his commitment to enhancing societies around the world by contributing to their economic growth and development. He encouraged Board and Council members to "lead by example" by following the highest ethical standards, urged IFAC's member bodies to collaborate with IFAC in serving the public interest, and called on member and regional accountancy bodies to join IFAC in its initiatives to develop the profession worldwide.

Supporting these goals, the IFAC Council approved an updated Strategic Plan that emphasizes the need for ongoing collaboration between IFAC and its member bodies and external stakeholders, calls for increased efforts for the development of the global profession, and outlines standard-setting priorities for the next two years.

"As part of our ongoing planning, we recognize that the profession should continue to look at the markets it serves - both within organizations and public practice - as well as the needs of these markets. We must be willing to be flexible and innovative to address these needs," states Mr. del Valle.

During the meeting, Developing Nations Committee Chair Ndung'u Gathinji announced the production of new French and Spanish language versions of the IFAC good practice guidance for the profession in developing nations, entitled Establishing and Developing a Professional Accountancy Body. The IFAC Council also approved a new constitution designed to modernize IFAC's approach to constitutional issues and to enhance specific aspects of governance. The Council also accepted the Certified Practicing Accountants Papua New Guinea as an associate of IFAC.

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 currently comprised 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 of ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

IFAC Board Members (November 2006 - November 2007)

Juan José Fermín del Valle, President Robert Bunting, Deputy President United States Warren Allen, New Zealand * Yugui Chen, China ** Kevin Dancey, Canada * Roberto D'Imperio, Italy Ingrid Doerga, Netherlands * Ndung'u Gathinji, Kenya Charles Horstmann, United States Gen Ikegami, Japan David Leonard, United Kingdom ** Bernadette McGrory-Farrell, Ireland Ofer Minirav, Israel Joycelyn Morton, Australia William Nahum, France ** Norbert Pfitzer, Germany * Roberto Resa, Mexico * Haji Alias Abdul Samad, Malaysia Göran Tidström, Nordic Federation Charles Tilley, United Kingdom Kamlesh Vikamsey, India Sylvie Voghel, Canada

* New IFAC Board members as of November 2006

** IFAC Board members reappointed for a second term in November 2006

Members of Council, fellow professional accountants, distinguished guests, friends. Two years ago, in Paris, you paid me the compliment of electing me as your President and of entrusting me with the opportunity to serve you, the leaders of our great profession of accountancy around the world. At that time our discussion focused on choices: together we were faced with the challenge of choosing to commit to rethink our roles, reshape our organization and recommit to our fundamental responsibilities to protect the public interest. We were challenged to have the determination to succeed. We were challenged to up our game and to meet the future with confidence. Looking back over the last two years, I believe that, together, we are meeting those challenges and that both the public interest and our self-respect as a great profession have been well served.

We agreed to focus on the many positive aspects of our worldwide profession, summarizing our vision as “generating growth and stability worldwide.” Together, we have focused on delivering that vision.

We have invested far, far more in supporting professional accountants in business and in supporting professional accountants in small and medium practices. The number, quality and relevance of the publications of our Professional Accountants in Business Committee and of our SMP Committee have been excellent and we should be proud of them. Together, we have delivered. For example:

• The SMP Committee have commissioned a guide to the use of ISAs in the audits of small and medium-sized enterprises.
• We are just beginning a project on responsibilities in the financial reporting supply chain. This is to be led by Norman Lyle, whose many achievements include being a former president of CIMA and a former Chief Financial Officer of Jardine Matheson.

These are intensely practical projects which will produce great benefit for the communities which we serve.

Our relationships with the global regulatory and institutional community have grown ever closer and more productive. The Public Interest Oversight Board (PIOB) was launched in February 2005. This very high quality group, strongly led by Professor Stavros Thomadakis, has made a real and positive difference to the quality of our standard setting. All concerned at IFAC have cooperated strongly with the PIOB, and this and other demonstrations of our commitment to the public interest have greatly increased the respect in which both IFAC and our profession are held. As an example, may I quote Charles Niemeier, a member of the US Public Company Accounting Oversight Board, who at a recent conference said:

“I am proud to say that the accounting profession has courageously looked at its involvement with these problems [Enron and similar scandals] and has accepted the need to change. It has faced its shortcomings and is learning from them. And with that acceptance, the accounting profession has moved beyond the problems of the past and entered a new phase where accountants will no longer accept being minimum compliance experts. Instead, accountants are becoming the promoters of best practices…”

As a further example, the European Commission has stated that it does not have governance concerns with the IAASB and the PIOB, and European Commissioner Charlie McCreevy has said:

“I am very happy that recently we have been able to sketch out an international understanding on the governance of the International Auditing and Assurance Standards Board and the Public Interest Oversight Board. This will allow us to move closer to the adoption of ISAs and I also think that the two EU observers should become full members of the Public Interest Oversight Board.”

Underpinning this confidence has been our commitment, together, to the IFAC values of integrity, transparency and expertise.

Achieving public confidence would not have been possible without the commitment of our standard-setting boards: the International Auditing and Assurance Standards Board, the International Accounting Education Standards Board, and the International Ethics Standard Board for Accountants. They have opened their meetings to the public; they have made all of their papers available to the public, who can even listen to recordings of their meetings on their website, and cooperate fully with independently chaired Consultative Advisory Groups. They have worked and are working on agendas which are relevant to supporting the public interest and to increasing the standing of our profession.

Public confidence also would not have been possible without the commitment of Helene Kennedy and her team to our communications program. This excellent work has underpinned our outreach to IFAC’s stakeholders.

Whilst not under the aegis of the PIOB, the International Public Sector Accounting Standards Board has also been doing an excellent job. External recognition of this is evident by the increasing adoption of (IPSASs). For example, last June, the United Nations General Assembly approved a package of financial management reforms that called for all UN agencies to use IPSASs for their financial statements.

And we have made real commitments to the strengthening of our profession, especially in developing and emerging economies. A strong accountancy profession is key to a strong financial infrastructure and to the creation of an investment climate of trust. In turn, these factors enable countries to obtain the investment necessary to achieve proper standards for the provision of health, education, clean water, energy and food. In other words, they, we are essential to the fight against poverty.

Through our Member Body Compliance Program, you have provided us, in an unprecedented show of support, with information about the regulatory and standard-setting frameworks of your member bodies and about your compliance with the IFAC Statements of Membership Obligations. Thereby you have helped us to focus our development work and you have demonstrated beyond all doubt your willingness to be accountable for your actions to meet high standards, to deliver quality and to protect the public interest. This work has been facilitated by our hardworking Compliance Advisory Panel.

Our Developing Nations Committee, where resources have been very significantly increased over the last two years, has been doing great work. Newly developed accountancy bodies are emerging and accountancy institutes in many developing nations are gaining momentum and influence as they institute programs, stimulated by our Developing Nations Committee, which foster a high quality profession. I am particularly proud that, in September, together with the African Development Bank and the World Bank, IFAC sponsored a learning workshop for government and private sector leaders and members of the accountancy profession to learn how we can best meet the needs of Africa in its fight against some of the worst poverty in the world. Real action is now taking place as a result of agreements made at that workshop and both Africa and the world will benefit.

The public has also benefited from our close cooperation with the Forum of Firms, whose members provide us with excellent people and financial support and are also driving harder and harder to achieve real quality of client service. Their commitment to our code of ethics, to ISAs and to ISQC 1 is a real benefit to the creation of even fairer and better informed capital markets throughout our world.

None of our work, however, would be possible without the support of you: our member bodies and regional organizations. Thank you all for your political support, for your financial support and for your support by providing such high quality people to work on IFAC boards and committees. To help you in this, we have significantly improved the processes of and transparency of our Nominating Committee, and you have responded by providing us with ever more and an ever higher quality of volunteers.

I would like to offer my sincere thanks to each and every member of our Board, our Boards, our Committees, and to our Technical Advisers; and to every member of our highly professional and hard working staff. I would like to thank Ian Ball for his great professionalism and his great personal support and Fermín del Valle, our Deputy President, for his support in the past and for his leadership in the future.

Fellow professional accountants, friends, together we have faced many challenges; together we have met them; together we have upped our game; and together we will meet the future with confidence.

Thank you so very much for your confidence, thank you for your friendship and support, thank you for the opportunity to serve you.

Thank you for giving me the privilege of serving as IFAC President and for the confidence you have placed in me. As IFAC President, over the next two years my objective will be to continue working in the same direction, advancing the course set by Past Presidents René Ricol and Graham Ward. It is a course that has enabled us to make significant progress in building public trust in our profession.

