1. RAISING REPORTING AND AUDITING PRACTICES WORLDWIDE IFAD INITIATIVE
Introduction
Good afternoon. I have been asked to talk to you about the initiative of the International Forum on Accountancy Development (IFAD). IFAD was created as a working group between the World Bank, the OECD, IOSCO (International Organization of Securities Commission), the Basel Committee, IFAC (International Federation of Accountants), the Big 5 Accounting Firms, UNCTAD, and regional development banks, in order to :
define a common work plan
improve the security and transparency of the markets
improve the financial stability on a global basis.
(and I have the dubious honor to chair the Steering Committee of the Big 5).
My brief presentation summarises the framing of the issues and the elements of solutions that we called a Vision (may a "grand mot") originally set out at the first meeting of the Forum in June 1999 by representatives of the large accounting and auditing firms. The Forum adopted this "Vision" at its October meeting and since, has entered into its implementation process
Jacques Manardo Deloitte Touche Tohmatsu
2nd Asian Corporate Governance Rountable
2 June 2000

2. The Need for Change
The quality of financial information is below expectations
The available financial information in many markets is inadequate for investors and other users to accurately assess risks and make reasoned decisions on a global level.
The quality of financial information falls short of user expectations and has created an expectation gap.
The absence of transparency and reliable financial information is a particular issue in respect of developing countries but is also an issue in many of the developed countries. The current position impairs the quality and efficiency of capital markets and undermines the public interest.
The Asian crisis in particular had raised questions about the quality of accounting and auditing in the affected countries.

3. The Need for Change
The quality of financial information is below expectations in many countries
Corporate governance practices and business culture fall short
A major factor contributing to these problems is the absence, in many countries, of corporate governance practices and the business culture necessary to support the provision of appropriate financial information.

4. The Need for Change
The quality of financial information is below expectations in many countries
Corporate governance practices and business culture fall short of what is required in many countries
Large accounting firms pledge to work with others to narrow this gap
The members of the Forum agreed that such change requires major roles to be played by many different parties including : reporting entities,
regulators,
standard setters,
governments,
and investors,
as well as the accounting profession.
Each of these parties must be active and willing participants in the analysis of the problems and the implementation of the solutions.
Improved transparency and greater comparability and reliability of information do reduce the cost of capital and therefore be of substantial benefit.
As a key part of the implementation of the Vision, the large accounting firms have committed to providing a leadership role. The firms are committed to working with others to raise standards as rapidly as possible. At the same time, where actions are solely or primarily within the control of the firms, we have agreed to put in place measures to alleviate the problems until longer term solutions are implemented.

5. The Vision Achievement of a rational framework of reporting
Requires a generally accepted framework
corporate governance
the accounting and audit profession
regulation
education
Our Vision is based on achieving a rational framework of reporting on the performance of economic entities, which serves the objectives of issuers and users across the world.
Inherent in this Vision is not only the question of accounting and reporting standards, but also, a generally accepted framework for corporate governance, for the accounting and audit profession, for regulation and for education embracing both the private and public sectors.
The vision has worldwide application and should be applied equally to developed and developing countries.

6. The Vision High quality financial information
 raise national accounting standards and practices with IAS as the benchmark
All general purpose financial information must be prepared using :
a single world-wide framework,
common measurement criteria and fair and comprehensive disclosure.
The Vision will not be achieved overnight. It will require significant long term efforts.
We determine that national accounting standards of most countries should be raised with IAS as the benchmark or as minimum standards. The exception would be where national GAAP is more developed than IAS.
We have been instrumental and very successful in reshaping the IASC into a strong independent body. This is now being implemented. Last week IOSCO' s announcement to endorse IASC's Core Standards is another success even if some work needs still to be done on the reconciliation issue. The Trustee selection is also for me another source of satisfaction with a very strong group composed of prominent names.
However, this change will take time. In the meantime, there is a need to ensure that the financial statements which are used across borders are clearly marked as being in accordance with the national standards of the issuer rather than international or other national standards. This disclosure would be included in the notes to the financial statements as well as the audit reports.
The Big 5 have started this in Asia Pacific.

