IES 3 prescribes the learning outcomes for professional skills that aspiring professional accountants are required to demonstrate by the end of Initial Professional Development. Professional skills are the (a) intellectual, (b) interpersonal and communication, (c) personal, and (d) organizational skills that a professional accountant integrates with technical competence and professional values, ethics, and attitudes to demonstrate professional competence.

IES 3 is effective from July 1, 2015.

IES 2 prescribes the learning outcomes for technical competence that aspiring professional accountants are required to demonstrate by the end of Initial Professional Development. Technical competence is the ability to apply professional knowledge to perform role to a defined standard.

It is effective from July 1, 2015.

This report is published by MOSAIC (Memorandum of Understanding to Strengthen Accountancy and Improve Collaboration), a historic Memorandum of Understanding that sets out the basis for improving cooperation and collaboration between IFAC and the international development community that will provides the foundation for increasing the capacity of professional accountancy organizations (PAOs) and improving the quality of financial management systems in emerging economies.

Workshop Session

During the Professional Accountancy Organization (PAO) Development Committee meeting in Accra, Ghana, a half-day open workshop session was held to which representatives of Pan African Federation of Accountants (PAFA) member bodies from across the continent were invited. The aim of the session was to:

• present the IFAC Statements of Membership Obligations (SMOs) and look at the changes made during the revision process;
• allow participants to share their experiences with adoption and/or implementation of the international standards in the SMOs, regardless of the development stage of the organization and IFAC membership status; and
• familiarize all participants with the Dashboard Reports and allow them to consider the responsibilities, adoption status, and current priorities for one or more SMOs in their own jurisdiction.

Following a presentation from IFAC staff, PAO Development Committee members, observers, and guests split into three groups to focus on three different SMO aspects:

• approaches to adoption and implementation of international standards;
• implementing quality assurance; and
• establishing effective investigation and disciplinary processes.

The workshop promoted exchange between participants and provide an open forum to share experiences and ideas. Below is a summary of some of the themes of discussion.

Summary of Discussion

Approaches to adoption and implementation of international standards

Responsibility: It is unusual for a PAO to have the responsibility for every standard-setting SMO (3, 4, 5, and 7). Where the responsibility lies elsewhere, understanding the environment, including any relevant legislation and resource challenges, is key to understanding the PAO’s role in supporting the associated processes. Due to the core role of government, challenges to progress on SMO 5 (International Public Sector Accounting Standards, or IPSAS) include a range of financial and political factors that differ significantly from one jurisdiction to the next. In cases where the PAO is not responsible for education and training, the PAO should consider a formal collaboration with the relevant educational institution(s). This can allow efficient sharing of information around the International Education Standards (IES) for timely updates to curriculum and training programs, resulting in the appropriate training of high quality professionals.

Enforcement: Enforcement of a code of ethics may be challenging where PAOs have limited capacity or a limited legal mandate. A consideration may be to work in partnership with a national anticorruption body to make additional resources available and may permit legal enforcement of a code of ethics in the jurisdiction. Working with a public institution also grants a wider audience, enabling key information regarding cases to be communicated in the public interest.

Proactivity: Not all PAOs evolve in a jurisdiction where the support and development of the accountancy profession is a priority for the government and/or other stakeholders. Where legislation related to the accountancy profession does not exist at the national level, PAOs should consider how best to enhance the relevance of the profession and encourage best practice from their members. This may include amending a PAO’s bylaws and rulebook to require members to use international standards in their professional practice. Such a decision must be supported by appropriate training, tools, and guidance.

Communications: Advocacy around the importance of international standards and information-sharing activities aimed at regulators and governments, as well as the public, should be a key part of a PAO’s strategy. Establishing and maintaining dialogue with key players in the political arena can ensure the accountancy profession is on their agenda. Where responsibility for standard setting or key implementation activities lies elsewhere, clearly communicating the assistance a PAO can provide to relevant stakeholders in support of high-quality financial information is essential.

Strategic planning: The ongoing update of standards by the international standard-setting boards requires processes to be in place to ensure timely adoption and implementation at the jurisdiction level. An agreed-to plan allows for objective setting, appropriate allocation of resources, and determination of a realistic timeline for implementation. SMO Action Plans are a tool that can be used for such an organizational planning process.

