The International Federation of Accountants (IFAC) and the International Auditing and Assurance Standards Board (IAASB) welcome the statement released today by IOSCO on International Standards on Auditing (ISAs) that recognizes the important role of ISAs "in facilitating cross-border securities offerings and listings." The IOSCO statement also welcomes the achievement of the completion of the Clarity Project, noting the improvements that have been made as a result of clarifying the ISA requirements.

"IOSCO's endorsement of the clarified ISAs and its encouragement of securities regulators to accept audits performed in accordance with the clarified ISAs is consistent with the IAASB's long-held objective of developing and promoting adoption of a high-quality set of auditing standards for use in all audits worldwide," states IAASB Chair Arnold Schilder.

IFAC, in its letter to the G-20 Working Group 1 in March, expressed its view that the global adoption of ISAs will improve the quality and consistency of the audit of financial information. Currently, more than 100 jurisdictions around the world use ISAs or base their national standards on them. Increased adoption of ISAs will facilitate greater transparency and result in higher standards of accountability.

"The IOSCO statement is testimony to the success of the standard-setting process for International Standards on Auditing, in which responsibility is shared between the public sector and the private sector," states IFAC President Robert Bunting. "It is vital that the standard-setting process operates in, and is seen to operate in, the public interest. Oversight of the IAASB's work by the Public Interest Oversight Board (PIOB) and the role of the IAASB's Consultative Advisory Group play critical roles in ensuring that the standards do reflect the public interest."

The IOSCO statement echoes support for the clarified ISAs expressed by the World Bank and the Basel Committee on Banking Supervision.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high-quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The PIOB oversees the activities of the IAASB, and, as one element of that oversight, establishes the criteria for its due process and working procedures.

IFAC (www.ifac.org) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce. In addition to setting international auditing and assurance standards, IFAC sets ethics, education, and public sector accounting standards. It also issues guidance to encourage high-quality performance by professional accountants in business.

At its May 18–21 meeting in Washington DC, the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) reaffirmed its commitment to its global convergence program and the development of standards dealing with financial instruments.

The IPSASB confirmed that it will continue its full consultation on exposure drafts (EDs): ED 37, Financial Instruments: Presentation, ED 38, Financial Instruments: Recognition and Measurement, and ED 39, Financial Instruments: Disclosures, while recognizing the intention of the  International Accounting Standards Board (IASB) to modify aspects of its current standards relating to the measurement of financial instruments. The IPSASB will consider any changes ultimately adopted by the IASB in due course.

“The IPSASB believes the public sector and its constituents are best served by having International Public Sector Accounting Standards (IPSASs) on financial instruments and removing reliance on the hierarchy at this time. The IPSASB strategy will provide stability for users and allow the IPSASB to manage the current period of uncertainty. The current global financial crisis underlines the importance of consistent financial reporting by governments of their exposures to financial instruments,” states Mike Hathorn, Chair of the IPSASB.

How to Comment
Comments on EDs 37–39 are requested by July 31, 2009.  The EDs may be viewed by going to www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org and stepheniefox@ifac.org. They can also be faxed to the attention of the IPSASB Technical Director at +1 (416) 977-8585, or mailed to the IPSASB Technical Director at 277 Wellington Street West, 4th Floor, Toronto, Ontario M5V 3H2, Canada. All comments will be considered a matter of public record and will ultimately be posted on the IFAC website.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce. In addition to setting international public sector financial reporting standards through the IPSASB, IFAC, through its independent standard-setting boards, sets ethics, auditing and assurance, and education standards. It also issues guidance to encourage high-quality performance by professional accountants in business.

Speaking yesterday to staff at the World Bank in Washington, D.C., Robert L. Bunting, President of the International Federation of Accountants (IFAC), said that the global accounting profession, with the support of the World Bank, must move ahead decisively with implementing a single set of high-quality international financial reporting and auditing standards. "Implementation is vital to strengthening global financial systems, especially during this time of economic crisis," stated Mr. Bunting. 

He said that IFAC is committed to working closely with the World Bank and other institutions to deliver assistance efficiently where it can have the greatest impact. He cited two critical areas where the two organizations must build on current synergy:

• To establish the appropriate professional accounting infrastructures and legal and regulatory mechanisms in developing and other countries; these are necessary pre-requisites for the effective implementation of standards; and
• To urge reforms of public sector financial management systems, encouraging increased government accountability and the adoption of accrual accounting where resources permit.

Mr. Bunting emphasized IFAC support for the extension of work in these areas by the World Bank and the International Monetary Fund.

He also noted that IFAC has called on the G20 to support the World Bank's Reports on the Observance of Standards and Codes (ROSC) initiative as a tool to assess a country's financial reporting architecture and measure the future effectiveness of economic reforms resulting from the economic crisis.