However, while I do not believe that we need to change our strategic direction, I would ask all of you here to help me to move farther and faster down the course, to come closer to achieving our ultimate goal: enhancing societies around the world by contributing to their social and economic development.

As Chairman of the Planning and Finance Committee, I have had the opportunity to work very closely and directly in the elaboration of IFAC’s strategic plan. I believe we have a good plan – a plan that is both relevant and achievable. We have to continue building upon it and designing the strategies that will allow us to meet the expectations of our constituencies and those of society in general with respect to the contribution our profession can make to the public good.

The critical thing now is to execute this strategy. The objectives are there for us to reach, and I am confident that together we are going to reach them and even supersede them.

I love this institution that I have had the chance to be a part of and contribute to over the last 9 years. I had the privilege to collaborate not only with René and Graham, but also with Presidents such as Frank Harding and Aki Fujinuma, and I had the honor of sharing the IFAC Board with exceptional colleagues.

I believe IFAC is a great organization, not because of its size or its budget, that we would wish to be higher in some areas, but fundamentally because of its mission, its objectives, its spirit, its convictions, and its seriousness as an institution.

I firmly believe in and admire the member bodies that comprise IFAC. Each one, in its environment and its specific field of action are, in many cases, model institutions in their respective societies and, in all cases, entities dedicated to their members and to the mission of IFAC.

This is your organization. It is your child that, next year, will be celebrating its 30^th birthday.

This unique, global accountancy organization is, because of the unity we represent, a great force, a respected authority, and a valued institution; we should, I believe, take great pride in this and protect it.

IFAC’s potential is even greater if we align efforts and resources with and among member bodies to achieve synergy and efficiency in areas of common interest. Our commitment should be to focus ourselves on those areas in which IFAC can achieve greater value for the public.

I have complete confidence in the capacity and commitment of the members of our Board to direct this organization in fulfilling its strategic objectives. They serve as an exemplary model of good practice in corporate governance, and do much to generate enthusiasm, participation and consensus to help IFAC achieve its mission.

I want to congratulate Robert Bunting, who will be my Deputy President. IFAC should be proud to have an officer with his professional and personal qualities. I know that I will count on him and we will work as a team serving from our respective roles for this institution.

Our institution also benefits from the invaluable work of our Chief Executive, Ian Ball, with his capacity, character, expertise, and his dedication to IFAC. Together with the entire staff, all of whom I have had the opportunity to work on different tasks over these years, they make up a talented management team that is dedicated to the organization.

Looking to the future, we can identify two areas that we should work on with similar decisiveness and commitment. On one hand, we should continue to work steadfastly on strengthening public confidence in the profession and in IFAC. On the other hand, we should encourage innovation and flexibility so that our profession can readily respond to the future demands that society will place on it. We must position ourselves to remain relevant and effective, no matter how times change.

As we look ahead, I believe that public confidence in the profession and in IFAC’s work can and will be strengthened, if we remain focused on our key current initiatives:

• Standard setting;
• The Member Body Compliance Program;
• The development of the profession; and
• Being the global voice of the profession.

In the area of standard setting, the International Standards on Auditing (ISAs), issued by the International Auditing and Assurance Standards Board (IAASB), have received increasing support from international and national regulators, including the European Commission, and are being adopted in many countries around the globe. We must continue the momentum.

The revised independence standard should convert into an international benchmark and an appropriate reference to facilitate global convergence on this issue.

A new standard on whistle blowing, that will have significant implications for professional accountants in business, is anticipated as well.

Looking ahead, we should focus on ensuring that ISAs and the IFAC Code of Ethics are incorporated in the standards of the profession in every major capital market and are endorsed by those regulators and other organizations whose stature and influence can help significantly to advance the convergence process.

Over the past year, the standards of the International Public Sector Accounting Standards Board (IPSASB) also received increased recognition, especially in light of their adoption by the United Nations this year.

Governmental financial reporting is an element of vital importance to the development of countries. Clarity and transparency of public accounts is the key that can lead to necessary accountability. Broad and successful adoption and implementation of International Public Sector Accounting Standards (IPSASs) is, in part, dependent upon IFAC’s efforts to support and promote the work of the IPSASB. If IFAC does not properly promote and support IPSASs, we can jeopardize the credibility of the standards and fail to maximize the large investment in them that has been made by IFAC, external supporters and member bodies.

IFAC’s role as a standard setter and as a representative of the global accountancy profession is dependent upon the quality of the standards produced and the credibility of the organization. We should protect the standard-setting processes that we have developed and that today can be presented as examples at a global level. We should also make a commitment to ensuring that we have permanently put in place the appropriate human resources.  

For the benefit of our profession and the public that we serve, we will continue to listen closely to the recommendations of the Public Interest Oversight Board (PIOB). The PIOB is already a highly regarded international body. We will work to strengthen both the processes for setting standards and the quality of those standards. I am personally committed to supporting the PIOB in all that they do, implementing the changes necessary to meet the public interest tests of good regulation. We must, I believe, build on the reform process that contributed to the renewal of public confidence in this great profession of ours. We can do so by continuing to focus on strengthening our standards and ensuring that their due processes meet the PIOB’s expectations.

We should continue to promote convergence, which I believe is an achievable goal and one that is in the best interests of the public. The more quickly we move on this, the greater the chance for success.

The policy position issued by the International Auditing and Assurance Standards Board and the guidelines that will surely be issued by the rest of the Public Interest Activity Committees will provide an orientation to the meaning and scope of convergence for each set of standards.

The IFAC Member Body Compliance Program is an essential initiative. It is an effective program to both strengthen and support the member bodies. It also represents a unique contribution to the public interest by making available information about the global profession that is not available in another single source and is difficult to collect. This demonstrates the operational capacity of our organization and its potential for activities like this that truly reflect our global position.

The Compliance Program should continue to be the engine for driving ongoing improvements in the quality and consistency of the financial management practices and auditing. We should position the Compliance Program as an effective tool to monitor and secure transparency of the financial reporting systems’ characteristics. Its implementation over the past year, and the unprecedented support it received from IFAC members, sends a loud and clear signal of your commitment to promoting high standards and quality performance by the world’s accountants. Looking ahead, we must leverage what we have learned. We have collected very rich information. Now we must consider effective ways to communicate this information. In meeting our goal of transparency, it is important for the public to know that they can easily obtain information on the financial reporting systems in the private and public sectors in countries around the globe.

Additionally, we should move from data collection to action. Under the leadership of the Compliance Advisory Panel and staff, we will begin the process of developing and monitoring action plans to help those countries whose standards were not yet of IFAC caliber.

In this process, we will align the activity with the World Bank and other multilateral credit agencies and aid organizations, trying to avoid unnecessary duplication of efforts while making the most efficient use of available resources.

Where possible, we will also try to engage the accounting firms, through the Transnational Auditors Committee or TAC, to secure their support for the Compliance Program in terms of collaboration with the member bodies in the implementation of the action plans, especially in those countries where resources of the member bodies are insufficient.

Another critical area for IFAC is working to develop the profession. The work initiated this year by the Developing Nations Committee has set the tone and the pace for the future. We have made it known that we are dedicated to helping all countries, no matter how large or small, no matter where they are located, no matter what their political climate. To be true to our mission of protecting the public interest through the development of stable economies, we must continue to be proactive in our approach to developing nations. We must offer help before we are asked for it. We must propose solutions before the questions have been formed.

Development of the profession in emerging countries is crucial for the sustainability of the profession and also for the sustainable development of those countries. Accountancy and auditing are essential for the functioning of the economy and the existence of an organized profession is essential to the functioning of accounting and auditing. We should promote the creation of professional bodies in those countries where there are none, attaining an organized accountancy profession in every country.

Another area in which we should continue to work intensely is on the development of the professional firms, whatever their size may be.

We recognize the potential strengths and influence of the TAC and its role as spokesman for how firms should and are improving audit quality. We should also encourage new firms to join the Forum of Firms.  

We will also continue our work through the Small and Medium Practices Committee. There should be no doubt with respect to IFAC’s commitment to meet the needs and serve the interests of professional practices of all sizes. IFAC should continue to be the vehicle through which the SMPs can channel their collaborative efforts, trying to identify and implement solutions that help them grow and develop.

IFAC must also continue to provide resources for and support the development of professional accountants in business. These professionals play a key role in the financial reporting supply chain, contribute to a business’s economic growth and development and are often involved in the implementation of good governance. The vast number of professional accountants in business and the diversity and scope of their work are testimony to their potential influence not only on their employers, but on society in general.