Implementing quality assurance

Quality review program: When establishing a quality review program , consider assessing existing internal quality review programs for larger firms and, depending on their effectiveness, placing some reliance on those programs when conducting specific reviews. For smaller firms, a robust quality review program can be monitored and supported by the PAO, which can feed findings into development programs. Peer review is typically ineffective in small jurisdictions where the profession is close-knit and, therefore, finding independent professionals is a challenge. Regional quality assurance systems can be a solution where capacity doesn’t exist at the national level.

Stakeholder engagement: Achieving buy-in from all stakeholders is crucial. A relationship with the auditor general can ensure high-level awareness of the results of all audits. At the early stages of the program’s implementation, when dealing with a firm that falls short of requirements, sensitizing those that will be affected, rather than seeking to instantly punish, can prove most effective. Public reporting of findings at the country level to highlight key themes from reviews, for example, can also help with this process.

Continuing professional development (CPD): Due to the importance of members in practice undertaking relevant CPD, a number of PAOs have introduced percentage-based mandatory practice-related CPD as a condition of annual practicing license renewal. More generally, PAOs should ensure that a wide range of CPD training and resources are available for members to update their knowledge and skills—this is particularly vital to assist small- and medium-sized practitioners (SMPs) who may not have capacity for in-house training.

Establishing effective investigation and disciplinary processes 

Advocacy and communication: Relationships should be built and maintained with government and other regulators to publicize the role of the PAO in investigating and disciplining its members. In jurisdictions where PAO membership is not mandatory to practice, it can be of crucial importance to ensure the public understands requirements and how to access quality professionals. Penalties for practicing without a license should be significant enough to act as a deterrent. Decisions regarding publication of names of individuals found to be practicing without a license or violating other regulations should be tied to the severity of each case.

Committee composition: Legislation can negatively affect an effective investigation and disciplinary process, since smaller jurisdictions can struggle to maintain the committee composition required by law. Where appropriate, credibility of disciplinary or appeals tribunals can be enhanced through the appointment of ministry or high court officials, or by their involvement in selecting committee members, such as the chair. Public members and legal representation, in addition to the presence of accountants on the committee, can enhance objectivity and transparency.

Cooperation with regulators: Agreements with regulatory authorities can ensure appropriate flow of information around cases. Where there is overlap in the processes of a PAO and those of an independent or audit regulator, a formal relationship can help avoid duplication and may lessen administrative burden on the PAO.

Background

The IFAC Member Body Compliance Program

The IFAC Member Body Compliance Program is one of continuous development and improvement for PAOs—IFAC members and associates. It is based on the IFAC Statements of Membership Obligations (SMOs), which serve as a technical framework for PAOs to set strategic objectives. The program operates with oversight and advice from the IFAC Compliance Advisory Panel (CAP) and is subject to Public Interest Oversight Board (PIOB) review. IFAC member body development staff and the PAO Development Committee work with PAOs to support their progress in addressing the SMOs.

The Revised SMOs

The IFAC SMOs were revised and ratified by the IFAC Council in November 2012 to use “plain English” principles and express member bodies’ obligations more clearly. At a high level, the revisions include:

• clearer definition of obligations;
• greater clarity and improved flow of logic;
• a focus on adoption and implementation, aligned with IFAC’s strategy;
• an applicability framework to guide PAOs with varying levels of responsibility for SMO areas;
• the extension of the scope of external quality assurance review to apply to all audits of financial statements; and
• a clarified process of investigation and discipline with a stronger connection to SMO 1.

IFAC members and associates are required to address the SMOs by developing, executing, reviewing, and regularly updating their SMO Action Plan.

SMO Progress Reports

Dasboard Reports are prepared by IFAC staff based on an evaluation of information presented by the IFAC member or associate in their SMO Action Plan. Dashboard Reports provide a high-level snapshot of the status of a PAO and its jurisdiction at a point in time. To evaluate and monitor progress made by IFAC members and associates, Dashboard Reports use three interrelated indicators.

• The level of responsibility that the PAO has for each of the seven SMO areas.
• The adoption status (at the country/jurisdiction level) of the international standards relevant to each SMO area.
• The status of progress made by the PAO, as represented in their SMO Action Plan.

