International Federation of Accountants

1. International Federation of Accountants International Standard Setting Meeting the Challenges of the Modern World Alta Prinsloo, IAASB Deputy Director September 12, 2007

2. A Time to Celebrate • 30 years since the establishment of IFAC • 20 years since the establishment of the first audit firm in Russia • 5 years since the establishment of the Audit Council in Russia

3. Agenda International Federation of Accountants (IFAC) Reformed to meet the challenges of the modern world Important contributor to international standard setting International convergence High standards of ethics High-quality auditing standards

4. About IFAC IFAC Today Expanding organization of 155 members and associates in 118 countries Represents 2.5 million accountants in public practice, education, government service, industry and commerce Promotes high-quality performance by professional accountants through Member Body Compliance Program Provides for public interest input and has public oversight

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

6. About IFAC IFAC’s Mission (Continued) • Establishing and promoting adherence to high-quality professional standards • Furthering the international convergence of such standards • Speaking out on public interest issues where the profession’s voice is most relevant

7. About IFAC IFAC Standard-Setting Boards • International Accounting Education Standards Board (IAESB) • International Auditing and Assurance Standards Board (IAASB) • International Ethics Standards Board for Accountants (IESBA) • International Public Sector Accounting Standards Board (IPSASB)

8. About IFAC IFAC Committees • Professional Accountants in Business Committee • Small and Medium Practices Committee • Developing Nations Committee • Transnational Auditors Committee

9. About IFAC Features of IFAC Standard-Setting • Independent boards with balanced membership • Transparency • Meetings are open to the public • Website (www.ifac.org) • Agenda material and recordings of IAASB meetings • Exposure drafts and final pronouncements • Consultative advisory groups • Rigorous due process that provides for extensive consultation • Public interest oversight

10. About IFAC Public Interest Oversight • Public Interest Oversight Board (PIOB) established in February 2005 • As part of IFAC reforms to • Strengthen standard-setting processes of standard-setting boards • Enhance transparency of those processes • Provide for public interest oversight • Continue collaboration between profession and regulators • Responsible to the public, not IFAC

11. Oversight & Consultation IFAC Oversight & Consultation KEY ACCOUNTABILITY OVERSIGHT CONSULTATION/ADVICE

12. Convergence Why is Convergence Important? • International convergence • Enhances credibility of national standards • Increases comparability of auditors’ reports • Leads to more efficient capital markets • Reduces costs for those who need and use financial statement information • Minimizes complexity when reporting in multiple jurisdictions

13. Convergence Why IFAC Standards for Convergence? • Robust structure and rigorous due process renders high-quality standards • Global benchmark • Wide acceptance

14. Convergence Support for ISAs • Financial Stability Forum • 12 Key Standards for Sound Financial Systems • World Federation of Exchanges • Issued statement of support • Europe • European Commission (EC) 8th Directive envisages use of ISAs for statutory audits in the European Union (EU) • Directive to be implemented by 2008; timing of ISA adoption yet to be determined

15. Convergence Support for ISAs (Continued) • US listed companies • Public Company Accounting Oversight Board (PCAOB) • Except for reporting on internal control, priorities similar to past and current IAASB topics • US unlisted companies • Auditing Standards Board (ASB) • De facto move to ISAs • 100+ countries use, rely or compare to ISAs

16. Convergence Challenges • Cultural differences • Philosophical differences • Applicability of standards to all types and sizes of entity by all sizes of audit firm • Translation • Training and education • Implementation • Frequency and complexity of changes • Monitoring and enforcement

17. Convergence Assisting with Convergence • Multilingual communication in five United Nations languages, including Russian • Publications and other up-to-date information available free of charge on IFAC website (www.ifac.org) • Permission to reproduce / translate and reproduce publications free of charge • Permissions policy

18. Convergence Assisting with Convergence (Continued) • Facilitation of convergence • Guidance for national standard setters that adopt the IAASB’s pronouncements with limited modifications • Basis for conclusions issued with new pronouncements • Facilitation of translations • Translations policy • Information about translations to be published on website during fall 2007

19. Convergence Assisting with Convergence (Continued) • Toolkits • Establishing and developing a professional accountancy body • Ethics education • Visits, presentations, forums, surveys, etc. • IFAC President visited Russia in July 2007 • IFAC to host: • SMP Forum in Malta on October 30, 2007 • Seminar on “The Financial Reporting Environment of the 21st Century” in Mexico City on November 14, 2007 • Forum on “Government, the Accountancy Profession, and the Public Trust” in New York City on December 4, 2007 • IFAC Global Leadership Survey planned for October/November

20. Ethics High Ethical Standards • Accountancy profession is built on public’s trust • Requires commitment to high ethical standards and integrity • Requires effective codes of conduct for all participants in financial reporting process

21. Ethics IFAC Code of Ethics • Revised Code effective June 30, 2006 • Five fundamental principles of professional ethics • Integrity, objectivity, professional competence and due care, confidentiality, and professional behavior • Establishes conceptual framework  professional accountants to • Identify threats to fundamental principles • Evaluate significance of threats • If threats other than clearly insignificant, apply safeguards to eliminate threats or reduce them to an acceptable level

22. Auditing IAASB – Objective • Serves the public interest by • Setting high-quality standards for • Quality control • Auditing • Other assurance engagements • Related services engagements • Facilitating convergence • Enhancing the quality and uniformity of practice throughout the world • Strengthening public confidence in the global auditing and assurance profession

23. Auditing Recent Standard-Setting Activities • Past few years focused on fundamentals • Quality control at firm and engagement level • Risk assessment and responses, including fraud • Audit documentation, and auditor reporting • Efforts now focused on addressing • Audit areas of higher risk (e.g., accounting estimates and fair values, related party transactions) • Specific topics (e.g., audit of group financial statements) • Major initiative to improve clarity of ISAs

24. Auditing IAASB Future Strategy • Strategy review during 2007 • Consultation paper on strategy 2009-2011 to be issued in October 2007 • Proposed strategic focus • Contributing to the effective operation of the world’s capital markets • Assisting with the implementation of standards • Addressing the needs of SMEs and their auditors

25. International Federation of Accountants www.ifac.org September 12, 2007