International developments in Accounting and Auditing Regulation

1. International developments in Accounting and Auditing Regulation REPARIS WORKSHOP VIENNA - 15 March 2006 Philippe DANJOU Chief Accountant – AMF IASB’s SAC Member CESRFin AuditbTask Force

2. Disclaimer This document was prepared solely for the purpose of informing participants to the March 2006 Reparis Forum. The views expressed herein only represent the personal views of the author, and cannot be considered whatsoever as representing those of the AMF, SAC or CESR AMF - titre de la présentation

3. The world of auditing and accounting is changing fast and becoming quite complex…I will try to give an overview of what is going on ! • NEW LEGISLATION ON AUDITING • NEW PUBLIC OVERSIGHT STRUCTURES • REPORTING ON INTERNAL • CONTROLS AND GOVERNANCE • CONVERGENCE OF ACCOUNTING • STANDARDS • STOCK EXCHANGES’ EVOLUTION • SECURITIES REGULATORS MORE ACTIVE AMF - titre de la présentation

4. MANY SUBJECTS AND PLAYERS Legislators IOSCO CESR Oversight bodies Codes of Corp Gov Enforcement stds Monitoring group Reports on Internal ctrl Oversight Corporate governance Enforcement authorities PREPARERS AUDITORS INVESTORS IFRS & IFRIC ISA Financial Intermediaries : Analysts CR agencies IASCF IFAC PIOB Standard setting processes AMF - titre de la présentation

5. Acronyms used in slides • MG / Monitoring group : an informal grouping of international organizations of regulators, ( World Bank; IAIS; BCBS, IOSCO); chaired by IOSCO ; FSF participates in a coordinating / umbrella role • PIOB : the Public Interest Oversight Board of IFAC • IFAC: The International Federation of Accountants (regroups the national Institutes or professional organizations of accountants); CAG: Consultative Advisory group (established to advise IAASB and IESBA) • IAASB: International Audit and Assurance Standards Board (establishes standards for auditing and other assurance work performed by auditors) • IESBA : International Ethics Standards Setting Board for Accountants (establishes international independence and ethical standards for auditors and other accountants); precedently named the Ethics Committee • IFIAR : International Forum of Independent Audit Regulators (regroups the national bodies in charge of the oversight of the audit profession; e.g PCAOB, FRC, H3C..) • WB : The World Bank • FSF: the Forum for Financial Stability • IAIS: the International Association of Insurance Supervisors • IOSCO: the International Organization of Securities Commissions • BCBS: the Basel Committee of Banking Supervisors AMF - titre de la présentation

6. AUDITING AMF - titre de la présentation

7. NEW LEGISLATION IN AUDITING • USA : • SARBANES-OXLEY • PCAOB • EU : • 8th Directive • NATIONAL AUDIT OVERSIGHT BODIES • Prospectus Directive • Transparency directive ( > 1/01/2007) AMF - titre de la présentation

8. IMPACT OF 8th DIRECTIVE ON EU AUDIT FIRMS National Enforcement bodies Endorsed ISA’s EU (8ème Directive) >2008 AUDIT FIRMS Professional Institutes Independence requirements National Audit Standards (ISA+) Oversight bodies Quality control systems <2007 AMF - titre de la présentation

9. WHO IS INVOLVED IN DEVELOPMENT OF ISA’s ? IOSCO /Securities Regulators BCBS World Bank IAIS… IFAC PIOB Monitoring group IAASB EU COMMISSION > 2008 CAG ENDORSED ISA in Official Journal ISA EGAOB AuRc US. PCAOB NATIONAL AOB’s IFIAR MEMBER STATES AUTHORITIES . AMF - titre de la présentation

10. OVERSIGHT OF STANDARD SETTING PROCESS Overview of the new relationship LEGEND IAIS WB BCBS Appoint members Appoint and evaluate PIOB Operations & independence IOSCO FSF Monitoring Group Oversight of due processes IFIAR ?? Influence standard setting proposals PIOB IFAC standard setting operations (PIAC’s) IAASB IESBA (Ethics Ctee) Other public interest functions AMF - titre de la présentation