IFAC’s reputation as a valid, reliable leader of the accountancy profession and its related stakeholders is dependent upon consistent, clear, high quality public messages and maintaining respect and strong relations with internal and external audiences. We should continue our proactive attitude in the relationships with firms, regulators, independent auditor oversight authorities, and investors.

As we look to the future, we should also recommit to and communicate the work of the IFAC Regulatory Liaison Group (IRLG). This group will continue to meet periodically with the Monitoring Group of regulators, and we will also plan a higher level of activity for the IRLG. Through this mechanism, we will also establish regular and open contact with the recently created International Forum of Independent Audit Regulators as well as with any new regulatory organizations that emerge.  

IFAC supports the oversight mechanisms that protect the public interest. Quality is ultimately the final and principal objective, and as much a focus for our profession as for the oversight bodies. The auditor should focus on the effectiveness and efficiency of his or her specific task: to perform a quality audit. Meeting the requirements of the independent audit regulator will then be a natural consequence.

The audit regulator, for its part, should comply with its obligation in the public interest and should recognize that the measure of its success will finally be the level of quality reached by the auditors it supervises.

Without diminishing the focus on other key activities that I have just referred to, IFAC, as the globally organized profession, must continue to give attention to the future. How are we to meet the challenges that lie ahead? And how can we accomplish our mission of improving the global economy? We know the world does not stand still.

The profession should continue looking to the markets it serves – both within organizations and from public practice – and to the needs of those markets. We need to be prepared to operate in the new technology environment, to take a leadership role in the preparation and assurance of non-financial information, and to identify and design more efficient ways to deliver our services or to generate new services that respond better to the changing demands of the market.

Like the world around us, we cannot stand still. We should continue to be players. We should take the initiative.

Here we have a clear link to education. Our profession can only meet the global challenges of the 21^st century if we are prepared to deal with an increasing quantity of financial reporting, governance and related audit requirements, greater complexity in business transactions, the ongoing emergence of new technology and the new demands of the market. Education provides the means to meet these challenges. If we do not see education as a priority, then we will be making a serious mistake.

As we strive to meet all these goals, we must be inclusive, encourage collaboration, and lead by example.

We must be willing to embrace each and every culture. We must recognize their strengths and understand their weaknesses. We must accept the diversity of this great profession of ours and consider how we can best benefit from it. We must be willing to receive and respect comments from every region and country. We must work to better understand their needs and those of their members. To be inclusive, we must create an environment conducive to communication and participation.

As part of our commitment to be inclusive, we must strive to overcome the language barriers that exist. I encourage member and regional bodies to continue their work on translations of our standards and guidance. I also urge you, where possible, to translate any of the speeches that we present and which are posted on the IFAC website. IFAC will continue to do its part as well. We will make sure that the availability of such translations is promoted on the IFAC website and in other materials that are distributed globally. We are translating development materials, including our developing nations toolkit, to make sure it is accessible to those most in need of it. Now we will also consider the feasibility of translating portions of the IFAC website into selected languages.

In addition to inclusiveness, we must make a strong commitment to collaboration. Collaboration is what got us here today. It is what enabled IFAC to develop new guidance and resources such as the IFAC KnowledgeNet for Professional Accountants in Business. It has enabled us to develop a stronger voice and to have that voice heard. Collaboration with all of you, as well as with others such as the World Bank, regional development banks, national standard setters, and organizations like the Financial Stability Forum, has enabled IFAC to more effectively accomplish its mission. We should promote and facilitate the collaboration between member bodies in projects where it is merited, using IFAC as the vehicle to make global projects viable and effectively add value.

Finally, let me share with you what I believe is a personal challenge for all of us. That is, the challenge to lead by example, to live our values of integrity, transparency, and expertise. We must demonstrate to our members, to investors, to regulators, and to global leaders that our values and ethics are indeed at the core of all that we do.

If we want to continue to enhance the ethical quality of our profession and to help improve the ethical quality of business and society in general, I believe we must, in all cases, do more than we are required to do. As leaders of the accountancy profession, it is our role to demonstrate how our organizations work to put the public interest first and how we inspire members to do the same. Our challenge is to lead by example.

Dear friends, the accountancy profession is standing strong and looking ahead. We have a clear vision. We are committed. We must act to give effect to that vision. Together, through IFAC, we can work to become a better, stronger and more effective profession, one that is more capable of achieving its goal of enhancing societies around the globe.

We must strive to manage the future and not allow it to manage us. Together, we can shape a future that protects the public good and that makes the world, plain and simply, a better place.

Thank you. 

Effective codes of conduct are a key element of strong corporate governance and internal controls within businesses worldwide. Recognizing the critical role that professional accountants in business play in these areas, the International Federation of Accountants' (IFAC) Professional Accountants in Business (PAIB) Committee has issued draft new guidance to assist companies and their professional accountants in developing and implementing a code of conduct.

The proposed new good practice guidance, Defining and Developing an Effective Code of Conduct, highlights the varied roles of professional accountants in business in driving and supporting organizational ethics and conducting ethics programs. It also provides practical guidance on the design and development of such codes. "The goal of this proposed guidance is to support sound corporate governance practices globally," emphasizes PAIB Committee Chair Bill Connell. "This guidance is the first in a series of principles-based pronouncements that the PAIB Committee will be developing as part of a long-term work program."

The PAIB Committee previously issued an exposure draft on developing codes of conduct in January 2006. Following significant comments and suggestions received, the committee made extensive changes to the content of the guidance. In the new exposure draft, the committee is recommending an approach based on developing a values-based organization and a values-driven code. The aim is to promote a culture that encourages employees to "do the right thing" and allows them to make appropriate decisions. This exposure draft will serve as the foundation for the committee's long-term work program to develop principles-based pronouncements. A preface document and explanatory memorandum on developing these new pronouncements will be exposed for public comment in early 2007.

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'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 of ethics, auditing and assurance, education, and public sector accounting. Through its Professional Accountants in Business Committee, IFAC issues guidance to encourage high quality performance by professional accountants in business.

The International Federation of Accountants (IFAC) is seeking proposals for the development of an explanatory guide on implementing International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements, for use by small and medium-sized practices (SMPs).The International Federation of Accountants (IFAC) is seeking proposals for the development of an explanatory guide on implementing International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements, for use by small and medium-sized practices (SMPs).

The purpose of this guide is to help SMPs around the world understand, comply with, and apply ISQC 1. The purpose of ISQC 1, which became effective on June 15, 2005, is to establish standards and provide guidance regarding a firm's responsibilities for its system of quality control for audits and reviews of historical financial information, and other assurance and related services engagements.

"Assisting SMPs in understanding how to apply ISQC 1 is consistent with IFAC's objective of helping these entities to implement international standards and so perform high quality work," states IFAC Chief Executive Ian Ball. "We envisage the guide being of particular benefit to auditors in those countries where the profession is at an early stage of development, but we believe it will also be of value in developed countries."

The specifications for the Request for Proposal: Development of a Guide to Quality Control for Use by Small and Medium Practices are available on IFAC's SMP Committee's web page. The deadline for submission is 12:00pm (EST), December 29, 2006.

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. 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. 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.

The World Federation of Exchanges (WFE) formally endorsed the processes for establishing International Standards on Auditing (ISAs) at its General Assembly meeting in Sao Paolo, Brazil last week, viewing ISAs as key to the development of a globally uniform financial reporting system. ISAs are developed by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board of the International Federation of Accountants (IFAC).

"WFE's endorsement of IFAC's structure of public oversight and the processes its public bodies have established for creating high quality global standards for audit work and assurance reviews is a critical advance for establishing the world's capital markets with constantly improving financial information," emphasizes WFE Secretary General Thomas Krantz. The WFE represents 57 securities and derivative markets that account for more than 97 percent of world stock market capitalization. Its endorsement provides important impetus for convergence to international standards, which is among IFAC's and the IAASB's most critical goals.

"We welcome this important endorsement of the ISA standard-setting process by the World Federation of Exchanges. It is a significant recognition of the quality of the ISAs and the important role they play in ensuring greater comparability of financial information for investors and facilitating cross border trade - both of which are critical to generating economic growth," states IFAC President Graham Ward.

The ISAs represent an integrated body of standards that provide direction on the actions and procedures the auditors need to perform and the judgments that need to be made to achieve the objective of an audit. ISAs are intended for use in all audits - publicly traded companies, private business of all sizes and government entities at all levels. They are increasingly being adopted worldwide; over 100 countries have adopted or incorporated ISAs into their national auditing standards or are using ISAs as a basis for preparing national auditing standards.

