Major reforms by the International Federation of Accountants will see the creation of a new board to look after standard-setting activities in the area of audit and assurance.
The Public Interest Oversight Board will comprise 10 members and will focus on IFAC’s development of audit standards, independence and ethics standards. It will also oversee the setting of education standards and IFAC’s member body compliance programme. Members of the PIOB will be selected by the regulatory community.
Audit firms in Europe will have to use IFAC’s audit standards by 2005.
The new board is the culmination of a review of IFAC’s governance activities and regulatory responsibilities. The process sought to provide more transparent standard-setting processes, greater public and regulatory input into those processes and better regulatory monitoring.
It also wanted to ensure there was regular, ongoing dialogue between regulators and the accountancy profession on a global scale.
IFAC was aided in the development of the proposals by several influential world bodies, including the International Organisation for Securities Commissions, the Basel Committee on Banking Supervision, the World Bank and the International Association on Insurance Supervisors.
The European Commission, through its head of internal markets Frits Bolkestein, was also heavily involved in the project.
‘The result of this very collaborative effort is a series of proposals, which we strongly believe are in the best interests of the public,’ said IFAC president Rene Ricol.
‘The most effective way to build public confidence in financial markets is to develop a well-designed, rigorous and transparent standard-setting process in which external parties are fully integrated. This is what the reform proposals are designed to accomplish.’
The reforms suggested IFAC’s proposals should get underway early in 2004, provided they receive approval from its council at a meeting next month.
The move follows a series of developments in the US and Europe to tighten the oversight of the audit profession following the Enron scandal.