Sri Lanka ROSC A&A Update 2014 September 15, 2014

Monitoring, Enforcement & Oversight Auditing Standards Accounting Standards Accountancy Profession & Ethics Education & Training Statutory Framework Reminder of approach. diagnostic to capacity building Emerging issues 2004 Policy recommendations Reforms to strengthen – systemic issues WHY Diagnostic questionnaire and due diligence

Stakeholder Consultations CASL – main partner PFM Steering Committee Preparers of financial statements SME and Financial Institutions All PAOs Auditor roundtables (large and SMPs separately) All regulators (separate meetings), Registrar of Companies, Dept of Inland Revenue Auditor General DG MOF (SOE) Chamber of Commerce Statutory Auditing Standards Committee & Accounting Standards Committee Learning providers 3

Objective Supporting Sri Lanka’s growth by –improving the investment climate (ROSC & ) Strengthening private sector transparency and accountability Strengthening regulators –Supporting structural shifts in the economy and social inclusion –Strengthening the public sector 4

5 Global IASB (Financial Reporting Standard Setter ) IFAC (Auditing, Ethics, Education, Public Sector Standard Setter and apex body for PAOs) Sri Lanka SLAASMB CBSL (Bank and NBFI) SEC & CSE Registrar of Companies IBSL Profession CASL Standard Setter for A&A Other Local Bodies AATSL / CMA Global Accounting Bodies CIMA/ ACCA/ CFA State & Foreign Universities 120,000 students 13,000 members

Improve investment Climate Achievement Adoption of IFRS & ISA Issuance of updated Corporate Governance Code Increased capacity and efficacy of regulators Development of BPO sector Medium sized auditor alliances with mid tier global practices PAO support for preparers and auditors Challenges Improve audit quality Regulators to share information and enhance capacity and review methodology New skills required for accounting professional regarding valuation for meaningful implementation of IFRS Application of auditing standards differ significantly among audit firms of different sizes. 6

Inclusive Growth and Structural Shifts Achievements Growth of local accounting bodies provides affordable qualifications/ employment CASL curriculum is fully compliant with International Education Standards CASL members hold influential positions in regional bodies Challenges Profession is Colombo centric PAOs do not have accreditation schemes for learning providers and approved employers SME f/s lack credibility Developing SMEs and SMPs 7

Public Financial Management Achievements Commenced issuance and awareness of IPSAS CASL established Public Sector Accountants Committee SOEs are mandated to follow IFRSs by law and F/s are reviewed by SLAASMB AG staff trained on IFRSs and uses modern risk based methods of audit for SOE audits. SOEs under companies act are audited by private auditors and audit engagements are regulated Challenges Management accounting systems at SOEs Significant number of SOEs delay submitting F/Ss to SLAASMB for review. Some of the serious deviations noted by SLAASMB is on SOEs Weak capacity in financial reporting, financial management and financial analysis at all level from directors who are not conversant in analysing and understanding financial information to preparers who are not knowledgeable in IFRSs. 8

Other Opportunities For Dialogue Management Accounting Standards Support for SOE oversight –Update SOE Governance Code –Support of Sector Specialists for MoFP to set and monitor KPIs for SOEs –Weak capacity at MoFP for oversight of SOEs. Lacks analytical capacity. –Weak IT infrastructure at MoFP to capture and analyse financial data of SOEs. Financial literacy at school level SME development 9

Q & A 10

Thank You 11