The IAASB, which meets in public, develops its standards following a rigorous and transparent due process. All proposed ISAs are exposed for public comment, and detailed project information is posted on its website (http://www.iaasb.org). The IAASB receives public interest input through public members that serve on the IAASB and from its Consultative Advisory Group* which is comprised of organizations, including the WFE, with an interest in the development of high quality international auditing standards. In addition, the Public Interest Oversight Board,** whose members are nominated by international regulators and organizations, provides public interest oversight of IAASB activities. All IAASB standards and guidance can be downloaded free-of-charge from the IFAC online bookstore: http://www.ifac.org/store.

About the IAASB and IFAC

The objective of the IAASB 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. 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.

For the majority of public sector entities, the costs of employee benefits have a major impact on financial performance and financial position. To assist governments and other public sector entities in appropriately accounting for these benefits, the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has issued an exposure draft (ED) of a proposed new International Public Sector Accounting Standard (IPSAS), ED 31, Employee Benefits.

"The proposed standard will contribute to more transparent and consistent accounting for employee benefits, which is essential to ensure responsible financial reporting by governments and other entities," emphasizes IPSASB Chair Philippe Adhémar. "The significance ofemployee benefits for the vast majority of public sector entities cannot be overestimated. The ED's requirements that entities account for obligations under public sector defined benefit plans and, when appropriate, recognize liabilities related to those obligations are particularly notable and may lead to important changes in existing practice for many public sector entities globally."

ED 31 is based on International Accounting Standard (IAS) 19, Employee Benefits, and addresses the four categories of employee benefits dealt with in IAS 19:

• Short-term employee benefits;
• Post-employment benefits;
• Other long-term employee benefits; and
• Termination benefits.

The proposed standard also deals with a number of issues of specific relevance to the public sector, including:

• Determining the risk-free discount rate to be applied for discounting obligations arising from post-employment benefits;
• The treatment of post-employment benefits provided through composite social security programs; and
• Mechanisms for the orderly implementation of the proposed standard in the public sector.

This ED was developed in accordance with one of the IPSASB's key strategic aims: promoting convergence with International Financial Reporting Standards (IFRSs) where the requirements of IFRSs are applicable to the public sector. It is also critical to the IPSASB's work to improve the quality of financial information reported by public sector entities around the world.

How to Comment

The IPSASB has identified a number of issues of particular significance to the public sector and is particularly keen to obtain constituents' views on how the ED deals with these issues. Comment on these and other issues raised in the ED are requested by February 28, 2007. It may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to publicsectorpubs@ifac.org. They can also be faxed to the attention of the IPSASB Technical Director 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 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'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. 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.

Ladies and gentlemen. It is a pleasure to be here with you today for the SC International annual conference and to commemorate the 20^th anniversary of the founding of SC International, one of the top 25 global accounting associations. Congratulations on reaching this important milestone.

I would like to thank Mr. Donal Watkin, your Executive Director, for the invitation to be here with you today. The firms you represent are a critical constituency of our international profession and I foresee that you will play an even greater role in the years to come in serving clients around the globe. We know that growing economies in Asia, where you have a strong presence, as well as in other parts of the world are in increasing need of services from professional accountants, as our role, indeed your role, is vital to assisting them in achieving economic growth.

I have been asked to speak to you today about the future of the accountancy profession. While our past success as a profession is a good foundation for the future, predicting the future simply by looking at the past assumes that conditions remain constant. That is like driving a car by looking only in the rear view mirror! 

Conditions certainly are not remaining constant. The environment in which we work has changed dramatically in the last few years and we are likely to see more significant changes in the upcoming years. Whether we are working in large, medium, or small firms, I believe that our fundamental duty is to the public interest and that our current and future activities must focus on achieving this goal. This is because our profession will have a future if and only if it serves, and is seen to serve, the public interest above all else. This morning, I will consider what future the profession might face and what IFAC is doing to bring about a successful future. I invite you to think about three interrelated global trends:

• First, the nature of business relationships will change in line with the changing balance of economic and, ultimately, geopolitical power between East and West, in particular with the rise of major economic powers in Asia, such as India and China. We are already seeing the success and vibrancy of their economies. Both these nations have big advantages – an enormous home market with few language barriers, the ability to spread research and development costs, huge investment in education and modern technology and mobile and educated workforces.
• Second, this shift will have a consequential effect on business and on reporting performance. Eastern business relationships are predominantly relationship-based, not transaction-based, and this is a major shift in perception for the West. Western business men and women – from the European Union, the United States and other nations – will need to look more closely at the development of financial and non-financial reporting as the values, expectations and decision-making criteria of society change.
• Third, the imperative that the developed world should be doing more to help developing nations, to benefit from globalization in a truly fair way, will become a primary focus of achieving world financial stability. Clearly, this objective is right for its own sake – both morally and ethically. In this effort, professional accountants will contribute where our expertise is most valuable, by building an investment climate of trust and by supporting both institutional strengthening and organizational performance throughout the world.

I am not alone in believing these to be significant trends. They are also recognized by business and government leaders, international standard setters, regulators, and international development and funding agencies.

Our profession has historically been responsible for the spread of financial knowledge and for a commitment to helping others around the world to develop the capacity to succeed. The growth of the profession has mirrored the growth of the capital markets and clearly – in business, practice and the public sector – we accountants are recognized as being intimately tied to the development and maintenance of sound financial infrastructures and of trustworthy, sustainable institutions. There is no doubt that a strong accountancy profession is fundamental to the economic success of every nation. The issues are common to countries throughout the globe, so it is right that we address them globally, as we do, through the International Federation of Accountants, as well as by acting locally, through national institutes and through firms such as yours.

Our response is important not only for the future of the accountancy profession but also as part of our responsibility to the future of the societies in which we live and work. Ours is a profession of people. What unites us is not simply shared technical expertise, but rather a shared commitment of people: professional accountants, to a common set of values, common objectives and a mission to serve the public interest.

Yes, we do need to address competitive pressures, for example, by maintaining our competency through Continuing Professional Development, by demonstrating our commitment to quality and to transparency, by delivering relevant and needed services and by being market oriented as professionals and by leveraging our strengths through associations such as the one which you have formed. But even more, we need to stay true to our core purpose of serving the public interest. Preparers of accounts must safeguard the integrity of financial statements. Practicing firms must meet both the challenges of running a business, thereby attracting high quality people into the profession, and safeguarding the quality, integrity and value of the audit. Accountants in the public sector must safeguard integrity in governments’ relationships with their citizens.

Our response to the trends I have talked about rests on three things:

• Making sure that we keep the public interest at the forefront of our activities – whatever sector we work in;
• Emphasizing the importance of ethics in all that we do – and promoting ethics throughout the whole financial reporting chain; and
• Supporting organizational performance by thinking globally – not just about our own businesses, but also in terms of global standards that promote transparent and useful information for decision making.

Public interest

So first, let us consider the public interest. There are three major initiatives, among others, that demonstrate our profession’s commitment to quality and that serve the public interest: the IFAC Member Body Compliance Program; the Forum of Firms and its commitment to quality; and our standard-setting initiatives.

Let me take a moment to tell you about the IFAC Member Body Compliance Program.  This program supports the development of high quality auditing, accounting, ethical, educational and related quality assurance and disciplinary standards in IFAC member bodies throughout the world. The program is intended to guide accounting institutes in the full spectrum of their professional responsibilities and to demonstrate a shared commitment to our profession’s values of integrity, transparency and expertise. As part of the Compliance Program, members and associates provide information on their compliance with IFAC’s membership requirements. This includes promoting and incorporating international standards, issued by IFAC and by the International Accounting Standards Board, into national standards and implementing quality assurance and investigation and discipline programs to monitor compliance with applicable professional standards. Responses to the Compliance Program are posted on the IFAC website once agreed with the member or associate.

The responses provide a valuable global snapshot of the accountancy profession from a standards perspective. Additionally, they help IFAC to gauge where it needs to focus its development work. Lastly, but perhaps most importantly, the responses to the questionnaires demonstrate the global profession’s willingness to be accountable for its actions to meet high standards, to deliver quality and to protect the public interest.  Phase 1 of the programme is complete.  Phase 2, which requires members and associates to complete a self-assessment questionnaire about their best endeavours to comply with IFAC’s membership requirements, is in progress. Almost all have completed their questionnaires and nearly forty are already available for you to review on our website.

I encourage you to review these responses to obtain information on the standard-setting and regulatory structures in countries around the globe and better to understand the extent to which international standards are promoted and followed in each country. This information could be valuable to you as your firms expand their operations.

The second program I want to discuss with you today is the Forum of Firms. 

