Allen Blewitt, ACCA's chief executive, goes head to head with Ian Ball, IFAC's chief executive, in a wide-ranging discussion of IFAC's work and the added value it offers both to its members and to accountancy professionals worldwide
Allen Blewitt: Ian, what is IFAC? How and why did IFAC come into being, in Munich, on Friday 7 October 1977? What were the driving factors and who led the process?
Ian Ball: IFAC was established at the 11th World Congress of Accountants in Munich, Germany, in October 1977 as the global federation for the accountancy profession. It was charged with protecting the public interest by developing international standards, promoting international convergence and contributing to the development of the accountancy profession worldwide. That mission guides IFAC's work today. Driving factors in IFAC's initial development were the far-sighted institutional initiatives seeking international standardisation of accounting and auditing, and the economic rationale that lay behind those initiatives. Many people were involved in the process that led to the establishment of IFAC 30 years ago. Sixty-three member bodies from 51 countries signed the first IFAC Constitution. ACCA was one of the founding members of IFAC, and John Peter Grenside of the UK represented the Association of Certified Accountants, as ACCA was then called, at the first IFAC Council meeting.
Today, IFAC represents 155 members and associates - professional accountancy bodies like ACCA - in nearly 120 countries worldwide. One of our primary roles is serving as the global spokesperson for the accountancy profession, speaking out on public interest issues where
the profession has expertise. We are the internationally-recognised standard setter in
the areas of auditing and assurance, ethics, education and public sector financial reporting. IFAC is also active in supporting the development of the profession across all sectors.
AB: How is IFAC funded and how does it demonstrate its value to its members?
IB: IFAC is funded through membership dues, funding from the Forum of Firms, and funding grants from external groups for specific IFAC activities, such as the support we receive for the International Public Sector Accounting Standards Board (IPSASB).
Our members receive significant benefits by virtue of their participation in IFAC. Membership in IFAC demonstrates that an organisation is committed to promoting high professional and ethical standards, quality performance by all accountants, and the interests of the public and all those who use and rely on the work of professional accountants. As members of the global federation of professional accountancy bodies, IFAC members have a significant voice in the leadership of the profession. Members share in and help to influence the development of the international profession in all sectors and in all countries. They also contribute to international standard setting activities in the areas of auditing and assurance, ethics, education and public sector accounting, and to furthering convergence to, and acceptance of, international standards. In addition, membership in IFAC can help to demonstrate an organisation's stature and development in their home country.
IFAC's value to members is also demonstrated by its output. IFAC develops guidance for all sectors of the profession - for auditors in large firms and small firms, for professional accountants in business, for those in government and for academia. We also provide guidance for developing nations to assist them in establishing and strengthening the profession in their countries. We seek to be transparent about exactly what we produce, and there is a section in our annual report that describes our outputs in detail.
AB: In your view, how effective is IFAC in communicating with governments and major stakeholders?
IB: While we can always improve, I believe
that IFAC has been very effective in working with a wide range of stakeholders, including governments, regulators and others. IFAC sees many positive results from its continuing dialogue with regulators and international organisations through the Monitoring Group, which includes the International Organisation
of Securities Commissions, the Basel Committee on Banking Supervision, the European Commission, the Financial Stability Forum, the International Association of Insurance Supervisors and the World Bank. Perhaps the most notable development from this relationship was the establishment in 2005 of the Public Interest Oversight Board (PIOB) to oversee IFAC's public interest activities. The creation of the PIOB, and the work that it has accomplished over the past two-and-a-half years, is a direct result of our collaboration with regulators, and has done much both to improve our processes and to enhance the authority of our standards.
With specific respect to governments and other public sector entities, IFAC speaks often of the imperative to improve public sector financial reporting and financial management. And we are seeing results. There is increasing adoption of the International Public Sector Accounting Standards (IPSASs) developed by the IPSASB. More than 50 countries worldwide have now adopted IPSASs, or are planning to do so.
AB: IFAC is increasing and enhancing its practical services to individual accountants and practices through, for example, IFACnet. What kind of relationship does IFAC seek with individual accountants and how will this be realised? How does this fit with the role of the member bodies?
IB: IFAC primarily communicates to individual accountants through its members and associates. Through the IFAC website, we do make all IFAC guidance and resources globally available to the world's accountants. One of IFAC's primary objectives is to work with its members and associates to develop guidance and facilitate the sharing of knowledge and resources to help professional accountants deliver high quality services. We are also concerned, however, to eliminate duplication
of efforts and to leverage the expertise of all
our constituencies. The IFAC KnowledgeNet
for Professional Accountants, IFACnet, is one good example of this. Developed initially for professional accountants in business, this multilingual global search engine provides accountants worldwide with one-stop access to good practice guidance, tools, resources and further information developed by IFAC and more than 30 of its member bodies. These resources are available in a range of languages, and nearly all of them are accessible free of charge. ACCA was one of the original member bodies that supported the IFACnet project when it was still in development. IFAC and member bodies have a shared role in providing services like IFACnet to professional accountants.