In his remarks, Mr. Bunting also pointed out that small- and medium-sized entities (SMEs) and micro-entities require special attention. Some of these entities will be the next Microsofts, Googles, and IKEAs, contributing new jobs, innovation, and wealth to national and international economies if they are allowed to innovate and grow.  "SMEs face challenges that are exacerbated in times of economic crisis-the ability to obtain capital and the rising costs of fuel, supplies, and other factors of production," Mr. Bunting explained. "We must take care not to further exacerbate these challenges through unnecessary and inappropriate re-regulation of the private sector and we must consider the cost-burden of their meeting regulatory and compliance requirements."

While IFAC-with 158 members in 123 countries and jurisdictions-is known for its work in establishing international standards for auditing, education, ethics, and public sector accounting, Mr. Bunting pointed out that one of its less-recognized roles will increase in importance in the coming years: as a facilitator and driver of the adoption and implementation of high-quality international standards.

"IFAC is committed to providing leadership on implementation issues by encouraging and facilitating collaboration among firms, practitioners, member bodies, regulators, and other stakeholders," stated Bunting, adding, "To do so effectively, the world must agree on a single set of standards."

To view Mr. Bunting's full speech, go to the IFAC Media Center at http://www.ifac.org/MediaCenter/?q=node/view/638.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 158 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce. Through its independent standard-setting boards, IFAC sets international ethics, auditing and assurance, education, and public sector accounting standards. It also issues guidance to encourage high-quality performance by professional accountants in business.

1) The Financial Crisis and the Opportunities for Change

A. Rahm Emanuel, President Obama's White House Chief of Staff, has stated, "Never let a serious crisis go to waste....it's an opportunity to do things you couldn't do before." It is certainly too great a crisis for IFAC to sit out. There are opportunities that we and other public interest enterprises cannot afford to miss. In IFAC's case:

1. Recognition of the importance of accounting and auditing is at a high point.
2. The interconnectedness of the world's financial markets and economies has been demonstrated in a resounding way.
3. The concern for a "level playing field" in the financial markets has created momentum for convergence of financial standards.

B. The Financial Crisis is a game changer for IFAC, as well as for other international institutions like the World Bank. We must act now and do so decisively to counteract the crisis as much as possible. For IFAC, we are faced with two tranches of economic reform:

• In one tranche are those working to stabilize banks and improve the flow of credit; this is an area in which IFAC's role is that of a minor player;
• In the other tranche are those working on the re-regulation of financial markets; here, IFAC has a major role to play.

Robert L. Bunting, President of the International Federation of Accountants (IFAC), was recognized for his contributions to accounting ethics, governance, and the public interest by the Loyola Marymount University's (LMU) College of Business Administration in Los Angeles on March 17. In accepting the award from Dr. Lawrence Kalbers of the Center for Accounting Ethics, Governance, and the Public Interest, he offered some views on ways to solve the current worldwide financial crisis and discussed the role that the international accounting community must play in the global recovery.

Featured as a guest of the school's Distinguished Speaker Series, Mr. Bunting told students, faculty, and members of the general public, "It is important for regulators to resist knee-jerk reactions, scapegoats, and silver bullets as they seek to shift the direction of national regulation in the midst of our current financial crisis." He emphasized that "regulation must be pragmatic and cost effective" and its cost must not exceed the benefit to the public. In particular, he cautioned regulators about the unintended burdens that regulations can place on small and medium enterprises, which are vital to global economic growth.

Among the subjects Mr. Bunting covered was "fair-value accounting," which he feels has come under undue criticism for its unreliability in shallow, illiquid markets. He believes that this kind of assessment only deflects attention from the more meaningful aspects of the world's current financial woes.

He also spoke about the disadvantages of a practice under consideration in some quarters: mandatory audit firm rotation. "While firm rotation might seem to remove any bias that may be attached to past decisions, it makes no sense at all," he emphasized adding, "In most parts of the world there are not enough choices to allow for this without forcing companies to choose audit firms that have no expertise in their industry."

He explained that a number of countries have experimented with-and subsequently abandoned-the concept as almost impossible to implement. Yet, it is being considered as a remedy to the Satyam scandal in India. Mr. Bunting pointed out that it would not be a pragmatic solution and would certainly set the country apart from nearly all of its trading partners- and represent a step backwards from the creation of a true global economic community.

"We must resist a retreat back into a national focus, with such manifestations as protectionism, national carve-outs of standards and regulations, and other short-sighted political solutions," Mr. Bunting warned. He suggested strengthening the Financial Stability Forum, which brings together national bodies of sector-specific regulators, central bankers, and industry supervisors, and the International Federation of Independent Audit Regulators, a newer organization, to deal with the consequences of the increasingly integrated global economy.