Dashboard Reports, in addition to addressing these three areas, also provide background information on the IFAC member or associate, including its size, sectors of the profession served, and a general indication of available resources and capacity.

The International Federation of Accountants (IFAC), the global organization for the accountancy profession, along with the World Bank, the Inter-American Development Bank, and the Global Public Policy Committee, held the seventh Conference for Accounting and Accountability for Regional Economic Growth, or CReCER (Contabilidad y Responsabilidad para el Crecimiento Económico Regional) in Cartagena, Colombia, this week. IFAC member body the Instituto Nacional de Contadores Públicos de Colombia hosted and executed the 2013 CReCER event.

Themed Integrating Approaches to Financial Reporting to Advance Regional Economic Growth: An Exchange between Public and Private Sector, the conference drew more than 350 attendees and speakers and covered important topics, such as national and regional initiatives to advance adoption and implementation of international standards; global perspectives on the evolving role of auditors and accountants; recent capital market developments to support investment; and the future of business reporting, including integrated reporting.

IFAC supports this important event as part of overall efforts to strengthen professional accountancy organizations and their role in contributing to high-quality financial reporting and serving as centers of excellence for the auditing and accountancy profession. This year’s event was especially important because of the timeliness of the sessions on strategies for integrating International Public Sector Accounting Standards with public sector financial management systems and the recent Exposure Draft on auditor reporting from the International Auditing and Assurance Standards Board.

“The discussions, collaborations, and learning that takes place at CReCER by the profession and its key stakeholders have a lasting impact on accountancy and the economies in the region,” according to IFAC President Warren Allen. “These three days set up the next few years of work on the ground for professional accountancy organizations and international standard setters.”

IFAC looks forward to continuing to collaborate with nations and organizations in the region to advance the global and local issues of importance to accountancy and accountants, especially strengthening public sector financial management.

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 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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The IFAC Nominating Committee plays a vital role in establishing the expertise of the independent standard-setting boards, the IFAC Board, Compliance Advisory Panel, and IFAC committees by seeking out and identifying the best candidates for vacancies. Whether it is one of the independent standard-setting boards or an IFAC committee, the Nominating Committee examines nominations from around the world, analyzes experience and expertise, and considers diversity when recommending new members and leadership for the boards and committees, all while maintaining transparency and strict adherence to due process. The Nominating Committee, under the oversight of the Public Interest Oversight Board (PIOB), also strives to ensure sufficient nominations are received each year and helps professional accountancy organizations and other stakeholders establish an effective nominations strategy.

The Nominating Committee is comprised of two ex-officio members—the IFAC president and deputy president—and at least four non-ex-officio members, of whom no more than two can be IFAC Board members. There are currently two Board members on the committee—Ana Maria Elorietta and Japheth Katto—although during some years there have been none. For 2013, the non-Board members, or ordinary members, are Margaret Parker, Professor Judy Tsui, and Sir David Tweedie.

I asked committee members to share their experiences and thoughts on the work of the committee in order to increase the knowledge among our stakeholders of the work and diligence involved.

—Warren Allen, IFAC President

1. What made you interested in serving on the Nominating Committee?
   
   Ana Maria Elorrieta: Due to my accumulated knowledge of IFAC, I felt that I had a reasonable understanding of most of the needs at the board and committee level so I realized that I could contribute to the nominations process. Additionally, in so doing, I would be representing Latin America.
   
   Japheth Katto: I wanted to make a contribution to the leadership and governance of IFAC, its committees, and the independent standard-setting boards by being part of the selection of professionals serving on the boards and committees. In my view this is an important exercise as serving the public interest is the foundation of IFAC's mission.
   
   Margaret Parker: My member body contacted me to put my name forward. I was on a nominating committee in my state in Australia so was familiar with the overall requirements of a nominating committee at the local level.
   
   Sir David Tweedie: I believe passionately in global standards, whether they are in accounting, auditing, ethics, or education. If we are to gain acceptance for these standards, we need the very best people the profession can offer to draft them. I wanted to do my best to ensure that the [boards and] committees were filled by those who were respected thinkers in their particular specialisms and had an international outlook rather than being merely placemen.
    
2. Since you became a member, has your view of the Nominating Committee and its work changed? Has serving on the Nominating Committee been what you expected?
   