AB: What would you say to the accountant who asks, ‘But what has IFAC actually done for me'?
IB: There are many things that IFAC has
done, and continues to do, that impact and contribute to the work of individual professional accountants. As the international spokespersons for the profession, we have a global platform at which we can raise and draw attention to the important issues affecting the profession. IFAC also supports accountants in delivering high quality work for its clients. The standards developed by its independent standard setting boards are used in countries around the world, and we should not underestimate the value of having common international standards. Convergence to these standards helps to promote consistent, but also efficient, practice by accountants worldwide. Also, the international IFAC Code of Ethics for Professional Accountants provides guidance to assist professional accountants in addressing ethical and independence issues. In addition, we develop tools like IFACnet and good practice guidance for professional accountants in business, small firms, transnational firms and developing nations - and we make it all publicly available and free of charge through our website.
AB: How does IFAC wish to assist small and medium-sized practices?
IB: IFAC is dedicated to supporting small and medium accounting practices (SMPs) and other professional accountants who serve small and medium entities (SMEs). In November 2005, we established a formal committee focused on the needs of SMPs. The IFAC SMP Committee regularly provides input, from an SMP/SME perspective, to the International Accounting Standards Board (IASB) and the IAASB. One
of the major IASB projects that the SMP Committee has been actively providing input to is the development of a proposed International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). Another way that IFAC supports SMPs is through the development of implementation guidance and by facilitating knowledge sharing. The SMP Committee is currently putting the finishing touches to a guide for applying the IAASB's International Standards on Auditing (ISAs) to the audits of SMEs. The guide will assist SMPs, and other professional accountants who serve SMEs, in understanding, complying with and applying ISAs to SME audits. The committee
is developing guides to quality control and practice development. IFAC is facilitating knowledge sharing through IFACnet and through annual forums that focus on issues related to SMPs and SMEs.
AB: IFAC's standard setting in the areas of auditing, ethics, education and public sector accounting are increasingly acknowledged
as significant contributors to uniformly high quality accounting standards. With four new standards and 10 exposure drafts issued
in 2006, how are the profession's global stakeholders reacting to IFAC's progress in
this area?
IB: The aggressive programme being followed by the IAASB is looking to redraft all of its
ISAs in an improved ‘clarity' style by the end
of 2008. This date has been set partly in recognition of the European Commission's
8th Directive, which proposes the adoption of international auditing standards. While we recognise that stakeholders are under significant pressure to respond to all these exposure drafts following so closely one after another, we are reassured by the strong expressions of support we are receiving as these exposure drafts hit the marketplace. The IAASB recently announced that the final effective date for all final redrafted ISAs will be for audits of financial statements for periods beginning on or after 15 December 2009. The IAASB believes that this date balances the needs of standard setters, regulators and auditors to plan for the adoption and implementation of the standards with the desire to have the standards be effective as soon as possible.
AB: In 2005, IFAC formed its Public Interest Oversight Board (PIOB), currently chaired by Professor Stavros Thomadakis. What does the board do and why is it so significant?
IB: As I mentioned earlier, the PIOB was formally established in February 2005 through the collaborative efforts of the international regulatory community working with IFAC to develop an effective public oversight mechanism that would increase the confidence of investors and others that IFAC's public interest activities are properly responsive to the public interest. The PIOB is chaired by Professor Stavros Thomadakis, who is a former chairman of the Greek Capital Market Commission, and includes seven other members who are nominated by the IOSCO, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors and the World Bank. In addition, two representatives of the European Commission serve as observers on the PIOB, and we anticipate the EC representatives becoming full members in 2008.
The PIOB provides public interest oversight of IFAC's standard setting activities in the areas of auditing and assurance, ethics and education, as well as the IFAC Member Body Compliance Program. IFAC and the PIOB are in continuous dialogue. The PIOB chair, or his designee, attends all IFAC Board and Council meetings and has the right of the floor. A PIOB representative attends all meetings of the IFAC Nominating Committee at which it discusses candidates for membership on the boards
that the PIOB oversees. A PIOB member also attends all meetings of the boards it oversees and regularly provides feedback to those boards on their processes. In addition, the PIOB approves the work plans and the due process
to be followed by each of the Public Interest Activity Committees. Through this oversight, the PIOB lends important authority to IFAC's public interest activities and further demonstrates its commitment to transparency and protecting the public interest.
AB: What is the Member Body Compliance Program and how is it related to IFAC's work in promoting quality in the professional work of accountants? What might be the impact on smaller, developing accounting bodies?
