An Overview of IAASA Presentation to CIPFA Members IPA, Lansdowne Road 2 April, 2005 Ian Drennan

2. An Overview of IAASA Presentation to CIPFA Members IPA, Lansdowne Road 2 April, 2005 Ian Drennan Chief Executive (Designate)

3. Contents • Brief History & the 2003 Act • The Authority • Prescribed Bodies • Statutory Remit & Functions • Work Programme & Programme of Expenditure • Objectives, Key Values & Assumptions • Approach • Related Activities • Current Agenda

4. A Brief History • RGA (2000) - Terms of reference included an examination of, inter alia: • whether self regulation of the accountancy profession was working effectively and consistently; • auditor independence; and • role of the auditor in ensuring companies’ compliance with law and regulations • RGA recommended, inter alia, • establishment of an Oversight body; • FRRP function; and • requirement for Directors’ Compliance Statements.

5. The 2003 Act • Recommendations of the RGA accepted by Government in December 2000. • RGA’s recommendations given the force of law by the Companies (Auditing and Accounting) Act, 2003. • The 2003 Act deals principally with: • the establishment of IAASA; and • ‘Other Measures to Strengthen the Regulation of Auditors’, including: • statutory backing for accounting standards; • audit committees; • disclosure of accounting policies; • disclosure of auditors’ remuneration (analysed by audit, audit related and non-audit); and • Directors’ Compliance Statements.

6. The Authority • Company ltd. by guarantee - Board will comprise 15 directors, nominated thus: • 2 (including the Chairprson) nominated by the Minister; • 3 nominated jointly by the prescribed accountancy bodies; • 9 nominated by the following bodies (1 each): • IBEC ICTU • IAIM ISE • Pensions Board IFSRA • Revenue DCE • Law Society • Chief Executive • A maximum of 5 of the 15 directors may be members of prescribed accountancy bodies.

7. Prescribed Bodies • Bodies recognised under the 1990 Act for audit purposes (i.e. ACCA, ICAEW, ICAI, ICAS, ICPAI, IIPA); and • any other body prescribed by the Minister (other bodies that may be prescribed include CIPFA, CIMA and the AIA). • Board currently examining the issue of prescription.

8. Statutory Remit • To supervise how the prescribed accountancy bodies regulate and monitor their members; • To promote adherence to high professional standards in the auditing & accountancy profession; • To monitor whether the accounts of certain classes of companies and other undertakings comply with the Companies Acts; and • To act as a specialist source of advice to the Minister on auditing and accounting matters.

9. Functions • The Authority’s principal functions will include: • Promoting adherence to the highest standards in the profession; • Reviewing the financial statements of certain companies and other undertakings; • Considering applications for recognition for audit purposes; • Supervising the manner in which the accountancy bodies monitor (including work quality) and regulate (including investigation and disciplinary functions) their members; • Where deemed appropriate, conducting investgations into bodies and/or members. • Co-operating in the development of auditing and ethical standards.

10. Work Programme • Act requires the preparation, and submission to the Minister, of a Work Programme and related Programme of Expenditure. • Development of the initial Work Programme involved detailed consultation and engagement with the accountancy bodies. • Ministerial approval currently awaited, at which time the recruitment process will commence.

11. Programme of Expenditure • The Act provides that: • the exchequer will provide 40% of the Authority’s funding; and • the remaining 60% will be provided by the profession (by way of a levy on the prescribed bodies). • Excluding capital and other expenditure of a once off nature, the 2005 budget, which assumes the appointment of staff in May/June, likely to be of the order of €1.5m.

12. Objectives • Through effective, independent oversight, inter alia, to: • enhance public confidence in the accountancy bodies’ regulatory & monitoring processes; • enhance public confidence in the financial reporting of those entities coming within the Authority’s remit; • promote, and contribute to the protection of, the public interest; • ensure that the prescribed accountancy bodies’ practices, procedures and standards conform to a common high standard reflective of international best practice.

13. Key Values & Assumptions • The key values and assumptions underpinning the Authority’s activities will include, inter alia: • Responsibility, in the first instance, for the regulation (including complaints handling, investigation and disciplinary activities) and, where applicable, monitoring of members will continue to reside with the prescribed bodies; • Complaints against members received by the Authority will, in the first instance, be referred to the relevant prescribed body; • The Authority’s processes and procedures will be open, transparent, publicly available and widely communicated;

14. Key Values & Assumptions • The Authority’s remit to ‘monitor’ financial statements, together with other relevant considerations, is such that a purely reactive approach will not suffice in the medium/long term; • The primary focus of the f/s review function will be on material departures from statute/standards; • In determining the nature and extent of its supervisory activities (i.e. in respect of both the prescribed bodies and financial statement review), the Authority will seek to employ risk assessment and selection methodologies.

15. Approach - Bodies • Each prescribed body will be the subject of a thorough initial review. • Reviews will encompass an examination of, inter alia, each body’s constitution, bye-laws (including complaints, investigation and disciplinary processes and procedures), regulations, standards and, where applicable, monitoring processes and procedures. • Subject to any deficiencies etc., each body’s bye-laws etc. will be approved by the Board.

16. Approach - Bodies • Annual ex-ante examination and approval of bodies’ regulatory and monitoring plans. • Annual ex-post examination of bodies’ reports of regulatory and monitoring activity. • Subsequent reviews of bodies will be performed on a risk analysis basis. • S25 visits to members / member firms will be performed in accordance with Board policy.

17. Approach – F/S Review • Develop financial statement review methodologies and programmes. • Develop risk assessment and selection models. • Commence reviews in accordance with Board policy and risk assessments. • Examine apparent instances of non-compliance with law and/or Standards and address as appropriate. • Liaise with UK and EU counterparts – consistency

18. Related Activities • In the furtherance of its objectives, the Authority has an involvement in a number of related fora: • APB – observer status • EECS - member • CLRG - member • POBA – common director • Involvement in such fora likely to increase significantly as operations commence.

19. Current Agenda • Matters currently on the Interim Board’s agenda include: • Apportionment model; • Prescription; • Recruitment; • Premises & related logistics; • Optimum scheduling of commencement orders.

20. End of presentation. Thank you.