In addition to the Member Body Compliance Program, IFAC, through the Forum of Firms, is able to promote convergence and adherence to high ethical values. The members of the Forum of Firms, which is comprised of over 20 global networks and associations of public accounting firms, have committed to the use of International Standards on Auditing and of the IFAC Code of Ethics for Professional Accountants for transnational audits. Additionally, these firms have committed to use the IAASB’s International Standard on Quality Control 1, which establishes a high quality standard for the quality control systems within the firms. This commitment to IFAC standards and to the promotion of high quality and consistent performance was reinforced in February 2006 with the approval of a new constitution for the Forum of Firms. The new constitution updates membership requirements to emphasize the firms’ commitment to audit in accordance with the IAASB’s International Standards on Auditing, and all members of the Forum must show that they meet all the requirements to be deemed to be full members. The requirements for membership and the names of all members of the Forum are listed on the Forum of Firms website, which is www.ifac.org/fof.

The Transnational Auditors Committee (TAC) is the executive committee of the Forum of Firms and also a committee of IFAC and is dedicated to meeting the needs of the Forum. Essentially, it assures that the voice of the firms is heard. It identifies audit practice issues and when the issues suggest changes in auditing or assurance standards may be required, it recommends to the appropriate IFAC standard-setting boards that the issue be reviewed. The TAC also provides a forum to discuss "best practices" in areas including quality control, auditing practices, independence, and training and development and acts as a formal conduit for interaction among transnational firms and international regulators and financial institutions with regard to audit quality, systems of quality control, and transparency of international networks. Lastly, the TAC nominates five candidates to serve on each of IFAC’s standard-setting boards (except for the IPSASB). 

I encourage SC International to consider membership of the Forum of Firms, as I believe that it represents a substantial opportunity for networks and associations visibly to demonstrate their commitment to quality to their clients, to regulators and to the public. Further, members of the Forum have found the Forum’s membership framework to be an extremely useful means to promote and monitor consistent high quality audit delivery in each of their member firms.

Let me turn now for a moment to our standard-setting initiatives. IFAC, through its independent standard-setting boards, sets standards in four areas: auditing and assurance, ethics, education and public sector accounting. Time does not permit me to elaborate on the roles of all of these boards or to describe all of the new standards, but I would like to highlight for you now a few of those which are most significant to well informed markets.

In the area of auditing, the International Auditing and Assurance Standards Board (IAASB) sets international standards on auditing and assurance, quality control and related services that are recognized throughout the world. A key objective of the IAASB is supporting international convergence to its International Standards on Auditing (ISAs). So far, more than 100 countries worldwide have adopted ISAs or are using them as the basis for national auditing standards. In addition, I am very pleased to report to you that at its General Assembly meeting, earlier this month, the World Federation of Exchanges announced its endorsement of ISAs. This important endorsement by the World Federation of Exchanges, which represents 57 securities and derivative markets that account for more than 97 percent of world stock market capitalization, provides important recognition of the high quality of the IAASB’s standards and of the reforms that we have implemented over the past three years to protect further the public interest and to enhance the transparency of the IAASB and of our other standard-setting boards.

To strengthen support for convergence at the national level, the IAASB has developed new guidance, for national auditing standards setters that adopt its standards with limited modifications, which was issued in July. While not intended to be a definitive statement on convergence, the document provides guidance on the extent to which modifications to adopted international standards are permitted, while still allowing the national standard setter to assert that the national standards conform to the international standards.

To ensure that its standards are clear and understandable the world over, the IAASB has undertaken a significant project to improve the clarity and structure of its standards. In September, it approved the first three standards redrafted in its clarity drafting convention, which will be released later this year. The IAASB has now undertaken an ambitious timetable to redraft all its standards in the new clarity style, with a provisional effective date for all new standards of December 15, 2008. The new style was developed based on input it received at an international Clarity forum last year and through responses to its 2004 Proposed Policy Statement and Consultation Paper on Clarity. We hope that this new style will not only make the standards more understandable, but also make them better capable of being translated and used in countries throughout the world.

The IAASB is also addressing several critical issues in auditing and assurance. In March 2006, it issued a re-exposure draft designed to enhance the quality of audits of group financial statements, entitled proposed ISA 600 (Revised and Redrafted), The Audit of Group Financial Statements. Following earlier consultations, the IAASB has modified the proposals and reissued the exposure draft to address issues related to the extent to which the group auditor needs to be involved in the audits of components that are audited by other auditors, whether these auditors are independent of the group auditor or belong to the group auditor's national or international firm or network of firms.

We at IFAC are also focused on strengthening the transparency and accountability of the financial reporting of governments and of other public sector entities. Through the International Public Sector Accounting Standards Board (IPSASB), IFAC develops International Public Sector Accounting Standards (IPSASs), which are designed to improve public sector financial management and accountability. We view this as an increasingly important area of IFAC activity. The IPSASB is currently addressing key issues for public sector accounting, including accounting for social policy obligations of governments, non-exchange revenue and budget reporting.

An important IPSASB objective is facilitating convergence with International Financial Reporting Standards, upon which the IPSASs are based, and with statistical bases of financial reporting. Last year, the IPSASB issued exposure drafts further to converge its standards with International Financial Reporting Standards and with statistical reporting bases. The IPSASB is making great strides in its convergence efforts. An increasing number of governments and public sector entities worldwide, including the Organisation for Economic Co-operation and Development, the World Bank and the North Atlantic Treaty Organisation, are using IPSASs. In addition, earlier this year, the United Nations General Assembly adopted a financial management reform program that calls for the adoption of IPSASs by all the organizations within the UN group.

Today, we accept that if we are to achieve convergence, particularly in the area of auditing standards, it’s very important to involve a broad constituency in standard setting in order to ensure that the views of those who use and rely upon those standards are considered. In this context, let me turn now to public interest oversight – which I see as essential to the credibility of standard setting and essential to building confidence in the work of auditors. In February 2005, a new independent Public Interest Oversight Board (PIOB) was created to oversee IFAC’s standard-setting activities in the areas of auditing, ethics and education; and the Member Body Compliance Program. The PIOB, led by Professor Stavros Thomadakis, and comprised of very high quality people, was established by IFAC in cooperation with international regulators and institutions. Its members are nominated by international regulators and other international organizations. In addition, we have obtained the close involvement of investors, regulators, preparers and others in our standard-setting processes through, for example, the Consultative Advisory Groups for each of our standard-setting boards.

The PIOB has approved the standard-setting processes of three standard-setting boards: the IAASB, International Accounting Education Standards Board, and the International Ethics Standards Board for Accountants and the new members of these boards for 2006 and 2007. I should point out that the PIOB does not oversee the IPSASB. That board is subject to different oversight. The PIOB’s oversight has helped to enhance the credibility of IFAC’s standards, build confidence in them by regulators and fuel international convergence. The power of its credentials has led recently to the European Commission committing to appointing two full members to it.

In addition to public interest input and oversight, IFAC also considers the needs of smaller firms and of small and medium enterprises (SMEs) in the development of international standards. We all are well aware that SMEs are, together, the economic engine that fuels growth, jobs, and ultimately individual prosperity and security, in developing as well as in developed countries, in all parts of the world. Here in the European Union, SMEs represent 95.77 percent of the businesses. These figures are mirrored globally, with SMEs representing 97 percent of the total companies in the Asia-Pacific region and 99.7 percent of all employers in the United States. Because of their sheer scale when taken as a whole and the dramatic effect that successful SMEs can have on national and international economies, their issues must be at and remain at the forefront of IFAC’s priorities. Our focus, through the IFAC Small and Medium Practices (SMP) Committee and other groups, is to develop practical guidance that is universally and easily available to accountants worldwide; to make sure that the voices of SMPs and SMEs are heard by standard setting boards; and to provide forums for the exchange of ideas on how we can all better support one another.

In July, the SMP Committee organized a forum in Hong Kong to discuss the challenges and opportunities facing SMEs and SMPs. Over 130 participants from 35 countries attended the conference and their deliberations 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.

To help to address these challenges, IFAC’s SMP Committee is taking a two-pronged approach to helping SMEs and SMPs to converge and comply with international auditing and accounting standards, helping to shape the form and content of international standards and providing practical assistance to SMPs and SMEs that have to use them. It is developing a guide to International Standards on Auditing for SMEs and a web-based knowledge resource for SMPs. Additionally, the SMP Committee continues to respond to exposure drafts of international standard setters where an SMP or SME focus is needed.

I emphasize that all IFAC exposure drafts are posted on the IFAC website and it is very important to us to get comments from firms like those you represent. Please do take the time to respond to the EDs.