Mr. Bunting added, "IFAC has experience in understanding how to make an international organization work, and we are ready and willing to help any groups, especially those who do not have experience in the standard-setting arena."

Robert L. Bunting was elected president of IFAC in November 2008 and has been an IFAC Board member since 2005. He is a past Chairman of the American Institute of Certified Public Accountants.

About IFAC
IFAC (www.ifac.org) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 122 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce. In addition to setting international auditing and assurance standards through The International Auditing and Assurance Standards Board (IAASB), IFAC sets ethics, education, and public sector accounting standards through its independent standard-setting boards. It also issues guidance to encourage high-quality performance by professional accountants in business.

Introduction
Good morning. I'd like to thank Dr. Kalbers and the Center for Accounting Ethics, Governance & the Public Interest for inviting me here today. I would also like to thank all of you for taking time from your busy schedules to hear what I have to say about restoring integrity to the global financial system, which, I'm sure you will agree, is in dire straits.

Before we get started, I would like to extend a particular welcome to the students in the audience. While it's true that you're inheriting a world that is in the worst financial shape that it has been in many decades, it's a great time to be entering the accountancy profession.

The importance of accounting and auditing is being reinforced as it never could be in times of plenty. For example, who in the accounting world ever would have thought that we would be asked to explain "fair value" to our non-accounting friends and even strangers who have a sudden interest in a financial reporting concept-let alone that they would be interested in our responses? This is, indeed, a rare time for the accountancy profession.

• You will be entering a truly global profession in terms of rapid convergence to a single set of auditing and financial reporting standards.
• You will be on the ground floor of new systems for regulating the profession and the global financial markets.
• And, you may be participating in a debate about the purpose of financial reporting: Is it for regulators and marketplace stability, or for investors and credit grantors?

Now, I'd like to focus specifically on the economic crisis.

Just before his untimely death in July 2008, Rashad Malik, the Commissioner of the SEC in Pakistan, wrote a very thought-provoking article on ethics and business.

In it, he suggested that ethics, as standards of society, do not exist in a vacuum but have to be evaluated with reference to accepted thresholds, actions, and feelings. To what extent, he asked, can the regulatory environment in a jurisdiction take account of ethical issues? At first sight, regulatory environment or statutory law do not give much attention to core ethical issues. The regulation in any system does not mention ethics and no legal texts refer to ethical concerns. The regulatory environment, however, does take account of ethics, for example, through enforcement and dispute settlement outcomes, which inevitably reflect certain values about how society perceives actions.

In today’s environment our thoughts on corporate governance immediately turn to visions of boards of directors rewarding themselves with lavish bonuses or unscrupulous owners creating corporate giants without substance. The names of Madoff and Satyam are on everyone’s lips today. In the papers this week, I have seen the initials of seven people accused of swindling Dh 1.8 billion from the Dubai Islamic Bank. A year ago, we were all talking about corporate failure at the Northern Rock Building Society. And before that, the discussion over coffee would have been Enron and WorldCom.

But corporate governance is much bigger than personal gain by a few key individuals in the upper levels of a company. The core of ethical concerns with regard to international economic relations usually comprise human rights, labor standards, environmental protection, and more recently extended to cooperation on anti-terrorism, anti money laundering, and transparency.

Many large companies have ethics and compliance officers. Why? Because there are so many expectations of business and so little public agreement on what ethics means at the detailed level that companies develop Codes of Conduct by which to govern their actions as corporate citizens and  as individuals working in that corporate culture. Of course, a written Code of Conduct does not mean much. Enron was loudly acclaimed as having a model Code with its Visions and Values platform encompassing Respect, Integrity, Communication, and Excellence values statement.

Where are we today?

While businesses brace for the worst and adjust their financial and operating strategies, the indicators from an ethics perspective are equally daunting:

• Business confidence has reached a record low
• 70% of workers in one recent study admitted they have already downloaded confidential company data for future personal use if they find themselves looking for a job
• 90% of compliance, legal, finance and risk executives surveyed say they expect fraud activity to increase in 2009

It is difficult to continue talking about the value of high ethical standards and the importance of individual action when the outlook for a company is grim.

Patricia Harned is President of the Ethics Resource Center. She has helped to shape ethics training for the securities industry in the U.S. She believes the Audit Committee can be a stabilizing influence in ethical matters today.

They must be alert to the fact that conditions are ripe for financial fraud – even in your business. I was talking to one senior partner from the national office of one of the Big 4 audit firms this week. He told me that his office had 200 open files of situations where they were considering a going concern qualification as part of the audit report. In all companies that are facing this trauma, the temptation to skirt the rules will grow. Pressures rising, revenue falling and a perception that the future will only be worse are the ingredients for taking “out of the box” survival strategies too far.

