The International Ethics Standards Board for Accountants (IESBA) is proposing changes to its Code of Ethics for Professional Accountants (the IESBA Code) to provide additional guidance to professional accountants in business and in public practice concerning conflicts of interest, and to make revisions to provide more comprehensive guidance in identifying, evaluating, and managing conflicts of interest.

The IESBA approved this project in October 2009.  It examined two sections of the IESBA Code that address conflicts—Section 220, for professional accountants in public practice, and Section 310, for professional accountants in business. In the IESBA’s view, the approach to be taken by a professional accountant in public practice and a professional accountant in business should be broadly similar.  The proposal recognizes, however, that conflicts of interest will typically arise in different circumstances for accountants in public practice, particularly because a conflict of interest may arise from professional services provided by other members of the accountant's firm.

Ken Dakdduk, IESBA Chair, notes, “The proposed changes will provide more specific requirements and guidance for a professional accountant in applying the conceptual framework when identifying, evaluating, and managing conflicts of interest. This includes a clearer description of what is meant under the IESBA Code by the term ‘conflict of interest.’ The changes should assist professional accountants in early identification of a potential conflict of interest, and prompt accountants to evaluate their ability to be objective in that situation and meet the other fundamental principles in the IESBA Code.  From the perspective of the public, timely identification of potential conflicts of interest can provide affected parties with more time to engage an alternative service provider.”

The proposed guidance also calls for professional accountants in business to be alert to interests and relationships that a reasonable and informed third party would be likely to conclude might compromise compliance with the fundamental principles. Further, the IESBA proposal would strengthen the guidance on threats created by compensation and incentive arrangements.

How to comment
The IESBA invites all stakeholders to comment on its proposals. To access the exposure draft and submit a comment, visit the IESBA website at www.ethicsboard.org. Comments on the exposure draft Proposed Changes to the Code of Ethics for Professional Accountants Addressing Conflicts of Interest are requested by March 31, 2012.

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

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

This an update on the initiative the IAESB has undertaken to revise and redraft its suite of eight International Education Standards (IESs).

Over 60 representatives from 12 Commonwealth of Independent States (CIS) and Baltic countries met with leadership and staff of the International Auditing and Assurance Standards Board (IAASB), the International Accounting Standards Board (IASB), and the International Federation of Accountants (IFAC) to discuss adoption and implementation of International Standards on Auditing (ISAs) and International Financial Reporting Standards (IFRSs).

The event—jointly hosted by IFAC and the International Financial Reporting Standards Foundation (IFRS Foundation) on November 28 and 29, 2011, in London, with the support of the Institute of Chartered Accountants of England and Wales (ICAEW)—was an excellent example of the constructive cooperation in regard to the development, adoption, and implementation of high-quality auditing, assurance, and financial reporting standards. The event involved a series of meetings to discuss areas of particular interest for each country delegation, including translation and adoption of standards and membership of IFAC. These meetings were preceded by a half-day seminar with presentations by key IAASB and IASB members. The event was attended by representatives from Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Latvia, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Delegates included IFAC member bodies and associates, professional accountancy organizations, national standard setters, ministries of finance, regulators and securities market authorities, national banks, donor organizations, and other key stakeholders. The meeting was convened under the leadership of Mr. David Damant, former chair of the IAASB Consultative Advisory Group and former board member of the International Accounting Standards Committee (predecessor to the IASB).

During his presentation on the IAASB’s activities, Chairman Arnold Schilder spoke about development of audit and assurance standards and audit quality. He said, “In developing high-quality audit standards, achieving effective implementation, and enhancing audit quality, we need to have a strong dialogue and cooperation with users and with regulators.” Prof. Schilder highlighted the constructive relationship between the IAASB and the IASB, and gave examples of this cooperation, including mutual attendance at meetings and commenting on relevant exposure drafts. Prof. Schilder also discussed the activities of the IAASB to respond to the needs of small- and medium-sized entities (SMEs); current initiatives in areas including auditor reporting, reviews and compilation engagements, disclosures, and reporting on greenhouse gases; possible future efforts addressing professional skepticism and proportionality of International Standard on Quality Control 1; and the IAASB’s monitoring of emerging developments on integrated reporting. 

Jon Grant, IAASB member, discussed the adoption and implementation of the ISAs and some key success factors, including effective planning, cooperation with relevant stakeholders, and high-quality translations.

IASB Vice Chair Ian Mackintosh presented an overview of the IASB’s current work plan and its ongoing consultation on the future agenda. Over 100 countries now require or permit the use of IFRSs. Russia is expected to adopt IFRSs in the very near future. Mr. Mackintosh also discussed the recently signed Memorandum of Understanding between the IASB and IFAC, which outlines the bodies’ commitment to continue to work together and further their constructive dialogue.