IB: The overall objectives of the Compliance Program are encouragement and improvement. The program is built around the Statements of Membership Obligations (SMOs), which set out requirements for IFAC members in areas such as convergence with international standards, quality assurance and investigation and discipline. Members perform self assessments against the SMO requirements, and the IFAC staff develops Policy Recommendations based on these assessments. The Policy Recommendations are intended to be a constructive tool to guide the member in developing an Action Plan to meet the requirements of the SMOs. Some smaller bodies will be challenged to prepare and execute Action Plans due to capacity constraints. IFAC will encourage its more developed members to mentor these smaller bodies as part of their social responsibility to strengthen the profession, and we also seek ways to utilise the support available from institutions like the World Bank
or the regional development banks.
AB: How is IFAC itself ‘contributing to economic growth and stability worldwide'? Does it measure its contribution and, if so, how?
IB: A key contributor to economic growth and stability is a sound international financial system - a fact recognised by the G7 governments when they formed the Financial Stability Forum (FSF). The FSF has in turn identified 12 core sets of standards for financial stability, of which International Financial Reporting Standards (IFRSs) and International Standards on Auditing are two sets of standards. These contribute to the transparency of financial and capital markets, and that helps to avoid or minimise
the impact of economic or financial shocks.
And we know that transparency and high quality information are ingredients of competitive economies. So IFAC's contribution to economic growth and stability, through its own standard setting and its support of IFRSs, is very direct. While we do not, and could not, directly
measure the impact of our activities on the global economy, we can see the influence and progressive adoption of our standards around
the world as a measure of our success.
AB: How does IFAC contribute to the developing professions in emerging economies?
IB: IFAC has established the Developing Nations Committee in order to share information and increase co-operation in strengthening the accountancy profession. The committee supports the development of the accounting profession in developing nations by aiding their participation in the international standard setting process and their efforts at seeking resources from member bodies and other organisations in developed nations. And, of course, we also contribute through our standard setting processes and associated guidance, enabling developing nations to directly access and adopt international benchmarks.
AB: The environment, global warming and sustainability were perhaps not top of the agenda at IFAC's first meeting in 1977, but how important are these issues for IFAC today?
IB: IFAC recognises that professional accountants have an important role in reporting on the environmental impact of companies' operations. Our Professional Accountants in Business Committee has issued two papers on professional accountants in business and sustainability reporting. In addition, within IFAC there is a Sustainability Experts Advisory Panel that advises IFAC's leadership and its boards and committees on matters related to sustainability and environmental reporting.
AB: Ethics is a pervasive issue for the profession. What has IFAC done to strengthen the reputation of the profession as adhering to the highest ethical standards of professional behaviour? Does the world believe us?
IB: At the same time as the IAASB is working
on its clarity project, the IFAC Ethics Board is considering amendments to its independence standards. These amendments are intended to reflect changing expectations since the current IFAC Code was issued in 2004.
Our Compliance Advisory Panel survey shows that more and more member bodies are adopting the code and are introducing programmes to monitor their members' adherence to the code. As you know, the code has been written in a threats and safeguards approach which requires the professional accountant to assess the circumstances of a particular engagement and develop solutions to mitigate a perceived threat. Regulators are generally supporting the threats and safeguards approach in their own codes, although we recognise the right of this group to set absolute prohibitions on provision of certain services where they believe this best serves their constituencies. On balance, we are glad
to see a global acceptance of the code. Its acceptance is conditional, however, on our member bodies exercising their own role and policing the code in relation to their members.
It is the results of these actions that will convince the world that the code is working.
AB: Where would you like to see IFAC 10 years from now, and how does this future vision accommodate the complementary roles of IFAC and the member bodies?
IB: One of IFAC's stated goals is to have a recognised member or associate in every country around the world. I don't know if we
will have achieved this in time for IFAC's 40th anniversary, but I am hopeful that we will see this vision come to reality in the not too distant future. This is a goal that member bodies can and do support by serving as mentors for professional bodies that are not as well established, or by helping the profession in countries where it is at an earlier stage of development, creating the infrastructure necessary to have a strong professional accountancy body.
Another goal for IFAC in the next 10 years
is to see full convergence to international standards become a reality. We are seeing real progress in this area with the standard setters
and regulators in the US, Europe, Japan and other large capital markets actively working towards convergence. Member bodies must continue to support convergence in their countries. This need for convergence applies to all of IFAC's standards and also to those of the IASB.
But our real goals are goals for the profession, and to achieve these will require contribution from IFAC, from its member bodies and from their members. I would like to see the profession contributing more to the quality of accounting, financial management and auditing in areas where our contribution is less than it should be. The quality of financial management in the public sector is still, from an international perspective, seriously deficient, and this imposes a considerable burden on our economies. The quality of financial reporting
in many jurisdictions, including those in developing and transitional economies, requires significant enhancement. I also believe that there is much work to be done to improve the quality and consistency of work by accountants working within business organisations.
Without the support and involvement of
our member bodies, IFAC could never fulfil its mission of serving the accountancy profession worldwide. I thank the ACCA for its 30 years of friendship and support, and I hope the next 30 years bring even greater success for both our organisations. |