   Japheth Katto: I always knew that the committee played a very big role and that its job was not an easy one. However, I did not fully appreciate how intricate and complicated the process was, especially when you have many candidates who fit the criteria of "best person for the job."
   
   Margaret Parker: Serving on the committee has been much more than I expected. The rigor and concern for the public interest are foremost in the committee’s mind. I have also come to understand that the work of the committee is vital to the quality of volunteers on the boards and committees.
   
   The committee is very cohesive and cooperative, which adds to the overall enjoyment of the work. On a personal level, it has been a wonderful experience to be on an international committee where the members are from all over the world.
   
   Judy Tsui: I was pleasantly surprised to find out that the Nominating Committee has established such comprehensive and consistent procedures and processes for all the nominations. The PIOB observer, in particular, serves as a monitor of public interest.
   
   Sir David Tweedie: I have been astounded at the thoroughness of the work of the committee. It seeks to be scrupulously fair—it examines the CVs very carefully, then ensures that not one committee member has an undue influence in the result. I have found the work of the committee and its staff extremely professional—far exceeding anything else I have experienced with nominating committees.
    
3. The competition for membership on boards and committees is very high; how does the committee select the “best” candidates for positions?
   
   Ana Maria Elorrieta: This is really a very important activity. We first analyze the profile of the best candidate in accordance with the boards’ and committees’ needs. Then we analyze the CVs received and try to match one to the other. The analysis of the CVs is very detailed work performed individually by each Nominating Committee member, so when we discuss as a group, each member has a point of view on the best candidates. Then we complete our knowledge of the candidates through the interviews to provide the basis for the final decision. It is a very comprehensive process.
   
   Japheth Katto: In arriving at the best candidate for the position, the committee's guiding criteria is the candidate's knowledge, experience, and ability to add value to the board or committee. Before the final decision, other factors, such as geographical and sector (Big 4, small- and medium-sized practices, professional accountants in business, etc.) representation are taken into account. Clearly, it wouldn't be in the public interest if all or most members of a board or committee were from the Big 4 or one region. Diversity is important.
   
   Margaret Parker: The committee members read all the CVs submitted via the Call for Nominations. We also consider the requirements of the boards and committees for which we are recommending candidates. It is, therefore, important for nominees to include their experience relevant to the particular board in their CV. The committee members individually rank the nominees prior to our meeting. At our next face-to-face meeting, a technical voting system is used to rank the nominees who are then chosen for either telephone or face-to-face interviews.
   
   Committee members, together with board/committee chairs, conduct telephone interviews, gleaning the candidates’ experience of the work of the board/committee, their relevant work experience, and what they may bring on a personal level. Written reports of the interviews are provided to the Nominating Committee for further consideration in choosing the recommended nominee.
   
   In making the final choice, all aspects of the “best” person for the job are considered—relevant experience required by the board/committee, regional representation, gender representation, and English language skills.
   
   Sir David Tweedie: Once the CVs have been read by the individual members, we all vote electronically at the same time and then select for interview those nominees that receive the highest number of votes. We usually interview twice as many candidates as there are vacancies. The interviews are carried out by a Nominating Committee member and the chair of the committee [in question]. The notes on these interviews are then passed to the whole committee at the next meeting where the interview results are debated. If there are doubts about the caliber of those interviewed other candidates may be sought from member bodies.
    
4. How is your role as an ordinary (non-Board) member different from a Board member? How is your role as a Board member different from an ordinary (non-Board) member?
   
   Ana Maria Elorrieta: The difference between a Board member and non-Board member is that we have the input from the Board, including suggestions and concerns related to the other boards and committees. This includes discussions around strategy and risks. We can add this perspective to the Nominating Committee discussion.
   
   Japheth Katto: I think as a Board member, I bring the perspective of the Board as a whole. I will know the Board's thinking based on previous experience and on ongoing consultations between the Nominating Committee and the Board.
   
   Margaret Parker: I don’t believe my role as an ordinary member is different from a Board member. We all have a say in the decision making, all have a vote in choosing the candidates for interview, all have an opportunity to provide input after an interview. The Board members will have wider experience with IFAC, which occasionally will impact our decisions; however, generally, there is no difference.
   
   Sir David Tweedie: In most cases, there is no difference between the two roles. The Board members, however, are more experienced with the workings of IFAC—they can explain IFAC policies and answer questions about individuals who have served on IFAC boards/committees in the past or explain the history of certain applications.
    
