1 June 2000 Hong Kong Role of Disclosure in Strengthening Corporate Governance and Accountability Regulation of the Audit Profession Tsuguoki Fujinuma President International Federation of Accountants (IFAC)

1 June 2000 Hong Kong 2 Introduction Regulators focussing on audit quality Self-regulation – the best way forward Action by the profession to ensure audit quality and relevance

1 June 2000 Hong Kong 3 Regulators Focus on audit profession due to: –expanded information needs as a result of globalisation, IT etc –high profile audit failures/Asian crisis Increasing involvement in audit profession: –endorsement of IAS by IOSCO –proposed endorsement of ISA by IOSCO –demands by regulators and IFIs for improved quality

1 June 2000 Hong Kong 4 Self-regulation – the best solution National level: –government/regulators responsible for legislative framework –professional bodies responsible for standard-setting, compliance, enforcement International level: –international legislation still at early stage –international professional bodies responsible for standard-setting, compliance, enforcement Profession is being challenged to demonstrate its ability to: –meet expanded demands of capital markets –undertake assurance standard-setting/enforcement roles

1 June 2000 Hong Kong 5 IFAC and IASC Aim of IFAC/IASC –creation of transparent and comparable global financial and auditing environment IASC –development, promulgation and review of IAS –changes in governance, membership IFAC –broad standard-setting role (ISA, ethics, education, other areas) –compliance review –enforcement

1 June 2000 Hong Kong 6 IFAC : International Standards on Auditing (ISA) Core of existing standards Existing level of acceptance and use Ensuring quality and relevance of standards New areas to be covered (derivatives) Other non-financial assurance areas (eg PFI, environmental reports, KPI) Their importance to decision-takers Benefits of international endorsement by IOSCO

1 June 2000 Hong Kong 7 IFAC : Ethics Importance of independence of auditors New IFAC principles-based framework Consistency of approach with EU and USA Other guidance (MDPs, other services to audit client)

1 June 2000 Hong Kong 8 IFAC : Education Particularly relevant to needs of developing nations IFAC’s proposed update of standard syllabus and IT components

1 June 2000 Hong Kong 9 Commitments of Major Firms To support use of IAS To use ISAs in their audit procedures To ensure ethics rules comply throughout their networks using IFAC Code as minimum To provide greater education and training Closer working relationship with IFAC through membership of IFAC Forum of Firms –eligibility requirements –membership obligations –firmwide independent quality reviews

1 June 2000 Hong Kong 10 Compliance, Monitoring, Enforcement Creation of independent Public Oversight Board Obligations of IFAC’s 143 member bodies Creation of IFAC Compliance Committee –to review domestic introduction of IAS, ISA, other IFAC standards and guidelines –to review monitoring and disciplinary procedures by profession bodies of their members Independent quality assurance reviews of firms through IFAC Forum of Firms Encourage adoption of standards through creation of International Forum on Accountancy Development (IFAD)

1 June 2000 Hong Kong 11 International Forum on Accountancy Development (IFAD) Building accounting capacity and capabilities in developing and emerging countries Strengthening financial reporting and its credibility Membership from IFAC, practising firms, regulators, IFIs Benchmarking various aspects of financial architecture against international standards e.g. accounting, auditing, independence, corporate governance, disclosure requirements Support and assistance to “plug gaps”

1 June 2000 Hong Kong 12 Conclusion Profession and firms taking significant steps to meet/exceed public expectations Harmonised and high quality accounting and auditing profession to support public and private sectors Working increasingly closely with regulators and IFIs towards this goal