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Tsuguoki Fujinuma President International Federation of Accountants (IFAC)

Role of Disclosure in Strengthening Corporate Governance and Accountability Regulation of the Audit Profession. Tsuguoki Fujinuma President International Federation of Accountants (IFAC). Introduction. Regulators focussing on audit quality Self-regulation – the best way forward

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Tsuguoki Fujinuma President International Federation of Accountants (IFAC)

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  1. Role of Disclosure in Strengthening Corporate Governance and AccountabilityRegulation of the Audit Profession Tsuguoki Fujinuma President International Federation of Accountants (IFAC) Hong Kong

  2. Introduction • Regulators focussing on audit quality • Self-regulation – the best way forward • Action by the profession to ensure audit quality and relevance Hong Kong

  3. Regulators • Focus on audit profession due to: • expanded information needs as a result of globalisation, IT etc • high profile audit failures/Asian crisis • Increasing involvement in audit profession: • endorsement of IAS by IOSCO • proposed endorsement of ISA by IOSCO • demands by regulators and IFIs for improved quality Hong Kong

  4. Self-regulation – the best solution • National level: • government/regulators responsible for legislative framework • professional bodies responsible for standard-setting, compliance, enforcement • International level: • international legislation still at early stage • international professional bodies responsible for standard-setting, compliance, enforcement • Profession is being challenged to demonstrate its ability to: • meet expanded demands of capital markets • undertake assurance standard-setting/enforcement roles Hong Kong

  5. IFAC and IASC • Aim of IFAC/IASC • creation of transparent and comparable global financial and auditing environment • IASC • development, promulgation and review of IAS • changes in governance, membership • IFAC • broad standard-setting role (ISA, ethics, education, other areas) • compliance review • enforcement Hong Kong

  6. IFAC : International Standards on Auditing (ISA) • Core of existing standards • Existing level of acceptance and use • Ensuring quality and relevance of standards • New areas to be covered (derivatives) • Other non-financial assurance areas (eg PFI, environmental reports, KPI) • Their importance to decision-takers • Benefits of international endorsement by IOSCO Hong Kong

  7. IFAC : Ethics • Importance of independence of auditors • New IFAC principles-based framework • Consistency of approach with EU and USA • Other guidance (MDPs, other services to audit client) Hong Kong

  8. IFAC : Education • Particularly relevant to needs of developing nations • IFAC’s proposed update of standard syllabus and IT components Hong Kong

  9. Commitments of Major Firms • To support use of IAS • To use ISAs in their audit procedures • To ensure ethics rules comply throughout their networks using IFAC Code as minimum • To provide greater education and training • Closer working relationship with IFAC through membership of IFAC Forum of Firms • eligibility requirements • membership obligations • firmwide independent quality reviews Hong Kong

  10. Compliance, Monitoring, Enforcement • Creation of independent Public Oversight Board • Obligations of IFAC’s 143 member bodies • Creation of IFAC Compliance Committee • to review domestic introduction of IAS, ISA, other IFAC standards and guidelines • to review monitoring and disciplinary procedures by profession bodies of their members • Independent quality assurance reviews of firms through IFAC Forum of Firms • Encourage adoption of standards through creation of International Forum on Accountancy Development (IFAD) Hong Kong

  11. International Forum on Accountancy Development (IFAD) • Building accounting capacity and capabilities in developing and emerging countries • Strengthening financial reporting and its credibility • Membership from IFAC, practising firms, regulators, IFIs • Benchmarking various aspects of financial architecture against international standards e.g. accounting, auditing, independence, corporate governance, disclosure requirements • Support and assistance to “plug gaps” Hong Kong

  12. Conclusion • Profession and firms taking significant steps to meet/exceed public expectations • Harmonised and high quality accounting and auditing profession to support public and private sectors • Working increasingly closely with regulators and IFIs towards this goal Hong Kong

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