Strengthening Accounting and Auditing in Latin America and the Caribbean: IFAC's Role and Priorities

1. International Federation of Accountants Supporting Accounting and Auditing in Latin America And the Caribbean Sylvia Barrett November 2006, Washington D.C.

2. IFAC IFAC’s Mission To serve the public interest,strengthen the worldwide accountancy profession and contribute to the development of strong international economies by…

3. IFAC IFAC’s Mission • Establishing and promoting adherence to high quality professional standards • Furthering international convergence • Speaking out on public interest issues • Promoting integrity, transparency and expertise

4. IFAC IFAC’s Membership • 163 organizations in 119 countries • 22 countries and 23 members / associates • Developing and developed economies • Professional accountants in • Business • Public practice • Government • Academia

5. IFAC Key Priorities and Activities • Development of the international profession • Role of IFAC members as national accountancy bodies • Focus on challenges facing members • Development of tools and resources • Developing Nations Committee (DNC) • Small and Medium Practitioners Committee (SMPC)

6. Role of the Profession Role of National Accountancy Body • Common legal responsibilities • Education and training (initial and continuing) • Examination (Licensing and/or certification) • Enforcement (Ethics and Discipline) • Standard-setting (Development and implementation) • Represent the needs of its members

7. Role of the Profession Role of National Accountancy Body • Absence of legal responsibilities • Emphasis on protecting the public interest • Input into development of legislation and regulation • Contribute to education needs of professional accountants • Input into the development of standards • Implementation of standards • Adherence to ethics and independence requirements

8. Membership Obligations Statements of Membership Obligations • Serve as the foundation for requirements of existing members and applicants • Incorporate international standards as an objective • Assist in implementation of the standards • Evaluating whether members are meeting the requirements (Compliance Program)

9. Membership Obligations Statements of Membership Obligations • Seven SMOs • Quality assurance • Accountancy education • Ethics • Auditing and assurance standards • Accounting standards • Investigation and discipline • Public sector accounting

10. Solutions IFAC Membership Obligations Information gathering and action plans Regulatory and standard-setting framework Whether and how SMOs being met Emphasis on “Incorporation” of international standards Responsible body or not responsible body Assist with implementation

11. Challenges Latin America and Caribbean • Economic composition • Capital markets but primarily smaller entities • Lack of resources and capacity • Financial and operational • Technical and language • Competing high priority activities • Profession, government and regulators

12. Challenges Financial Reporting and Auditing Statutory reporting and auditing Which entities should prepare financial statements? What are the thresholds for requiring an audit? Convergence National decision to converge or not Role of IFAC members in promoting international standards

13. Challenges Financial Reporting and Auditing Convergence Keeping pace with new and amended standards Increasingly complex reporting standards Applicability of all required auditing procedures Cost versus benefit considerations

14. Challenges Standard-Setting By Multiple Bodies Regulatory bodies: banking, insurance, securities market Professional accountancy bodies IFAC members and non-IFAC members National federations and local associations / branches

15. Challenges Standard-Setting By Multiple Bodies Impact Conflicts Lack of consensus Market confusion Established standards vary in legal authority Duplication of efforts when resources limited

16. Challenges Adoption versus Implementation • Understanding the difference between adoption and implementation • Many countries have formally adopted IFRS and ISA but then lack • Experience, skills, training, resources and basic tools • Standards not used in practice

17. Joint Efforts Requires the participation of all key stakeholders IFAC and professional accountancy bodies Government and regulators Donor and development community Education community Individual professional accountants

18. Solutions and Actions Joint Effort • Avoid duplication of effort • Regional solutions based on common challenges • Representing a regional / sub-regional view • Share experiences and work together to effect change

19. Solutions and Action Education and training Different university curriculum Lack of resources to update education programs for new standards and practices Need to implement effective continuing education Access to practical experience providers

20. Solutions SMP and SME Activities Small and Medium Practitioners Committee Input and involvement in IAASB processes and task forces “Think small” approach Following IASB’s project on SME standards Develop tools for smaller practitioners ISA Guide (Quarter 2, 2007) ISA – based audits

21. Developing Nations Committee Developing Nations • Recently issued: “Establishing and Developing a Professional Accountancy Body” • Provides practical guidance and examples • Assists in identifying priorities for developing organizations

22. Latin America Summary Diversity in Latin America Key challenges continue to exist Solutions driven by joint efforts IFAC Activities Member Body Compliance Program Small and Medium Practices Committee Developing Nations Committee

23. International Federation of Accountants www.ifac.org