A Tall Order to Fill

A Tall Order to Fill
IFAC Works to Provide Assurances on Global Convergence

The word “shall” doesn’t have exactly the same meaning in every language. Albeit a minor detail for, say, a translator of best-selling novels, this discrepancy in interpretation could be of significant consequence to a public company auditor in Europe. In a word, it succinctly illustrates the myriad concerns that CPA firms and regulators have about the move toward global convergence of accounting and auditing standards, and the need for uniformity before such standards are adopted.

As recently demonstrated by James M. Sylph, the International Federation of Accountants (IFAC) is working around the clock to provide assurances to the accounting profession, regulators and the public while it seeks to develop a comprehensive set of standards on auditing, ethics education and public sector financial reporting. Technical director of the International Auditing and Assurance Standards Board (IAASB) of IFAC, Sylph was the invited guest speaker for the New York State Society of CPAs’ International Accounting and Auditing Committee’s Dec. 18 meeting in Manhattan.

A 159-member body spanning 118 countries—including the United States, where the American Institute of CPAs is the principal member—IFAC, with input from international regulators, underwent a series of reforms in 2003 to better meet its strategic priorities. A chief component of the reform is the creation of the Public Interest Oversight Board (PIOB) that will oversee IFAC’s standard-setting activities, including the IAASB’s, increase public input in the standard-setting process, and foster ongoing collaboration between the international profession and regulators. Independent of IFAC, the 10-member PIOB, appointed by regulators, will have an initial focus on audit and assurance services, independence and other ethics issues, according to Sylph.

The PIOB will also approve nominations to the 18-member IAASB, which will comprise three observers in 2004, including the Japanese Financial Services Agency, the European Commission and the Public Company Accounting Oversight Board (PCAOB). The IAASB is experiencing its own reforms, which include the appointment of a full-time chair, effective this month, and the strengthening and formalization of relations with national standard setters.

The IAASB’s current agenda is a full one that calls for the European Union’s adoption of a body of auditing standards for all audits in 2005. Sylph said these standards would apply to approximately 1 million audits, the vast majority of which are private.
In addition to the pronouncements of nine new or revised international audit standards with 2005 effective dates, the IAASB is also working to clarify language in their statements to ensure that standards will be accurately interpreted in all countries.

Sylph said the single biggest supporter of global convergence of standards is the European Commission, which has 25 member countries. Though IFAC has reacted positively to PCAOB Chairman William McDonough’s comments on convergence, Sylph said he believes the United States’ concerns with global standards emanate from philosophical differences over the international principles-based system and the rules-based system that this country has traditionally employed.