Reporting shifts

I would like to return now to the second trend that I described in the beginning of my remarks. Recalling the East/West shift, relationship-based business, rather than transactional based business, poses its own issues. At present, financial statements report transactions and the results of transactions. In future, companies will also have to report on their relationships, probably through narrative reporting.

The International Accounting Standards Board has undertaken a project to consider a possible role in improving the quality of the management commentary. Last October, it issued a discussion paper that offers recommendations on how the IASB might promote the wider adoption of best practice in the interests of investors and of others who use financial reports.

Accounting for sustainability is another area that will gather more impetus. It involves recognizing the intangible costs and benefits of decisions as well as the tangible, for example, how decisions taken today will affect future performance and outcomes. Conventionally, we account in financial statements for the revenues and expenses that fall to or on the organization. Accounting for sustainability involves seeking to account for costs and benefits – including non-financial effects – that fall on other members of society.

To encourage the involvement of the profession in this issue, IFAC has established a Sustainability Experts Advisory Panel, which serves in an advisory capacity to both our Professional Accountants in Business (PAIB) Committee and the International Auditing and Assurance Standards Board. The PAIB Committee plans to raise awareness of the issue and to provide good practice guidance for professional accountants in business in this area. As part of this process, it will be coordinating and encouraging member body research and representation. In addition, IFAC is addressing sustainability on a global level through its representation on the Global Reporting Initiative.

Developing credible accounting measures on sustainability is, conceptually, extremely difficult but must be tackled. Coupling this driver with the East/West shift, will traditional accounting measures become the appendices to narrative reports, not the main information for analysis and reaction?

Ethics and the whole financial reporting chain

My second point focuses on ethics. Serving the public interest is grounded in our professional ethics. That will not change.

Our profession is built upon and committed to sustainability and stability, consistency and credibility, and independence and integrity. These are enduring values which are the hallmarks of a profession. They must be upheld and enforced by professional accountancy firms if the public interest is to be well-served. And they should underpin our future response to the global trends I mentioned.

All IFAC staff and volunteers embrace and promote the values we stand for – integrity, transparency and expertise. These values are reflected in our strategic plan, in our professional standards and in our decision-making processes, as well as in IFAC’s Code of Ethics for Professional Accountants, which is applicable to all professional accountants in business, practice and government and upon which many national codes of professional conduct and ethics are based. Last June, IFAC’s International Ethics Standards Board for Accountants issued an updated Code of Ethics, which reinforces the five fundamental principles of professional ethics: integrity, objectivity, professional competence and due care, confidentiality and professional behavior. These are personal qualities that today’s and tomorrow’s accountants must have.

In future it will become even more important for us to take up the challenge of promoting the importance of ethics throughout the financial reporting supply chain. Because, as was highlighted in the IFAC-initiated independent report on Rebuilding Public Confidence in Financial Reporting, prepared by a Task Force chaired by John Crow, a former Governor of the Bank of Canada and a former Chairman of the Central Bank Governors of the Group of Ten Countries, and published three years ago: failure to recognize the primacy of integrity was a major contributor to the financial scandals of recent years. A key recommendation of the report was that effective corporate ethics codes need to be in place and actively monitored. So often in the past, we have heard that finance directors have acted as the only conscience of the board when, of course, without underestimating the importance of the finance director, ethical behavior should be at the heart of the board and of the company as a whole.

So while one cannot over-emphasize that the tone for an organization needs to be set at the top, there is a key role for all professional accountants in business to help in practical ways to promote ethical values throughout an organization. Members of firms such as yours should, I believe, encourage your clients to recognize and to act on this responsibility.

Before I move on from ethics, I want to emphasize that a fundamental role of the International Ethics Standards Board for Accountants is to ensure that the Code remains relevant. As part of this process, in July, the Ethics Standards Board issued a revision to the Code of Ethics to update the definition of a network firm. This update provides important guidance to firms in the area of independence and includes information on the application of the definition. The Ethics Standards Board is also currently addressing issues such as audit independence and whistle-blowing and is in the process of developing new guidance for professional accountants in government and in business.

Additionally, IFAC’s International Accounting Education Standards Board has released new guidance on ethics. Last month, it proposed a new International Education Practice Statement (IEPS), Approaches to Developing and Maintaining Professional Values, Ethics and Attitudes, designed to assist IFAC member bodies in developing ethics education and continuing professional development programs for their members. There is no doubt that ethics education programs enhance professional accountants’ ethical judgment and their decision making.

Organizational performance – thinking globally

My third point is on supporting organizational performance by thinking globally.

We have a duty to our profession throughout the world, including both developed and developing nations, and to ourselves to deliver:

• The enduring values I’ve talked about – our commitment to the public interest and to professional ethics;
• The benefits of global standards, with accountancy as the international language of business; and
• Trust in the capital markets.

We are well-placed to act, bringing benefits now and for future generations.

Our profession is regarded as one of the main conduits to fighting financial corruption. And it is no secret that many developing economies have a problem on this front, often driven by those in developed nations who, for example, offer bribes to gain advantage, but too often driven by poverty. For example, the misappropriation of aid funds has been raised as part of last June’s G8 discussions. So we need to build strong professions that can help to ensure that the right funds are directed to the right places.

IFAC’s Developing Nations Committee is working at an international level, with organizations such as the World Bank and the United Nations Conference on Trade and Development, to build responsible accountancy professions in developing nations and to support the development of the financial infrastructures within which our profession will operate. Towards that end, this past September IFAC, together with the World Bank and the African Development Bank, sponsored a Learning Workshop in Nairobi for government leaders, donor agencies and representatives of the accountancy profession, among others, as a first step in determining a plan of action to help African nations further to develop stable economies.

As a result of an extensive consultative process, the Committee is also preparing a country-specific approach to supporting developing nations, helping both those countries where there is no established profession and those that have only begun to build the professional, financial and regulatory architecture necessary to support economic growth.

In addition, to assist in the establishment and development of professional accountancy bodies – which is viewed as a critical first step in creating a sound and viable financial infrastructure – we have released good practice guidance on the roles and responsibilities of a professional body, education and examination, and on capacity development. This guidance addresses a range of situations, including where the accountancy profession does not exist in a country, where the profession exists and there is a desire to establish a professional accountancy body, and where an existing professional body requires further development and enhancement. The guide also includes suggested areas for priority action based on short-, medium- and long-term goals and projects.

In Conclusion

The future of our profession does rest on staying relevant, up to date and market oriented. But most fundamentally, it depends on demonstrating professionalism, acting in the public interest and not losing sight of our core purpose as custodians of transparency and integrity in financial reporting. It needs to be focused on ethics as the foundation of that purpose and acting and thinking globally, at a local level, to fulfill that purpose.

These objectives are at the heart of IFAC’s work and are, I believe, embraced in SC’s strategic plan. Our profession needs to be respected and influential today, if we are to be so in the future.

All of us here have a role to play in building confidence in financial information and financial infrastructure. Yet we also have a role to play in communicating how those infrastructures work to protect the public interest. Clear information about the financial reporting process needs to be presented to those who rely on – or want to rely on – the information that results from it. Additionally, clear information about the economic policy framework, the regulatory environment, and economic developments is essential to sound business decisions. Thus, while I urge you to continue to take actions in this area, it is equally important to communicate those actions to the public who, ultimately, will benefit from them.

If we continue to commit to putting the public interest first and to living our profession’s values of integrity, transparency and expertise, the future of the accountancy profession is bright: For professional accountants in public practice, this means that you will be recognized fully for the role you play: as auditors, in facilitating fair, well-informed capital markets; and as professional advisors, in creating wealth. 

If we fail to commit to the public interest and to sound values, we will lose public confidence and no longer have an accountancy profession or accountancy firms that we would recognize as such.

It is a stark choice. I believe that we will make the right choice, together. Working together as a global profession we will live those values of integrity, transparency and expertise. Working together with regulators, investors and other stakeholders, we will command justified public confidence.

As we look to the future, it is evident that the quality of information expected by investors and needed by public and private sector decision makers will become even more critical to the development not only of national market economies, but to the global economy as well. Thus, ensuring high-quality financial reporting is an area where there is no room for compromise. We must all continue to be as proactive as possible and make an ongoing commitment to high-quality financial reporting. Nor can we afford to compromise in any other service area. Acting with integrity, transparency and competency must be the supreme driving force for all accountants. It is good for business and good for society. It is what distinguishes our profession from all others and enables us to contribute to worldwide stability and prosperity.

If I leave you today with only one message, it is that you should never forget this role that you play in the global arena.

