Presentation given by Szymon Radziszewicz, Senior Technical Manager for the International Federation of Accountants, on the need for a balanced approach to regulation of the accountancy profession and how the accountancy profession contributes to economic stability and growth, at the 6th Cross-Border Meeting In Moldova in June 2012.
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Finding the Balance: Regulation and the Role of the Accountancy Profession
1. Finding the Balance
Regulation and the Role of
Accountancy Profession
Szymon Radziszewicz
Senior Technical Manager
Member Body Development
6th Cross-Border Meeting
Chişinău, Moldova
June 22, 2012
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2. Today’s Presentation
Outline
• The context
– History
– Complexity
• Regulation of the profession – the global perspective
– Balancing shared regulation
– Framework for strong accountancy profession
• Role of the national profession
– Commitment to quality
– Provide support and leadership
• How IFAC assists
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3. 5000 Years Ago
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4. 500 Years Ago
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5. 16 Years Ago
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6. 4 Years Ago
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7. Last week
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8. Complexity
International Landscape Today
• Pressure on the broader financial architecture
– Economy in recovery
• Globalization
– Information, Capital, Accountants moving across borders
• Diverse and segmented
– Large multinationals and smaller local SMEs
– International network firms and local SMPs
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9. Clarity
IFAC Perspective on Regulation
• Global regulatory convergence
– IFAC’s position; importance of high-quality globally accepted standards
and consistent adoption, implementation and oversight
• Balancing shared regulation
– Policy Position Paper (PPP) 1 and the role of professional accountancy
organizations
• Statements of Membership Obligations (SMOs)
– A framework for credible and high quality professional accountancy
organizations
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10. Finding the Balance
Regulation of the Accountancy Profession
• “Regulation of individual professional accountants is
primarily conducted at a national level, with professional
accountancy organizations playing an important role in
working with governments to ensure that such regulation
is effective, efficient, and in the public interest.”
• Characteristics of (and threats to) effective regulation
• A shared approach to regulation – roles for government
and professional accountancy organizations
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11. Finding the Balance
Framework for Strong PAOs
SMO1 Quality Assurance
SMO2 International Education Standards
SMO3 International Standards on Auditing
SMO4 International Code of Ethics
SMO5 International Public Sector Accounting Standards
SMO6 Investigation and Discipline
SMO7 International Financial Reporting Standards
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12. Balancing Act – the SMO Applicability Framework
Degree of responsibility for an SMO area
No
Direct Shared
Responsibility
For the elements for Use best endeavors to:
Implement all the which Member Body
requirements of the has direct a. Encourage those
SMO responsibility follow responsible for the
the approach for requirements to follow
In exceptional situations "Direct" this SMO in
departures are possible implementing them;
if can be justified from AND
the public interest AND
perspective and need to For the elements for
be documented which Member Body
has no direct b. Assist in the
responsibility follow implementation where
the approach for appropriate
"No Responsibility "
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14. Role of the Profession
Strong Accountancy Profession = Inclusive and
Sustainable Growth
High-Quality Inclusive and
Financial Information Sustainable Growth
Accountancy
Profession
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15. Role of the Profession
The Goal – Provide Quality Information
• Contribute to economic stability and growth
• Enhance efficiency and accountability of businesses
• Promote and support governmental transparency and
accountability
• Be a key player in rebuilding confidence in financial
markets
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16. Role of the Profession
Be the Voice
• Educate stakeholders and advocate the role of the
profession
• Raising awareness about the need for accountants and
auditors
– Public Sector and Private Sector
• Input into development of legislation and regulation
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17. Role of the Profession
Provide Support
• Training and examination
• If not the standard-setter:
• Input into the development of standards
• Support implementation of standards
• Promote and monitor adherence to ethics and
independence requirements
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18. Role of the Profession
Leadership through Action
• Commitment to the public interest
• Adherence to the values of integrity, transparency and
expertise
• Commitment to follow high standards
• Ongoing education
• Oversight of its public interest activities
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20. Ultimate Objective
IFAC’s Vision
For the global accountancy profession to be
recognized as a valued leader in the
development of strong and sustainable
organizations, financial markets and
economies
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21. Tools and Resources
• www.ifac.org/ComplianceProgram
• www.ifac.org/about-ifac/professional-accountancy-
organization-development-committee
• www.ifac.org/SMP
• web.ifac.org/clarity-center/index
• www.ifac.org/Ethics/Resources.php
• www.ifac.org/Translations
• www.ifac.org/issues-insights/public-policy-regulation
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The annual balance sheet of a Sumerian state-owned farm, drawn up by the scribe responsible for artisans: detailed account of materials and workdays for a basketry workshop.
Do we need to despair?
The timeswe live in are no doubtveryinteresting.
But being part of the accountancy profession we have the tools to bring clarity to today’s complex world
Policy Position Paper 1 emphasizes best practicein the design and implementation of regulation. An understanding of the characteristics and operations of the market is essential (market size, business diversity, economic factors, consumers, etc.). Care needs to be taken that the nature and characteristics of the operation of the market are well understood; otherwise, the regulation may not achieve its purpose. To be effective, IFAC believes that regulation should reflect six qualities: (i) transparent; (ii) proportionate; (iii) targeted; (iv) non-discriminatory; (v) implemented fairly and consistently; and (vi) subject to regular review.Regulation should aim to ensure that the quality of services provided by the profession responds effectively and efficiently to the demands of the economy and society.It must be designed to take into consideration the shocks and stresses that may occur in different economic conditions.
The SMOs are alignedwith the underlying International Standards and providekey focus areas for the profession
To understand how the SMOs can work for each organization, you must first understand the applicability framework
Once you understand what are the specific responsibilities for each SMO area you can use SMOs as the building blocks defining the PAOs. While the priorities and emphasis on each SMO area can be different for each PAO, the basic ideas are the same. The accountancy profession needs to: Have solid base of education (experience, examination) and focus on lifelong continuous professional development Focus on adoption and implementation of international standards With strong ethical standards as the cornerstone AND Quality assurance and investigation & discipline as mechanisms to maintain and continuously improve high quality practice by professional accountants.
Global organization for the accountancy professionComprised of 167 Members and Associates in 127 countriesMembers and Associates are Professional Accountancy OrganizationsRepresents 2,5 millions accountants in public practice, business, government, and academiaThe color may be uniform but there are different ways to effectively organize the profession, different legislative frameworks, different stakeholder expectations and capacity Green – membersYellow – associates onlyGrey – no IFAC representation
Somespecifictools for PAO development:Good Practice Guidance, Establishing and Developing a Professional Accountancy BodyMentoring Guidelines for Professional Accountancy OrganizationsThe Education, Training, and Development of Accounting Technicians