This is the first time accountancy firms have been directly linked to a project undertaken by the International Federation of Accountants, a collection of the world’s accountancy bodies.
The project has been brewing since 1999, following pressure from the World Bank and securities regulators who expressed concerns that different audits conducted by the same firm or its subsidiaries were not of the same standard. These concerns gave birth to the Forum of Firms and the International Forum for Accountancy Development (IFAD) – an assembly of regulators, investors and accountancy firms.
The provisional chairman of the Forum of Firms is Karl Ernst Knorr, member of the executive board of BDO in Germany.
The position, as well as the Forum, will remain provisional until a formal constitution and operating procedures have been agreed upon by IFAC and the participating firms.
Knorr said: ‘Our meeting yesterday made very good progress on constitutional and operating issues, and there is a high degree of enthusiasm for moving forward as quickly as possible.’
The cost of funding the large-scale project will be taken on by the Forum’s member firms.
‘We plan to formally establish the Forum of Firms within the next few months. We expect to have policies and procedures ready by the summer,’ added Knorr.
Once the Forum is up and running it hopes to exert sufficient pressure on regulators and government’s to uphold and enforce global auditing and accounting rules.
‘It’s a global world, but everything’s decided by individual governments,’ warned Richard Findlater, a senior partner at Ernst & Young and an E&Y representative on the firms’ co-ordinating committee since its inception in 1999.
‘We need regulators and governments to put pressure on as well. We are ready to take our part but we can’t have all the responsibility,’ said Rene Ricol, deputy president of IFAC.
Pressure mounted in spring last year at IFAC’s five-yearly conference in Edinburgh when Ira Millstein, special adviser to the World Bank, called on the largest accountancy firms to set a minimum level below which the quality of an audit would not fall.
IFAD was established on the back of the Asia crisis following a clarion call in 1997 from James Wolfensohn, president of the World Bank.
Participation in IFAC’s Forum of Firms will be open to any accounting practice with transnational clients, which undertakes to comply with rigorous quality obligations.
All member firms will have to adopt international accounting and auditing standards as minimum requirements in order to comply with a common code of ethics based upon IFAC’s ethical guidance. In addition they will have to undergo regular external quality assurance reviews throughout their networks.
The news comes just days after the publication of a survey of accounting standards and their comparability with global accounting rules in 53 countries with a view to showing where progress needs to be made.
The original participating firms in the Forum included Arthur Andersen, BDO International, Deloitte Touche Tohmatsu, Ernst & Young International, Grant Thornton, KPMG and PricewaterhouseCoopers. Others are to be announced later today.
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