Thank you very much for your attention.

Good afternoon. It is a pleasure for me to be here today with you in the inauguration of the National Congress on Auditing.

On a personal note, it is always a marvelous opportunity to visit Spain, the country where my grandfather was born, and for this reason it is especially close to my heart. It is amazing how the places of our origins forge and inspire a sense of identity and affection.

It is also a joy for me to have the possibility to visit such a special and admirable city such as Bilbao.

In fact, I think that it is particularly symbolic that we are meeting, exchanging opinions, analyzing the future of the accounting profession, its challenges and the answers that it must have to those challenges, in a city that knew how to correctly redefine itself when it was necessary. Bilbao re-won and strengthened its vitality by centering on culture and converting itself into a city dedicated to services and also by turning itself over to environmental and urban renewal. I believe that Bilbao offers a brilliant example of how to face tendencies and adapt to the context, difficulties and changes.

We can see this city in the same light as its country, together with all of their citizens, as a model of interpretation to think about the challenges facing the accounting profession and also to take advantage of the opportunities presented to us.

I want to thank the Instituto de Censores Jurados de Cuentas and in particular it’s President, Don José María Gassó, for the invitation extended to me and allowing me to be here today in contact with all of you.

The slogan for this plenary session is “the profession on a new horizon.” This implies that the profession is moving. And when we are moving, we are always exposed to the vicissitudes of the road.

There can always be a stone in the road. One can trip over it if distracted. One can stop and let him or herself be detained by the obstacle. One can see the rock as a purposeful threat. One can simply overcome that obstacle or one can pause above it and use it as an opportunity to extend his or her vision of the horizon and also to build a bridge to move even farther. In any case, the difference is not the stone, but rather the attitude of the person.

I will begin by giving you good news: today, society is convinced, more than ever, that the accounting profession and, in particular, auditing is essential for the proper functioning of the capital and financial markets and for the proper functioning of the economy. Today, there is a clear conviction that auditing is a key link in the chain in the production of financial information and therefore has an important function in the public interest.

The great challenge unfolding for us all is to intelligently define the conditions, so that quality is given, and given efficiently.

The audit directive has provided a reasonable regulatory framework for Europe. Among the definitions adopted by the directive throughout the member states, I would like to point out the decision to adopt the international auditing standards, once they will have been developed following the due process, with public oversight and transparency, and have been generally accepted internationally, contributing to the high level of credibility and quality of the annual or consolidated accounts and will have added to the European public interest.

IFAC, through the International Audit and Assurance Standards Board (IAASB), has been working impeccably so that all of the above mentioned conditions are achieved and the standards adopted by the European Commission.

The decision has been taken to accelerate the Clarity Project to finish it before the end of 2008, instead of 2011, as was estimated in the original plan.

The Consultative Advisory Group of the IAASB has been made stronger to permit a fluid and significant contribution on behalf of the users of the standards.

IFAC has successfully implemented the reform and the Public Interest Oversight Board (PIOB) is achieving its duty to oversee the public interest activities of IFAC. In March of this year, the PIOB approved the due process and the work processes of the different standards setting boards, among them the International Audit and Assurance Standards Board. In May, the Public Interest Oversight Board issued its first public interest report, in which in reference to the transparency and the quality of the nominating process for the members of the standards setting boards of IFAC, it reported that, “The PIOB concluded that the IFAC Nominating Committee had operated with a high level of professionalism and had sought to make high quality choices with a sense of fairness, balance, and objectivity.”

A few days ago, in the conference of the Fédération des Experts Comptables Européens, Commissioner Charlie McCreevy communicated his satisfaction, which of course is shared by IFAC, for the recent understanding about governance issues of the International Auditing and Assurance Standards Board and the Public Interest Oversight Board and has expressed that this will allow the Commission to move closer to the adoption of ISAs. He also confirmed that he thinks that the two EU observers should become full members of the Public Interest Oversight Board. 3

Therefore, all of the conditions are being fulfilled to seal the adoption of the International Standards on Auditing on the behalf of the European Commission. And this is very good news for Europe and for the rest of the world.

In relation to the auditing standards, in particular, with respect to their use by small and medium enterprises, I think it is worth mentioning that IFAC, through the Small and Medium Practices Committee, estimates that for the middle of 2007 they will publish a Guide for the application of the International Standards on Auditing for the audits of small and medium enterprises. It will be without a doubt very useful, considering the number and the importance of these businesses in all economies of the world. It will facilitate a practical implementation of the principle that an audit is an audit and that it is not convenient to consider the existence of different sets of auditing standards according to the size of the entities being audited.

The auditing directive leaves considerable room with respect to other areas for the decisions of the member states in the transition process of national legislation and ruling.

I would like to refer today to two of these areas: public oversight, in particular, quality control, and the independence of the auditor.

The European Directive establishes that each member state should organize an effective system of public oversight of auditors and auditing firms and define, for this, certain principles.

The principal objective of the oversight mechanism should be to protect the public interest. The key element of the oversight function is independence with respect to the accounting profession, whether it is achieved exclusively through the resources of the oversight body or through monitoring and directing of activities of other organizations, including professional organizations.

In this area, it is fundamental maintain sight of the primary objective, the reason for being. As I said in the beginning, the quality of the audit is a key factor for the confidence in financial information and of the capital and financial market system as a whole. Public oversight is an important way of assuring the quality of audits.

Quality is ultimately the final and principal objective. It is clear that as much the profession, as the oversight body, coincide in this central objective. In this issue, there are no conflicting interests, but rather the contrary is true, the interests coincide.

The understanding of this reality is fundamental at the time of designing the oversight system and delineating the relationship between the overseer and the overseen. 

It is clear, then, that in this concurrence of objective, it is not the mere fulfillment of requirements and formalities, but rather the true implanting of a culture of quality, that will signify the measure of success for all: auditors and supervisors. The great beneficiary will be the public that uses auditor services.

In this sense it is interesting to remember that the IFAC Statement of Membership Obligation (SMO) 1, related to quality control, establishes that each member body, in this case the Instituto de Censores Jurados de Cuentas de España, should assure the existence of an mandatory quality control program and that when these functions are managed, as in this case, by an independent government body, it should assist in the implementation in all that is appropriate and should obtain an understanding of the scope of such a program, in such a way so that if all the aspects included in said SMOs are not satisfied, the professional organization should establish a complementary program that covers all the missing parts.

This is a very good demonstration that there are not different objectives, but rather a shared final objective.

The principles and standards included in the SMO 1 constitute a very good base for the design of the quality control program and can be very useful in the development and implementation phases that, in the processes of transitioning the auditing directive to legislation and local rules, will be faced next.

The current sections of the IFAC Code of Ethics related to independence were issued in November 2001. The facts and the circumstances present since then have driven many jurisdictions to perform actions tending to restore credibility in financial information, of which many refer concretely to the independence requirements of the auditor. Hence, the International Ethics Standards Board for Accountants decided to confront the revision of the corresponding section of the Code to determine which of the requirements should be revised. A forum was held in October 2005 to obtain the comments and input for this project. The topic has been considered high priority, it is being intensely worked on, and with out a doubt an exposure draft will be issued in December of this year.

The objective of this rule, based in principles and developed under the approach of threats and safeguards, updated now based on experience and the new market demands can constitute a clear international reference.

If on the one hand, IFAC’s requirement of its member bodies is that they not apply requirements less strict that the contents of the IFAC Code, then the ideal certainly is world wide convergence in this area as well.

To conclude, I would like to refer briefly to the accounting standards.

Just as the rest of the European Union, Spain has adopted the International Financial Reporting Standards (IFRSs) for the consolidated financial statements of listed entities.

It is my understanding that it is in the process of defining the applicable standards for the rest of the cases. It is also my understanding that a consensus also exists, which of course I share, that these standards should be harmonized with the IFRSs.

Being as it is, allow me to make a suggestion. Think seriously about the possibility of adopting IFRSs, in your case, introducing some exception if a founded justification exists, and avoid the elaboration of your own a set of standards, as harmonized as it may be. What’s more, the greater the degree of harmonization attempted to achieve, the less sense it makes to have the superposition of sets of standards.

Under this same focus, the adoption of standards issued by the International Accounting Standards Board (IASB) for small and medium enterprises should also be considered, those that it is assumed will be consistent with the applicable IFRS to entities that should have public accounts.

This not only unmistakably will assure consistency, but also will facilitate the future process with respect to changes in the international standards. In addition, it would allow for savings in resources that could be used in incrementing and strengthening the participation of Spain in the elaboration process of international standards, whether it is intervening directly in the IASB, having an active and opportune participation in the analysis of drafts, or contributing with proposals to be integrated in the work agenda of the IASB.