Transparency should be your company mantra. The media is fixated on the economic situation and, as a result, stakeholders are developing impressions of corporate activity from sources wholly apart from the Corporate Communications Department.

I am indebted to Dr. Saidi, who is not only Chief Economist of DIFC but also the Executive Director of the Hawkamah Institute of Corporate Governance, set up here in GCC in 2006. He referred me to their 2007–2008 survey report on corporate governance in MENA. I encourage you to read it.

The key to success will be stakeholder trust, and trust is built through consistent transparency. The ethics compliance officer and audit committee should help set the tone for communication and disclosure. The Hawkahma survey identified that most, but not all, companies provide financial statements but non-financial disclosure could be improved, 32% of GCC companies do not publish an annual report in English, only 23% of companies publicly preannounce the date of their AGM, only 25% of banks and listed firms provide information on their dividend policies on line, 19% of GCC companies have no website at all, and only 2% of GCC companies hold analyst meetings or conference calls. You cannot be a credible company on the world stage if you do not communicate. We heard from Dr. Nasser Saidi earlier today about his vision of the GCC creating a common currency, becoming the third global currency, and a global capital market center. I strongly suggest that the viability of the GCC, as a global market, will be dependent on local businesses listed on that center being seen at the leading edge of good corporate governance and leading proponents of full and complete disclosure of financial and non-financial information. Only then will businesses from around the world feel confident in seeking to raise money on this exchange.

There is no one country that has a perfect system of corporate governance. We can all learn from each other. Don’t reject one country’s model on the basis that it was not made here. Take the best elements from different frameworks and adopt them to your environment. And all countries have weaknesses that need to be overcome. Whether it is the U.S. preference for having the Chairman and CEO roles held by one person, in spite of overwhelming global views that this is a bad idea, or the GCC experience that only 25% of listed family-owned enterprises have a family council in place, we can all improve. I want to recognize good governance that I have seen since I arrived in Dubai last week. The Abu Dhabi Ship Building company announced its general meeting in the papers. I was pleased to note that one of the items on the agenda was a proposal to amend the company’s Articles of Association to comply with the Corporate Governance Code for Joint Stock Companies. In the same paper, Qatar Telecom announced its annual meeting, which included a proposal to determine the remuneration of the directors for the year ended December 2008.

So where do you look for good ideas? The Organisation for Economic Co-operation and Development (OECD) published the OECD Principles of Corporate Governance: 2004. They are intended to assist governments in their efforts to evaluate and improve the legal, institutional, and regulatory framework for corporate governance in their countries, and to provide guidance and suggestions for stock exchanges, investors, corporations, and other parties that have a role in the process of developing good corporate governance. Last month IFAC published International Good Practice Guidance (IGPG) that provides a framework and principles-based guidance for the professional accountant in business and their organizations on evaluating and improving governance in organizations. It is based on the OECD principles and can be downloaded free of charge from the IFAC website. Look to Appendix B for a list of useful resources.

I am a member of the Institute of Directors in my home country of Canada. To become a director of a publicly listed company there, it is very desirable, although not yet mandatory, that you take 12–15 days of training and pass an examination run by the Institute of Directors to show you have the overall skills needed to act properly as a corporate director. The companies that provide directors and officers liability insurance are beginning to ask how many directors on a board have had this training and rewarding companies who recruit these qualified directors by lowering premiums on the D&O insurance. Those boards are a better risk.

And finally, I call on each of you to lead by example. Your credibility as a professional has taken you a lifetime to achieve. It can take a single unethical action to destroy. And not only do you destroy your own reputation, but you damage the reputation of everyone from the same professional background or holding a similar job title. Headline journalism brands us all. The 999 members of boards of directors who act ethically and apply good corporate governance practices are forgotten in the 1 case that is reported in the press.

I liked the 5 Cs of Linda de Beer’s presentation. They are worth repeating:

• Conscience – acting with intellectual honesty
• Care
• Competence – knowledge and skills, but also a willingness to be reviewed
• Commitment – diligence in the performance of duties
• Courage – to always act with integrity

Thank you.

This IAASB Staff Audit Practice Alert assists auditors by highlighting areas within the ISAs that are particularly relevant in the audit of fair value accounting estimates1 in times of market uncertainty.

It is an enormous pleasure and privilege for me to be able to share time with you this morning in order to discuss convergence with international standards on auditing.  President CA Ved Jain, may I start these remarks by thanking you most sincerely for the opportunity to share time with you, with your Vice President, CA Uttam Prakash Agarwal, with your fellow guests and with your members: fellow chartered accountants of the Institute of Chartered Accountants of India. 

