IFAC pledges to improve corporate governance
The International Federation of Accountants has this week acknowledged its role and that of the profession in reducing the occurrence of major corporate failures such as Enron.
As a start it said it would set up an international task force of investors, directors and auditors to make recommendations on the role and composition of audit committees and how they should report to shareholders.
The collapse of Enron has focused the limelight not only on the quality of audits and accounting standards but also on the independence and effectiveness of audit committees.
IFAC has called for the involvement of governments, regulators and other stakeholders in order to achieve its aims.
The organisation took the opportunity to reiterate its commitment to principles-based standards and, ‘not detailed rules’ as used in the US. It also said it may need to bring forward the date for applying new rules on independence.
Graham Ward, UK board member of IFAC, said: ‘Audit committees need a strong hand to secure good governance. The IFAC task force will recommend international best practice on the role and composition of audit committees, and how they should report to shareholders. For example, should audit committees have a duty to tell shareholders if they have not received all the explanations they require?’