As you may have been able to appreciate from the examples I mentioned today, IFAC continues working intensely to promote the global adoption of the international standards, to facilitate and improve the applicability of the standards to small and medium enterprises, to contribute to the development and the strength of the accounting profession around the world, and to improve the quality of financial and auditing information.

We want to do accomplish this with the collaboration of our member bodies. We want to ensure the existences of adequate channels for participation so that our activities can benefit from all cultures and take the best from each.

Global convergence does not imply cultural change. Ortega y Gasset says that “culture is a set of solutions that society gives to the problems of the era it lives.” If convergence helps a culture have better solutions, this does not mean that the culture has to change, it only implies adapting.

Spain can not be absent from this process. The Instituto de Censores Jurados de Cuentas de España has a great deal to add to the global profession. Each country has its unique values and talents, which if they are not added, are lost.

In relation to my last point, it pleases me to inform you that the Executive Committee of IFAC has designated Carmen Rodríguez as member of the IESBA and this designation has been approved by the PIOB.

I am convinced that Spain is in the conditions, and I would even say that it has the obligation, to continue increasing its presence in the international environment.

As far as all of you, I want to encourage you to continue working with your sights on the new horizon, looking at the market and its needs, identifying and designing more efficient methods to serve your clients, preparing to act with new technology and to take the leadership in the preparation and revision of non-financial information and in the new forms of accessing and using information, convinced of the value that you can add and the contribution that you can make to the integral development of the society you live in. 

Thank you, Eamonn, for inviting me to make a few remarks this evening. It is a privilege to be here with you and your President, Pádraig Ó Feinneadha, to speak before such a distinguished group of professionals. Indeed, I truly appreciate this opportunity discuss a topic that increasingly has made its way into boardrooms, classrooms, lunchrooms, and even to our dinner table: that is the topic of Ethics in Business. Ethics, as we know from the lessons we learned from Enron, WorldCom, Tyco and other companies around the world, is a driver both of business stability and business success. Without a strong ethical foundation, companies and their management are more likely now, than ever before, to find their customer base eroded and their profit margins narrowed.

What is to prevent ethical lapses on the part of company management and those that support management, such as lawyers, investment managers and professional accountants: both in public practice and those who work as CFOs or internal auditors? I think there are three fundamental ways to prevent it: Company management must:

• Establish realistic business objectives;
• Develop a transparent business culture; and
• Promote and enforce a corporate code of ethics among their employees and require their service providers to do the same.

Let me comment briefly on these areas, beginning with the need to establish realistic business objectives, before I turn to the accounting profession’s ethical roles and responsibilities.

Last year, a study entitled, The Ethical Enterprise, A Global Study of Business Ethics, reported that the number one factor likely to cause people to compromise ethical standards was pressure to meet unrealistic business objectives and deadlines. Recognizing this, management must strive to balance business objectives with the reality of their resources and, along the way, they must continually remind employees that ethics is sacrosanct. An Ethics Department or resource center should be available to assist employees when they are confronted with ethical dilemmas. We are quick to provide technical resources to our employees, to assist them in expeditiously and correctly carrying out their work; we must apply the same strategy to ethics.

Secondly, we must develop a transparent business culture. Again, this is an area where there is no room for compromise. An open and transparent corporate culture breeds honesty and respect on the part of employees. Corporate secrets, on the other hand, arouse suspicions and create unhealthy corporate cultures. Without transparency, the credibility of the organization can also be compromised.

Thirdly, it is vital that every company, no matter how large or small, no matter what the industry or area of practice, develop and promote a corporate code of ethics. The value of that code will be significantly enhanced if the code is consistently enforced. In fact, this was exactly the recommendation made in the 2003 report of the Task Force on Rebuilding Public Confidence in Financial Reporting, chaired by John Crow: a former Chairman of the Central Bank Governors of the Group of Ten countries. The Task Force emphasized the need for management to develop an ethical “tone at the top” and to reinforce this tone with an ethical code of conduct that is widely promoted throughout the company and regularly enforced. Those recommendations, supported by regulators, standard setters and others, are now resulting in significant changes in corporate culture. Ethics and values are, I believe, finally getting the attention that is necessary.

What then is the role of the International Federation of Accountants in promoting strong ethics? First, IFAC’s values of integrity, transparency and expertise, are embraced in all the work carried out by IFAC and by our four independent standard-setting boards. Our board and committee members, for example, all sign declarations indicating their commitment to these values and to act in the best interests of the public.

IFAC’s International Ethics Standards Board for Accountants develops the international Code of Ethics for Professional Accountants, which is applicable to all accountants, including those in business and industry, public practice, the public sector and academia. In June 2005, the Ethics Standards Board released an updated Code of Ethics, which establishes a conceptual framework for all professional accountants to ensure compliance with the five fundamental principles of professional ethics. These principles are integrity, objectivity, professional competence and due care, confidentiality and professional behavior. Under the framework, professional accountants are required to identify threats to these fundamental principles and, if there are threats, to apply safeguards to ensure that the principles are not compromised. The framework applies to all professional accountants: to those in public practice, as well as to those in business and government.

And by the way, the title ‘accountant’ should only apply to members of recognised institutes, to protect and reassure the public that all those known as accountants are bound to follow the IFAC ethics code.

In July 2006, the Ethics Standards Board issued a revision to the Code of Ethics to update the definition of a network firm. This update provides important guidance to firms in the area of independence and includes information on the application of the definition. The Ethics Standards Board is also currently addressing issues such as audit independence and whistle-blowing and is in the process of developing new guidance for professional accountants in government and in business.

Additionally, IFAC’s International Accounting Education Standards Board has released new guidance on ethics. Last month, it proposed a new International Education Practice Statement (IEPS), Approaches to Developing and Maintaining Professional Values, Ethics and Attitudes, designed to assist IFAC member bodies, such as CPA Ireland, in developing ethics education and continuing professional development programs for their members. There is no doubt that ethics education programs enhance professional accountants’ ethical judgment and decision making. The guidance proposed by the Education Standards Board will help member bodies to develop these skills in current and future professional accountants.

The Education Standards Board is now in the process of finalizing an Ethics Education Toolkit to assist member bodies, academic institutions and others in instilling a strong ethical foundation in the accountants of tomorrow. The toolkit will include sample course outlines, teaching notes, case studies, video clips of ethical dilemmas, and a database of ethics education resource materials. It will be available for download from the IFAC website free-of-charge, like all IFAC publications, by the end of the year.

My personal belief is that probity and profitability go hand in hand. Ethical conduct lies at the core of all business. We do business with those we trust; we get business from those who trust us. Ethics, therefore, are a driver of business growth which demands attention from boards and investors alike. Similarly, society accepts those it trusts and ethics are a driver of the social and political acceptability of doing business in corporate form.

The IFAC Professional Accountants in Business (PAIB) Committee is, therefore, expanding the guidance it develops, with a focus on supporting professional accountants in business in providing high quality information and in acting ethically. Earlier this year, the committee issued an exposure draft, Guidance for the Development of a Code of Corporate Conduct, proposing guidance to assist professional accountants and others in establishing and implementing codes of conduct in their organizations. The goal of this proposed new guidance is to support sound corporate governance policies worldwide. The proposed guidance highlights the benefits of an effective code of conduct and identifies professional accountants’ roles in the development, monitoring, reinforcement, and reporting of such codes in their organizations. To assist in the creation of codes of conduct, the guidance includes information on presentation and content, organizational and management challenges, and implementing a code of conduct in a global organization.

Guidance is helpful, but it is important for all of us to keep in mind that it is best to lead by example. Good governance and sound ethics have to be embedded within companies, to grow from within, not be force fed from without. That means leaders, such as yourselves, need to be role models as well as active promoters of sound ethics.

The French Mathematician and philosopher Blaise Pascal said: “The virtue of man ought to be measured not by his extraordinary exertions, but by his everyday conduct.” I believe that these words hold true for every professional accountant worldwide, as well as for all of us in this room tonight. By dedicating ourselves to doing what is right, we will enhance our professional reputation, win public and client trust, and contribute to economic prosperity.

I know that the CPA Institute shares these values, together with the IFAC values of integrity, transparency and expertise. Your participation in the IFAC Member Body Compliance Program, in which you indicate your commitment to and promotion of international auditing, ethics, and accounting standards, makes a very clear statement about the strength of your organization. I am proud to work with you, both institutionally and personally, in our profession’s drive to generate economic growth and stability in every country of the world.

Thank you very much for your attention.