Wei-Guo Zhang, IASB member responsible for the relationship with the CIS, discussed ongoing IASB projects in the areas of revenue, leases, financial instruments, and insurance. 

Paul Pacter, IASB member, informed the group about the IFRS for SMEs. Released in 2009, this self-contained International Financial Reporting Standard is designed to meet the needs and capabilities of SMEs.  To date more than 70 jurisdictions have adopted the standard.

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

About the IASB
The IASB was established in 2001 and is the standard-setting body of the IFRS Foundation, an independent, private sector, not-for-profit organization. The IASB is committed to developing, in the public interest, a single set of high quality global accounting standards that provide high quality transparent and comparable information in general purpose financial statements. In pursuit of this objective the IASB conducts extensive public consultations and seeks the co-operation of international and national bodies around the world. The IASB has 15 full-time members drawn from 11 countries and a variety of professional backgrounds. By July 2012 the Board will be expanded to 16 members. Board members are appointed by and accountable to the Trustees of the IFRS Foundation, who are required to select the best available combination of technical expertise and diversity of international business and market experience. In their work the Trustees are accountable to a Monitoring Board of public authorities. For more information visit www.ifrs.org.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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The International Auditing and Assurance Standards Board (IAASB) today released its plan for a post-implementation review of the clarified International Standards on Auditing (ISAs). In 2009 the IAASB concluded its five-year Clarity project to redraft and revise the ISAs. The post-implementation review is the second phase of the IAASB’s efforts to monitor the implementation of these standards. The review is focused on whether the clarified ISAs are being consistently understood and implemented in a way that achieves the IAASB’s goals in revising and redrafting them.

“With extensive uptake of the clarified ISAs throughout the world, in already more than seventy-five countries, now is the time to gain a deeper understanding of how the clarified ISAs are being used and implemented,” said Prof. Arnold Schilder, Chairman of the IAASB. “When this review is completed in 2013, the IAASB will be better able to assess whether there is need for further changes to the ISAs. Timely feedback on the clarified ISAs from a variety of stakeholders is therefore essential for this purpose and the IAASB’s objective of ensuring that its standards continue to be of the highest quality.”

Features of the post-implementation review, which involves gathering information about the use of the clarified ISAs during 2012, are set out in the IAASB’s Plan for a Post-Implementation Review of the Clarified International Standards on Auditing.

Recognizing the broad range of stakeholders that may be interested in providing feedback to the IAASB about the clarified ISAs and their implementation, the IAASB encourages and welcomes input from all interested parties for the purpose of the review.

How to Comment

To access the plan and details on how to provide input, visit the IAASB’s website. Input for the purpose of the review is requested by no later than October 31, 2012.

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

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 164 members and associates in 125 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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This plan is the second phase of the IAASB’s efforts to monitor the implementation of clarified ISAs. The review is focused on whether these standards are being consistently understood and implemented in a way that achieves the IAASB’s goals in revising and redrafting them. Recognizing the broad range of stakeholders that may be interested in providing feedback to the IAASB about the clarified ISAs and their implementation, the IAASB encourages and welcomes input from all interested parties for the purpose of the review.

The International Ethics Standards Board for Accountants (IESBA) today released for exposure  Proposed Changes to the Code of Ethics for Professional Accountants Related to Provisions Addressing a Breach of a Requirement of the Code. The IESBA believes that any breach of a provision of the Code of Ethics for Professional Accountants (IESBA Code) should be treated as a matter of utmost importance. Therefore, the IESBA has proposed changes to the IESBA Code that will provide guidance to a professional accountant on the action to be taken in such situations. This includes a robust framework for addressing a breach of an independence requirement that will result in greater transparency. This Exposure Draft is the result of a project that commenced in 2010.*

The proposed changes to the IESBA Code include a requirement that a professional accountant take whatever actions that might be available as soon as possible to satisfactorily address the consequences of a breach of a provision of the Code.  For a breach of an independence requirement in the IESBA Code, a detailed framework is provided setting out the action to be taken. Specifically, the proposed changes would require a firm to:

• terminate, suspend, or eliminate the interest or relationship that caused the breach;
• evaluate the significance of the breach and determine whether action can be taken to satisfactorily address the consequences of the breach;
• communicate all breaches with those charged with governance and obtain their agreement with the proposed course of action; and
• document the actions taken and all the matters discussed with those charged with governance and, if applicable, any relevant regulators.

“The proposed changes to the IESBA Code should help to ensure that the significance of any breach of an independence requirement is discussed with those charged with governance, and that professional judgment is taken into account when taking action,” stated Ken Dakdduk, IESBA Chair. “An auditor resignation due to an independence violation—regardless of the magnitude of the violation—has potential consequences to the company, its investors, and the capital markets.  The proposed framework will guide accountants, and those charged with governance, in determining whether resignation is an appropriate outcome or whether a different outcome can be supported. In addition, disclosure will enhance transparency, and the proposed documentation requirement adds a degree of rigor to the process that will be very useful.”

