THE EUROPEAN COMMISSION should launch an independent investigation into the governance of the body responsible for setting international accounting standards, an MEP has told Accountancy Age.
Syed Kamall, MEP for London and an outspoken critic of IFRS accounting rules, wants the EC to mandate a review into the IFRS Foundation, which oversees the work of global standard setter the IASB, following the discovery of serious governance failings at the organisation.
"They need to be as transparent as they can and be open to a review and investigation," Kamall told Accountancy Age.
Kamall, who was part of a group of MEPs that questioned whether IFRS is compatible with European company law, wants to see an investigation that is "similar" to Philippe Maystadt's review of Efrag, a European advisory group on international accounting standards.
Maystadt, a former president of the European Investment Bank, was tasked last year by internal markets commissioner Michel Barnier to find ways to improve the governance of the European bodies involved in developing IFRS. In his report, part of a broader debate on accounting standards, Maystadt recommended reorganising EFRAG to increase its legitimacy with a view to strengthening the EU's influence in international accounting standard-setting.
The IASB is under increased scrutiny after its oversight body was found to have made late and inaccurate filings to Companies House, while politicians have also raised questions about its governance structure, lack of transparency and close ties to the accounting profession, chiefly the Big Four firms.
A particular concern for Kamall is that the IASB takes step to disclose other board positions or accountancy firm affiliations held by its directors. "On conflicts, if the IASB is quite clear where its directors come from and what boards they sit on, others can determine the detail of what conflict is," he says.
The EC is already introducing measures to ensure the IASB is democratically accountable and avoids conflicts of interest as part of a funding package agreed earlier this month, while the IASB has begun planning an internal review of its structure and effectiveness, to be undertaken during 2015 and has held five separate reviews into its governance, structure and operations since its formation in 2001.
However, the IASB has been warned that its funding could be withdrawn if it doesn't meet certain demands laid down by parliament.
"I believe there are teeth to that threat," Kamall says. "We will see what happens in the next parliament but there is support across all parliamentary groups for reform."
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