May I also take this opportunity to congratulate you on your election as a member of the Board of the International Federation of Accountants, which became effective last week on 13 November 2008.  Our global profession has been illuminated by the contribution of the Institute of Chartered Accountants of India and its many excellent nominees to IFAC boards and committees; it will be even more brightly illuminated by your presence at its Board meetings.  Under your leadership, the Institute of Chartered Accountants of India is the largest professional body of Chartered Accountants in the World, with a strong tradition of service to the public interest and to the Indian economy.  Members of your Institute are increasingly working overseas, to the benefit of the economies of the countries in which they work. 

I am particularly delighted at the MOU signed yesterday between the Institute of Chartered Accountants of India and my own professional body of the Institute of Chartered Accountants in England and Wales.  This foreshadows a time of great development of our wonderful profession in India and the UK and of even more outstanding service to our two great nations.  May I congratulate you on your outstanding leadership of the Institute of Chartered Accountants of India, which will shine throughout the years ahead as a major milestone in the development of the Indian profession and the Indian economy. 

One of the epithets applied to the Institute of Chartered Accountants of India is "partners in nation building."  To me, this is an excellent characterisation of the contribution of our profession of accountancy to the world.  Our profession is concerned with adding value to economies, in particular in creating an investment climate of trust.  An investment climate of trust is key to raising capital on the national and international markets.  It is key to the provision of energy, water, education, healthcare, food, and employment.  Indeed, it is key to the fight against poverty-a fight which is so important to us all.

High standards of auditing are an essential component of an investment climate of trust, and it is my firm belief that trust will be higher if all nations adopt and implement International Standards on Auditing as the standards to be followed by auditors in their own country.  I am most encouraged by the progress which has been made in India towards the adoption of International Standards on Auditing and would strongly encourage you to complete this process at the very earliest opportunity.  Indeed, I am delighted to have been told that this is your firm intention.

Good morning, ladies and gentlemen. I am honored to participate in the 12^th World Congress of Accounting Historians here in Turkey. I am pleased to be back in Istanbul, which I had the pleasure of visiting in November 2006 for the 16^th World Congress of Accountants. This city is the perfect location for a global discussion centering on history and business, as this is a place where civilization and commerce have some of their deepest roots. 

I would like to extend my appreciation to Dr. Oktay Güvemli for inviting me to speak to you today.

As many of you are aware, IFAC is the global organization for the accountancy profession and is comprised of 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, industry, commerce, education, and government.

While IFAC itself is very young – we celebrated our 30th anniversary last year – the history of the accountancy profession stretches back centuries. The military museum where we are meeting is featuring a special exhibition on accounting from the Ottoman Empire, including documents on the Merdiban, or Stairs, method of accounting that was used as the state accounting system in the Middle East for more than 1,000 years.

The tradition of a deeply committed accountancy profession in this country continues today. I would like to acknowledge IFAC’s two member bodies here inTurkey: the Expert Accountants’ Association of Turkey and the Union of Chambers of Certified Public Accountants of Turkey. In addition, I would like to recognize and thank the two Turkish members who currently serve as IFAC volunteers: Omer Duman who is a member of the International Public Sector Accounting Standards Board, and Masum Turker who is a member of the Small and Medium Practices Committee.

History is important. It is important because it is a source of knowledge. History is a source for learning and a driver of evolution. If we need to understand something, we need to observe its beginning and its development.

In order to create a clear and promising path for our future, we need to consider and understand our past. History helps us understand who we are and where we are standing. We live in a time of rapid change, a time of progress, where we sometimes prefer to define ourselves in terms of where we are going, not where we come from.

But history does matter. Our view of history shapes the way we view the present, and, therefore, it contributes to our ability to find solutions for existing problems and challenges.

The writer and historian David Crabtree defines history as the facts about the past that are significant and true. This simple definition contains two words packed with meaning which must be understood in order to understand history.

The first word is “significant.” History is the process of simplifying. Of all that could be said about an event or a process, what is most important or most significant? The goal of history is to identify the knowledge about the past that best captures the essence of values, skills, passions or achievements.

And these facts have to be “true” in the sense they are well supported by research, investigation and reliable sources. History confines itself to facts, and to the relation of actual events. The dignity of history consists in describing events with truth and accuracy and in presenting human agents and their actions in an interesting and instructive form. The first element in history, therefore, is truthfulness.

Since I am not a historian, I will not talk to you today about past history. Instead, I will focus on why, I believe, today we are experiencing a very special time in the history of accounting and auditing and what the near future may hold.

I think that two significant issues are shaping the future of accounting and auditing: the achievement of convergence and the return to a principles-based approach in the development and use of professional standards. 

Global convergence

What we are witnessing around the world is a rapidly spreading affirmation that convergence to a single set of global, principles-based auditing and accounting standards is an idea whose time has come.

It is a time when convergence plays an important role, and the use of commonly accepted international standards worldwide is being recognized by everyone as a true need, as something that will contribute significantly to the proper functioning of the financial and the capital markets and, consequently, will improve the world’s economic growth and stability.