5. What does serving the public interest, which is embedded in IFAC’s mission, mean to you as a member of the Nominating Committee?
   
   Ana Maria Elorrieta: To serve the public interest is to act with an objective and balanced view and avoid influence of any type. It means to think strategically and with a long-term view, looking to protect the society and not any individual part.
   
   Japheth Katto: Simply put, serving in the public interest means selecting those candidates that are going to work not in the interest of their nominating organization or their employers or regions, who are not going to allow [themselves] to be unduly influenced, and who are going to act with integrity in the interest of the global profession and the public that it serves.
   
   Margaret Parker: To me, serving the public interest means making decisions that are best for the whole rather than a part of the whole. This can be applied from a wide perspective, such as making decisions that are best for the world rather than a particular country or region, or doing what is best for a group rather than the individual. When applying this philosophy to the nominating [process], it means making decisions that are in the best interest of the public at large, rather than the accountancy profession in particular, or a particular region, country, or individual.
   
   Sir David Tweedie: The public interest should be in the DNA of every accountant. In looking at candidates, I look for those that have clearly been involved in public policy issues, have written articles advocating professionalism, or have given time to move the profession forward. Public interest to me is acting in a neutral, unbiased way to present transparent information to society at large and to act with integrity and objectivity without regard to particular interests. I look for this in those who are nominated for the [boards or] committees.
    
6. How does the committee ensure due process in its actions?
   
   Ana Maria Elorrieta: There is a clear and objective process that is carefully followed. There are discussions at each phase, to reaffirm the adequacy of the decisions taken at each stage of the process. Every member is free to contribute and discuss.
   
   Japheth Katto: The committee has procedures and processes that are agreed [to], including Terms of Reference [which are approved by the IFAC Council and the PIOB]. It makes consensus decisions and documents its processes. In addition, its work is observed by the PIOB.
   
   Judy Tsui: Due process is ensured through:
   
   • Open, detailed, and rigorous discussions;
   • Adhering to anonymous electronic voting [to derive a shortlist of candidates];
   • Adhering to the principle of candidate selection based on the “best person for the job” and meeting geographical and gender diversity when possible once the candidates meet performance criteria; and
   • Maintaining the practice of having the board/committee chair and Nominating Committee members conduct telephone interviews for selecting board/committee members, and conducting in-person interviews for selecting IFAC Board and Nominating Committee members, and board/committee chairs.
   Margaret Parker: The committee members are very conscious of working in the public interest and according to the Terms of Reference of the committee. Members of the staff of IFAC who are familiar with the Constitution and regulations surrounding the work of the committee are also in attendance at the meetings to provide input where necessary. However, the meetings of the Nominating Committee are overseen by a member of the PIOB who ensures due process is followed and that the public interest is protected.
   
   Sir David Tweedie: See the answer to question three. Sometimes, however, excellent candidates simply are unable to obtain a place on a committee by virtue of the fact that their country or region is over represented and views from other parts of the world are necessary to give balance to that committee. In such cases, the unsuccessful candidates are frequently advised to reapply for a position. Due process isn’t simply looking for the best candidates but seeking to achieve a balanced composition on any board or IFAC committee.

IFAC Board member Masum Turker presents at the HLB International Conference.

The Governance Self-Assessment for Professional Accountancy Organizations is an assessment tool developed to assist professional accountancy organizations in reviewing how they meet the principles and practices of the Model Guide for Professional Accountancy Organizations and Evaluating and Improving Governance in Organizations

IFAC has developed this Model Guide based on Good Governance: A Code for the Voluntary and Community Sector (The Code), created by the Code Steering Group, comprised of the Association for Chief Executive Officers (ACEVO), the Charity Trustee Networks (CTN), the Institute of Chartered Secretaries and Administrators (ICSA), and the National Council for Voluntary Organisations (NCVO), and supported by the Charity Commission for England and Wales. The Model Guide has been specifically developed to assist PAOs in

Presentation given to the Federation of Accounting Professionals in Thailand during a seminar on the IFAC Statements of Membership Obligations (SMOs). The presentation includes information what the SMOs are, their importance, the November 2012 revisions, and what organizations need to understand and do to apply the SMOs.