How to Comment
The IESBA invites all stakeholders to comment on its proposals. To access the exposure draft and submit a comment, visit the IESBA’s website at www.ifac.org/Ethics/publications-resources. Comments on the exposure draft are requested by January 23, 2012.

*Note to Editors:
In 2010, the IESBA assessed the provisions in the IESBA Code that address a breach of an independence requirement, and concluded that a project should be undertaken to reconsider those provisions, including determining whether the provisions are needed and, if so, how the guidance can be enhanced with regard to scope and application. As a result of this project, the IESBA concluded that it is in the public interest to have an appropriate mechanism that can be consistently applied across all jurisdictions in order to provide companies, auditors, regulators, and similar authorities with a framework to evaluate the impact of an independence violation and determine whether the auditor's resignation is the only appropriate outcome.

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

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 164 members and associates in 125 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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The IPSASB has approved the Consultation Paper Reporting Service Performance Information. The IPSASB considers that reporting service performance information is necessary to meet the objectives of financial reporting, which are to provide information that is useful to users of General Purpose Financial Reports (GPFR) for accountability and decision making. This project aims to present a principles-based approach to developing a consistent framework for public sector entities.

IPSASB Chair Andreas Bergmann stressed, “Service performance information is essential for accountability for the efficient and effective use of resources, service provision, and achievement public sector entities’ objectives. Service performance reporting can provide financial and non-financial, as well as quantitative and qualitative, information about the achievement of service delivery objectives in the current reporting period, as well as anticipated future service delivery activities and resource needs.”

Various public sector entities around the world currently report service performance information. In practice, such reporting is diverse. The objective of the IPSASB’s service performance information project has been to improve the consistency and comparability of such information across jurisdictions and between entities.

Overall, the Consultation Paper proposes a framework for reporting service performance information. The framework includes information on the scope of the service performance information reported, the public sector entity’s objectives, the achievement of those objectives, and a narrative discussion of the achievement of all the objectives. The Consultation Paper also proposes a standardized service performance information terminology and working definitions to enhance users’ understanding of service performance information reported as outlined in the proposed framework.

The Consultation Paper is available to download free of charge from the IPSASB website (www.ipsasb.org). The IPSASB encourages IFAC members, associates, and regional accountancy bodies to promote the availability of this consultation paper to their members and employees.  

About the IPSASB
The IPSASB develops accounting standards and guidance for use by public sector entities. The structures and processes that support the operations of the IPSASB are facilitated by IFAC.

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 164 members and associates in 125 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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The International Public Sector Accounting Standards Board (IPSASB) has published Exposure Draft (ED) 46, Recommended Practice Guideline. This ED builds on a consultation paper issued in late 2009. ED 46 provides good practice guidelines on reporting on the long-term fiscal sustainability of a public sector entity, and particularly emphasizes that entities may be able to draw on projections that are already being made by other bodies, thereby ensuring a cost-effective approach.

The sovereign debt crisis has emphasized the significance of the fiscal condition of governments and other public sector entities to the global economy. There have been heightened concerns about the ability of governments to meet debt servicing obligations and the extent to which they can maintain current policies and meet current and future obligations related to entitlement programs, without raising taxes and contributions or increasing debt to unsustainable levels.

These concerns have emphasized the importance of providing projections of inflows and outflows of resources over the longer term, together with narrative explanations of the main risks facing governments and other public sector entities. This information allows the users of general purpose financial reports to assess the extent to which current policies are sustainable, and complements the financial statements, which remain at the core of public sector financial reporting.

“The continuing volatility in the world’s financial markets has reinforced the IPSASB’s conviction that  financial statements alone cannot provide all the information necessary to enable citizens, investors, and other users to evaluate the long-term fiscal sustainability of governments and public sector entities,” explained Andreas Bergmann, chair of the IPSASB. “ED 46 aims to provide straightforward guidance to entities to ensure that information on their fiscal sustainability is complete, relevant, and understandable. I encourage our constituents to give this ED full consideration, provide feedback, and assess the need to report on the long-term sustainability of their finances.”

This IPSASB project has continued to benefit greatly from the oversight of a Task Force with a wide membership, including standard setters with experience reporting on long-term fiscal sustainability, governments that have many years’ experience reporting on long-term fiscal sustainability, and supranational organizations, such as the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), and Eurostat, the statistical office of the European Union.

ED 46 is available to download free of charge from the IFAC website (www.ipsasb.org). The IPSASB encourages IFAC members, associates, and regional accountancy bodies to promote the availability of this Exposure Draft to their members and employees.  

About the IPSASB
The IPSASB develops accounting standards and guidance for use by public sector entities. The structures and processes that support the operations of the IPSASB are facilitated by IFAC.

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 164 members and associates in 125 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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