In the past year or two, many countries and jurisdictions have reached the conclusion that convergence is essential to consistent financial reporting, believing, in turn, that it fosters investments and global economic competitiveness.

One event that will undoubtedly be registered in the history of the accountancy profession as significant in 2007 is the United States Securities and Exchange Commission’s adoption of rules to accept, from foreign private issuers in their filings with the Commission, financial statements prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) without reconciliation to generally accepted accounting principles (GAAP) as used in the United States. 

No less important in our current history have been the decisions that were taken by countries like Australia, New Zealand, India, China, Canada, Brazil and others to converge with IFRSs or International Standards on Auditing.

This progress is actually not a surprise to IFAC. I am proud to tell you that IFAC was a champion of convergence long before the concept was popular and well before it was called convergence. Surely history will acknowledge IFAC’s role and contribution in this area.

IFAC is so committed to the goal of convergence that this is reflected in its mission statement. Well before many in the business community were working with a global mindset, IFAC recognized that a single set of high quality international standards is essential to raising the quality and uniformity of practice by professional accountants throughout the world.

In our early days, we referred to “harmonization” of standards but moved to the word “convergence,” because it better conveys what IFAC is working to achieve: many interested parties moving simultaneously towards the same point: the worldwide use of a consistent set of high quality professional standards.

IFAC’s four independent standard-setting boards – the International Auditing and Assurance Standards Board (IAASB), the International Accounting Education Standards Board, International Ethics Standards Board for Accountants, and the International Public Sector Accounting Standards Board – are committed to developing international standards that raise the level of practice and promote reliable and high quality financial reporting worldwide. IFAC’s commitment to convergence also includes promoting the use of the accounting standards developed by the IASB. 

In fact, IFAC showed great foresight in adhering to a global perspective back in the 1970s and 1980s, because the phenomenon of globalization was just around the corner. In the 1990s, as the world increasingly “flattened” and barriers to trade and investment collapsed, the need for a more common business language with consistently applied standards became ever more necessary. We witnessed the tripling of the global equity market value of all publicly traded securities and saw even the smallest companies begin to adopt structures that would enable them to participate and compete in the global marketplace.

While these developments presented the accountancy profession with unique challenges, the ongoing development and adoption of international standards enabled us to effectively respond and contribute to strengthening economic growth and development around the globe.

Today, support for global convergence is nearly unanimous and crosses regional, cultural and professional boundaries. The results of IFAC’s Global Leadership Survey of the leaders of professional accountancy organizations, conducted in late 2007, showed that nearly all respondents believed that convergence was key to economic growth and development in their respective countries. In responding to our survey, they ranked convergence to International Standards on Auditing (ISAs), set by the IAASB, at the same high level of importance as convergence to IFRSs set by the IASB. The respondents to the Global Leadership Survey recognized that convergence strengthens auditing and accounting standards and results in improved financial reporting, which is so critical to establishing investor confidence and to creating vibrant capital markets. 

Members of IFAC are not alone in supporting convergence.

• The World Federation of Exchanges has endorsed the IAASB’s processes for standard setting and recognizes the importance of ISAs.
• The Financial Stability Forum has identified ISAs and IFRS as two of the 12 key standards for sound financial systems and deserving of propriety implementation depending on country circumstances.
• And the World Bank uses ISAs and IFRSs as the benchmarks for its ROSCs (Reports on the Observance of Standards and Codes) for assessing the quality of national auditing and accounting standards.

Convergence is a most important and, I believe, a most achievable goal and the more quickly we move on this, the greater the chance for success is. However, it is also important to be aware that there is still a long road to be traveled in order to achieve the goal of global convergence. Our aspirations should be beyond the scope of equivalence and mutual recognition and we should recognize that we have much to do to move further down the path.

IFAC’s work supporting and promoting convergence

Because IFAC understands there is much to be gained from convergence, and because developing a strong accountancy profession is central to our mission, we are working in numerous ways to support and promote adoption of high quality international standards in all countries and jurisdictions around the world. Let me briefly outline three of IFAC’s actions in this regard.

First, the IAASB’s Clarity project aims to ease the process of convergence to ISAs, making them easier to translate and to implement. Besides, this project supports the historic tendency: to achieve simplicity. The IAASB expects to complete all 35 ISAs as final standards, redrafted under the Clarity project, by the end of 2008. These standards will be effective for financial periods beginning on or after December 15, 2009. IFAC believes the Clarity project is crucial to removing any barriers to convergence to international auditing standards.

I am convinced that the Clarity Project, as its subsequent impact on the formulation of the future auditing standards, will be recognized as one of the significant milestones in the history of auditing.