11. Role of PIOB (press release 28 february 2005) AMF - titre de la présentation

12. CORPORATE GOVERNANCE AND INTERNAL CONTROLS AMF - titre de la présentation

13. REPORTING ON INTERNAL CONTROLS AND GOVERNANCE • USA • Section 404 of SOX • COSO Framework • AUDITORS REPORTING • EU – PROPOSED REVISION OF 4th AND 7th DIRECTIVES • CORPORATE GOVERNANCE STATEMENTS • INTERNAL CONTROLS IN RELATION WITH FINANCIAL REPORTS • NO AUDITORS INVOLVEMENT REQUIRED • MEMBER STATES DEVELOPMENTS AHEAD OF EU • SOMETIMES, AUDITORS HAVE REPORTING REQUIREMENTS AMF - titre de la présentation

14. Corporate Governance statement : mandatory for companies listed on a regulated market (Art. 1.2) A report included in the annual report in a specific section : • Shall refer to the mandatory or voluntary corporate governance code followed by the company; include all information about the corporate gov. practices applied beyond the requirements under national law • If company departs from such code : explain such departures and reasons for doing so • In the absence of code applied , reason for that • Describes operation of the shareholders’ meetings and description of shareholders rights • Unless fully contained in national law • Composition and operation of Board and its committees • (point 3) Describes the « main features of the internal control and risk management system » (at annual accounts level) and « in relation to the process for preparing consolidated accounts » AMF - titre de la présentation

15. Duties and liability for the annual accounts and annual report (art 1.3 and 2.3) • MS shall ensure that the members of the administrative, management or supervisory bodies have collectively the duty to ensure that the following documents are drawn up and published in accordance with the requirements of this directive and of IFRS as adopted in the EU : • Annual accounts ( and consolidated accounts if applicable) • Annual report • Corporate governance statement • Such bodies shall act within the competences assigned to them by national law • MS shall ensure that the provisions of their regulations on liability apply to these bodies’members at least towards the company ; they shall lay down rules on penalties applicable to infringements of the prvisions adopted pursuant to this directive. AMF - titre de la présentation

16. ACCOUNTING STANDARDS AMF - titre de la présentation

17. BEFORE 2005 : THE TOWER OF BABEL US Gaap JAPAN CANADA GERMANY IAS AUS UK FRANCE AMF - titre de la présentation

18. IASB RECENT DEVELOPMENTS • NEW CONSTITUTION AND PROCEDURES • INCREASED NUMBER OF TRUSTEES • NEW CHAIR OF TRUSTEES • CHANGE IN BOARD’S VOTING RULE (8 to 9 positive votes out of 14 members) • NEW S.A.C WITH ELECTED CHAIRMAN • RENEWAL OF BOARD MEMBERS • NEW DUE PROCESS CHARTER • INCREASED FOCUS ON IFRIC • DIRECTIONS OF STANDARDS • 2005 STABLE PLATFORM (  2006) • CONVERGENCE PROGRAMS ( MAINLY USA) • EQUIVALENCE OF IFRS WITH OTHER NATIONAL FRAMEWORKS ? • CESR’s ADVICE TO COMMISSION ON US, CANADA, JAPAN • PENDING DECISION AMF - titre de la présentation

19. STRUCTURE OF STANDARD SETTER IASC Foundation 22 trustees The standard setting operation Standards Advisory Council IAS Board 12+2 IFRIC (Interprétations) Staff Advisory groups AMF - titre de la présentation

20. Use of IFRS by world’s largest companies (2005) AMF - titre de la présentation

21. 2002-2009 : ADOPTION, CONVERGENCE, EQUIVALENCE WITH IFRS US/FASB JAPAN CANADA 2009 ? CHINA IFRS AUS NZ 2006 EU 2005 More than 90 countries accept or require use of IFRS standards AMF - titre de la présentation

