International Federation of Accountants Supporting Accounting and Auditing in Latin America And the Caribbean Sylvia Barrett November 2006, Washington D.C.

IFAC’s Mission To serve the public interest, strengthen the worldwide accountancy profession and contribute to the development of strong international economies by… IFAC IFAC

IFAC’s Mission Establishing and promoting adherence to high quality professional standardsEstablishing and promoting adherence to high quality professional standards Furthering international convergenceFurthering international convergence Speaking out on public interest issuesSpeaking out on public interest issues Promoting integrity, transparency and expertisePromoting integrity, transparency and expertise IFAC IFAC

IFAC’s Membership IFAC’s Membership 163 organizations in 119 countries163 organizations in 119 countries –22 countries and 23 members / associates Developing and developed economiesDeveloping and developed economies Professional accountants inProfessional accountants in –Business –Public practice –Government –Academia IFAC

Key Priorities and Activities Development of the international professionDevelopment of the international profession –Role of IFAC members as national accountancy bodies Focus on challenges facing membersFocus on challenges facing members –Development of tools and resources –Developing Nations Committee (DNC) –Small and Medium Practitioners Committee (SMPC) IFAC

Role of National Accountancy Body Common legal responsibilitiesCommon legal responsibilities –Education and training (initial and continuing) –Examination (Licensing and/or certification) –Enforcement (Ethics and Discipline) –Standard-setting (Development and implementation) Represent the needs of its membersRepresent the needs of its members Role of the Profession

Role of National Accountancy Body Role of National Accountancy Body Absence of legal responsibilitiesAbsence of legal responsibilities –Emphasis on protecting the public interest –Input into development of legislation and regulation –Contribute to education needs of professional accountants –Input into the development of standards –Implementation of standards –Adherence to ethics and independence requirements Role of the Profession

Statements of Membership Obligations Serve as the foundation for requirements of existing members and applicantsServe as the foundation for requirements of existing members and applicants –Incorporate international standards as an objective –Assist in implementation of the standards Evaluating whether members are meeting the requirements (Compliance Program)Evaluating whether members are meeting the requirements (Compliance Program) Membership Obligations

Statements of Membership Obligations Statements of Membership Obligations Seven SMOsSeven SMOs –Quality assurance –Accountancy education –Ethics –Auditing and assurance standards –Accounting standards –Investigation and discipline –Public sector accounting Membership Obligations

Information gathering and action plansInformation gathering and action plans –Regulatory and standard-setting framework –Whether and how SMOs being met Emphasis onEmphasis on –“Incorporation” of international standards –Responsible body or not responsible body –Assist with implementation IFAC Membership Obligations Solutions Solutions

Latin America and Caribbean Economic compositionEconomic composition –Capital markets but primarily smaller entities Lack of resources and capacityLack of resources and capacity –Financial and operational –Technical and language Competing high priority activitiesCompeting high priority activities –Profession, government and regulators Challenge s

Statutory reporting and auditingStatutory reporting and auditing –Which entities should prepare financial statements? –What are the thresholds for requiring an audit? ConvergenceConvergence –National decision to converge or not –Role of IFAC members in promoting international standards Financial Reporting and Auditing Challenges Challenges

ConvergenceConvergence –Keeping pace with new and amended standards –Increasingly complex reporting standards –Applicability of all required auditing procedures Cost versus benefit considerationsCost versus benefit considerations Financial Reporting and Auditing Challenges Challenges

Regulatory bodies: banking, insurance, securities marketRegulatory bodies: banking, insurance, securities market Professional accountancy bodiesProfessional accountancy bodies –IFAC members and non-IFAC members –National federations and local associations / branches Standard-Setting By Multiple Bodies Challenges Challenges

ImpactImpact –Conflicts –Lack of consensus –Market confusion –Established standards vary in legal authority –Duplication of efforts when resources limited Standard-Setting By Multiple Bodies Challenges Challenges

Adoption versus Implementation Understanding the difference between adoption and implementationUnderstanding the difference between adoption and implementation Many countries have formally adopted IFRS and ISA but then lackMany countries have formally adopted IFRS and ISA but then lack –Experience, skills, training, resources and basic tools –Standards not used in practice Challenges

Requires the participation of all key stakeholdersRequires the participation of all key stakeholders –IFAC and professional accountancy bodies –Government and regulators –Donor and development community –Education community –Individual professional accountants Joint Efforts

Joint Effort Avoid duplication of effortAvoid duplication of effort Regional solutions based on common challengesRegional solutions based on common challenges –Representing a regional / sub-regional view –Share experiences and work together to effect change Solutions and Actions

Different university curriculumDifferent university curriculum Lack of resources to update education programs for new standards and practicesLack of resources to update education programs for new standards and practices Need to implement effective continuing educationNeed to implement effective continuing education Access to practical experience providersAccess to practical experience providers Education and training Solutions and Action

Small and Medium Practitioners CommitteeSmall and Medium Practitioners Committee –Input and involvement in IAASB processes and task forces –“Think small” approach –Following IASB’s project on SME standards Develop tools for smaller practitionersDevelop tools for smaller practitioners –ISA Guide (Quarter 2, 2007) –ISA – based audits SMP and SME Activities Solutions Solutions

Recently issued: “Establishing and Developing a Professional Accountancy Body”Recently issued: “Establishing and Developing a Professional Accountancy Body” –Provides practical guidance and examples –Assists in identifying priorities for developing organizations Developing Nations Developing Nations Committee

Diversity in Latin AmericaDiversity in Latin America Key challenges continue to existKey challenges continue to exist Solutions driven by joint effortsSolutions driven by joint efforts IFAC ActivitiesIFAC Activities –Member Body Compliance Program –Small and Medium Practices Committee –Developing Nations Committee Summary Latin America Latin America

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