IFAC also works to promote convergence through its Member Body Compliance Program. This program was established to support IFAC’s members and associates in meeting the requirements for IFAC membership, which are set out in the Statements of Membership Obligations, or SMOs. As part of the Compliance Program, IFAC members and associates completed self-evaluation questionnaires designed to assess whether and how they are complying with SMOs, which require them to promote, incorporate and assist in implementing international standards issued by IFAC’s independent standard-setting boards and the IASB, and to have in place quality assurance and investigation and discipline programs.

The Compliance Program plays a major role in contributing to the overall quality of the profession, and it does so in a way that is supportive and collaborative. Launched in November 2003, the Compliance Program is now entering the third phase, which involves member bodies and associates developing action plans based on policy recommendations provided by IFAC Compliance staff. To encourage the development of effective and responsive action plans, IFAC encourages its member bodies and associates to collaborate by sharing their experiences and offering advice in the preparation and implementation of Action Plans.

I would also like to emphasize that IFAC’s Member Body Compliance Program is an international model of transparency. All responses to the self-assessment questionnaire are posted on the IFAC website and the action plans, once agreed with the member body, will also be posted on the site. Thus, anyone in any part of the world can readily obtain information about the state of the profession in the more than 120 countries represented by IFAC members and associates.

I am absolutely convinced that the IFAC Compliance Program will remain in history as one of the most ambitious and effective programs for the development of the accounting profession and for the improvement of financial reporting systems.

Another way IFAC is working to promote international convergence is through increased dialogue with those who oversee the financial and capital markets and, for that reason, have key interests in the work of the profession. We are engaged in ongoing dialogue with international regulators and organizations, including the International Organization of Securities Commissions, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, the European Commission, the World Bank, and the Financial Stability Forum. We also hold meetings with national regulators in countries that IFAC officers and chairs of standard-setting boards visit. Regulators also participate on the consultative advisory groups to IFAC standard-setting boards.

In recent years, IFAC has undertaken a number of reforms, including increased dialogue with regulators and other organizations, to help ensure that its standard-setting activities reflect the public interest and are fully transparent to those affected by the standards. One of the most important developments, and one that history will also highlight as a relevant event, was the establishment of the international Public Interest Oversight Board (PIOB) in March 2005 to oversee IFAC’s standard-setting activities in the areas of auditing and assurance, ethics, and education, as well as the IFAC Member Body Compliance Program. Earlier this year, the PIOB completed its first three-year term, and its continuing oversight has helped to increase confidence that IFAC’s activities are properly responsive to the public interest.

The return to principles and the search for simplicity

Along with the historic achievement of convergence, we are now also witnessing another historic process: the return to principles and the search for simplicity.

I talk about a return to principles because the standards were first created as generally accepted principles. Initially, they were the reflection of the criteria that had consensus among the professionals of a specific jurisdiction. It was that consensus that gave the standards authority. And those basic standards were expressed as general principles. These standards, on the other hand, were generated in each country, and they were strongly influenced by each culture.

It is not easy now to determine how, in a relatively short period of time, in many countries those general principles became a set of numerous and complex detailed rules.

Those who favor rules say the more specific the requirement, the more certain you can be that, for example, similar transactions are accounted for in a similar manner. Rules limit the preparer’s or auditor’s use of professional judgment and, in a litigious environment, can initially provide a sense of protection. Regulators and oversight authorities tend to like rules because they offer a specific means of measuring compliance.

On the other hand, the argument against rules is that no standard will fit all circumstances. Since the practice of auditing and accounting is a technique, not a science, it is necessary that professional accountants and auditors exercise their professional judgment. With the principles-driven approach, the standards have some requirements written into them, accompanied by guidance, that provide a framework within which the auditor or preparer uses his or her professional judgment and interprets the standard in a given circumstance.

The facts and events of our profession’s recent past seem to indicate that the concept of “principles-based standards” will be imposed. Underlying this development is the “search for simplicity,” a basic principle in the definition of criteria and the elaboration of standards.

Looking ahead, I believe we can expect principles-based standards to become the global benchmark. The world regulatory community has been endorsing IFRSs and major regulators in the world are supporting ISAs. Globally, most major economies are already using international standards or national standards based significantly on IFRSs and ISAs. 

Last year, the SEC established an advisory committee to develop recommendations on improving financial reporting in the US. In February 2008, the committee submitted a number of proposals to the SEC in a progress report; the proposals included that the Financial Accounting Standards Board move away from industry-specific guidance and instead focus on activity-based guidance. The committee also proposed that the SEC and US Public Company Accounting Oversight Board adopt frameworks for reviewing the exercise of judgment.

In this progress report, the committee recognized that detailed rules not only increase the complexity of the financial reporting system, but they also permit the structuring of transactions to achieve a particular accounting result, even if the results are inconsistent with the economic substance of the transactions or the underlying purposes of the rules.

