Public confidence in the audit has suffered a setback in recent years. In the 1990s, attention focused on the auditor following a number of high-profile audit failures. As we enter the 21st century, new questions are being asked.
Do existing rules on independence guarantee objectivity? Should auditors have responsibility to report on non-financial information? Does the brand name of a firm really guarantee uniform standards of work worldwide?
The profession and the firms are rising to these challenges. The firms acknowledge the need for strong leadership. They wish to contribute to that leadership and play a role in a strengthened IFAC.
Later this year the IFAC Forum of Firms will be created. Membership will be open to all firms with offices in more than one jurisdiction or which have, or intend to have, clients with cross-border investors. They will have to comply with certain obligations, including undergoing independent quality reviews. A new independent Public Oversight Board will ensure that the activities of IFAC and the forum are conducted in the public interest.
At the same time, the major firms have undertaken to ensure compliance with IFAC’s International Standards on Auditing and, as a minimum, its code of ethics.
Against this background IFAC is working with regulators, international institutions, major firms and others to improve the quality of financial reporting and auditing .
At its meeting in Washington today the International Forum for Accountancy Development will initiate a review where, with the agreement of the countries concerned and using global standards as benchmarks, local teams will examine national accounting and auditing standards, ethics and disciplinary procedures, corporate governance, banking and company law. IFAD will then seek to plug the gaps.
IFAD will today also approve one or more papers designed to emphasise the key role of the profession in ensuring the accountability and credibility of financial information. These papers will encourage many countries to increase the role of and reliance upon the work of accountants and auditors in the public and private sectors.
With co-operation from those responsible for change, the profession has committed itself to promoting high quality financial reporting worldwide and subjecting this information to independent audit processes which will guarantee reliability, transparency and comparability of information globally.
Frank Harding is president of the International Federation of Accountants.
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