22. AMF - titre de la présentation

23. AMF - titre de la présentation

24. ROADMAP TO CONVERGENCE PROGRAM – SHORT TERM * Denotes joint project IASB - FASB AMF - titre de la présentation

25. ROADMAP TO CONVERGENCE PROGRAM – OTHER PROJECTS • Business Combinations Phase II • Consolidations • Fair Value measurement guidance • Liabilities and Equity distinctions • Performance Reporting • Post-Retirement benefits (including pensions) • Revenue Recognition TOPICS BEING RESEARCHED, NOT YET ACTIVE ON AGENDA • Derecognition • Financial Instruments (replacement of IAS 39 and FAS 133) • Intangible Assets • Leases AMF - titre de la présentation

26. STOCK EXCHANGES AMF - titre de la présentation

27. STOCK EXCHANGES EVOLUTION • PRIVATISATION • BECOMING « FOR PROFIT » ENTITIES • LISTING ON MARKETS : • EURONEXT, LES, OM, DEUTSCHE BÖRSE, NYSE… • CONSOLIDATION – MERGERS – ACQUISITIONS • SELF REGULATION OF MARKETS NO LONGER VIABLE SOLUTION • INCREASING ROLE OF INDEPENDENT PUBLIC AUTHORITIES * PROSPECTUS DIRECTIVE * TRANSPARENCY DIRECTIVE * MARKET ABUSE DIRECTIVE AMF - titre de la présentation

28. REGULATORS AMF - titre de la présentation

29. EVOLUTION OF REGULATORS • BECOMING INDEPENDENT ADMINISTRATIVE AUTHORITIES • INCREASING SCOPE OF ACTIVITIES • INCREASED POWERS • SOMETIMES DELEGATION OF RESPONSIBILITIES TO A SPECIALIZED BODY (e.g UK FRC, German FREP-DPFR, etc.) • INTERNATIONAL NETWORKS DEVELOP : IOSCO, CESR AMF - titre de la présentation

30. Regulators are working to strengthen all links in the Financial Reporting Supply Chain Codes of Corp Gov Enforcement stds Reports on Internal ctrl Oversight Courts of justice Corporate governance Enforcement authorities PREPARERS AUDITORS INVESTORS IFRS & IFRIC ISA Financial Intermediaries : Analysts CR agencies Standard setting processes AMF - titre de la présentation

31. IOSCO Technical Committee National securities regulators Chairs committee SC n°1 Special projects, Audit Task Force Accounting Auditing Disclosures Other task forces Enforcement data base AMF - titre de la présentation

32. CESR organisation (post June 2004) Market Participants Consultative Panel CESR Chairs Plenary meeting 4 x year Permanent Operational Groups Expert Groups • Level 2 • MiFID • Intermediaries • Cooperation and Enforcement • Markets • Transparency • Investment Management Mediation Task Force CESR-Pol CESR-Fin Level 3 • Level 3 • Investment Management • Clearing and Settlement • Prospectus Review Panel AMF - titre de la présentation

33. CESR-Fin - Organisation ARC CESR-Fin SAC SISE ATF SCE EFRAG EECS FEE AMF - titre de la présentation

34. CESR Fin Key objectives • IFRS: • Monitor pro-actively the development and EU adoption (endorsement) of international accounting standards (IAS/IFRS) • Level 2 and 3 regulatory work • Enforcement of compliance with IFRS:foster a proper and consistent application of IAS/IFRS by EU listed companies, through coordination of national supervision activities and exchange of information • Audit:Monitor developments in Europe in the field of auditing. AMF - titre de la présentation

35. Enforcement : national & coordination (EU and Worldwide) Controls Ex ante Ex post Other EU National regulators National Enforcement Agency AMF, FSA,… EECS COORDINATION OF DECISIONS CONSULTATIONS National Enforcement decision SEC (USA) Enforcement Decisions Data base IOSCO database Other Regul. AMF - titre de la présentation

36. International developments in Accounting and Auditing Regulation REPARIS WORKSHOP VIENNA - 15 March 2006 AMF - titre de la présentation