It is truly gratifying to witness such international affirmation of principles-based standards, especially considering IFAC’s long commitment to this issue. This concept will necessarily entail an increased use of professional judgment, and this, in turn, will lead to an increase in the value of the old principle of uniformity, as a substantial requisite in the preparation and presentation of financial information.

The way forward

As the momentum for convergence and for principles-based standards continues to build and become a reality, the language of our profession becomes a truly universal one. Thus, you can see why this is a very special moment in accounting and auditing history. 

This is not to say that our work is over or that the push for convergence is a part of the past. It is, indeed, a necessary part of our future. IFAC well recognizes that additional progress needs to be made. And this additional work is required by, on the one hand, the developed economies, that have to accept being a part of an international process of standard setting and, on the other hand, by the emerging economies, where it is necessary to work intensely on the training and the guidance to effectively implement standards. All of us, including the profession here inTurkeyand around the globe, can be of assistance in this process. We must look for and identify the role we can play in helping emerging economies to strengthen the profession.

Moreover, we are only beginning this process of establishing principles-based standards and searching for simplicity. We still have a long road ahead of us.

In developing its strategy for the coming years, IFAC acknowledges that much work lies ahead in addressing issues beyond convergence and simplicity.

The accountancy profession must also continue to work to achieve greater efficiency and effectiveness and remain open to new approaches and further improvements, for example, in financial reporting. 

The quality and usability of financial reports was a key area of focus for a report that IFAC released earlier this year on the financial reporting supply chain. The report – which surveyed 340 financial reporting supply chain participants worldwide, including investors, preparers, company management and directors, auditors, standard setters, and regulators – found that the quality and strength of financial reports and financial reporting have improved in recent years as have corporate governance, the preparation of financial reports, and the audit of financial reports. But the report also emphasized that investors and other stakeholders are still finding it difficult to make sense of the figures in financial reports due to insufficient narrative reporting or qualitative information on company strategy and other areas. As a result, the recommendations for change included making the financial reporting information more understandable, increasing communication among all financial reporting supply chain participants, and including more business-driven information. 

These findings were echoed in the referred interim report of the SEC advisory committee on improving US financial reporting, which called for increasing emphasis on the investor perspective in the financial reporting system.

IFAC is already working to address these concerns, having launched a new project to analyze actions currently being taken to address the suitability of business reporting and to identify areas for future development. This project will take the findings of the financial reporting supply chain report to the next stage and deliver specific recommendations for further action in enhancing the quality and usefulness of corporate reporting.

I have often expressed my belief that the future of the accountancy profession lies in its ability to change, evolve and adapt to market demands. This includes technological demands such as XBRL, the language for the electronic communication of business and financial data.

The use of XBRL is seen as an important part of making financial reports more consistent, interactive, and useful. This view is shared by a number of regulators, including theUSSecurities and Exchange Commission, stock exchanges around the world, and national banks inBelgium,Japan,Spainand elsewhere. It is very probable that in the next few years XBRL will have a firm place in the history of accountancy.

If we act creatively in rethinking financial reporting, and in approaching many other challenges, the accountancy profession will be better equipped to sustain itself and grow. Looking to the future, we must be innovative and flexible – words, I know, that are not popularly associated with accountants. Nonetheless, we have proven we can proceed with innovation. 

To further sustain this great profession, I believe that each and every professional accountant must become its greatest advocate. We must not be shy about talking about our role in creating an investment climate of trust, of contributing to economic growth and development, and of serving as the corporate conscience for companies large and small. These are all roles that we can and should be proud of. We must let others know how they, too, can fulfill these and other roles in the international profession and provide them with the necessary training and education so that they can succeed in fulfilling them.  

Finally, as a unified global profession, we must come to agreement on strategic objectives and actions and then align our activities. We need to identify and implement mechanisms that facilitate effective communication, collaboration and consultation. And, the global profession, acting in unison, needs to address issues of new and growing importance, such as our role in environmental sustainability reporting.

Historians say that in order to consider our future, we must learn from our past. As we do this, we see that IFAC and the accountancy profession have acted as pioneers in anticipating the need for a more global business perspective. Celebrating our 30^th anniversary last year underscored our progress. Our predecessors had vision and they anticipated the future. They made the right decisions and acted upon them. IFAC was focused on convergence and principles-based standards before other organizations began to consider such issues. IFAC was one of the first organizations working to develop international standards and urging the accountancy profession to address crucial matters with a global mindset.

I believe the accountancy profession can meet the challenges and opportunities of the coming decades with a similar capacity for vision and change. Today, we continue to offer the world an example of what can be accomplished.

And if we are effective, we can make a positive difference in the world.

Thank you for your attention.