7. The Vision High quality financial information (IAS)
A strong world-wide audit profession
 raise auditing standards and practices to common high standards (IFAC)
All general purpose financial statements must be audited in compliance with a single world-wide framework of auditing standards that provides users with assurance and that is applied rigorously and consistently.
The implementation of international standards on auditing will result in significant enhancement in national standards in many countries.
The common high standards on ethics and specifically on independence required in the profession will be obtained through implementing new global standards developed by IFAC (International Federation of Accountants).
We have agreed with the governing body of IFAC a program to reshape IFAC, strengthening its decision making process and be much better staffed to promulgate improved/updated standards.
This transformation has been approved by the IFAC Council last week in Edinburg.

8. The Vision High quality financial information (IAS)
A strong world-wide audit profession (IFAC)
Sound corporate governance requirements
 OCDE Principles of Corporate Governance
Beyond accounting standards and auditing standards, there is a 3rd pillar to our building :
The corporate governance requirements of the country must specifically address the respective roles and responsibilities of management, directors, audit committees, and auditors, consistent with the financial reporting model of the Vision.
We have agreed that the basis for benchmarking of corporate governance in the private sector would be the OECD Principles of Corporate Governance.
We also believe that financial accountability and reporting laws must transcend cultural beliefs and practices and must specifically address the issues of corruption, fraud, and misrepresentation.

9. The Vision High quality financial information (IAS)
A strong world-wide audit profession (IFAC)
Sound corporate governance requirements (OECD)
Role of regulators
It is also agreed that regulators must establish :
rules of conduct that are consistent with the Vision. They must act as enforcers of the adopted standards and ensure that divergence from the established rules are addressed quickly and effectively.
Regulators must support the use of :
common standards and reporting requirements
for financial, insurance and other institutions within their control.
This is not yet the case in some key countries.

10. The Vision High quality financial information (IAS)
A strong world-wide audit profession (IFAC)
Sound corporate governance requirements (OECD)
Role of regulators
Education
Finally, a significant obstacle to the achievement of the Vision is a lack of education or knowledge of high quality accounting and auditing standards on the part of preparers of financial information, users of financial information, governments, accountants, auditors, and regulatory bodies. In many countries, without proper education or knowledge, implementation of a plan that would lead to achieving the Vision is impossible.

11. The Vision Parties that Need to Work Together Governments
Regulators and standard setters
Capital providers
International financial institutions
Issuers
Supreme audit institutions
The accounting and auditing profession
Achieving this Vision involves many interested and affected parties who must commit to the implementation of policies and procedures - the Vision cannot be achieved solely by the accounting profession or by any other participant acting alone: it requires the establishment of an effective partnership of many international and national organisations. There are many parties that MUST work together to effect change.
Governments are responsible for promulgating laws under which accounting and auditing operate, for setting the tone regarding transparency and disclosure and for reporting the results of government activities and government owned organisations.
Regulators and standard setters provide the standards which are used in each country and are more or less effective to the extent to which they have adequate processes in place to ensure compliance. Governments, regulators and standard setters must raise accounting, auditing and ethical standards locally and strengthen the way they operate co-operatively on a global basis.
Capital providers, in setting the criteria that they use in making their financing decisions, are a very strong influence on what accounting is used and what auditing standards are practised.
International financial institutions, such as the World Bank, have a strong ability to influence by conditions attached to sovereign debt or by the provision of finance to infrastructure projects or may have a more general role in acting as a catalyst of change.
Issuers are responsible for preparing and issuing financial reports and are therefore the first place to go if there are deficiencies in reporting : you in this room have a key role to play.
Let us not forget supreme audit institutions which have a key direct role in the audit of government and government owned entities.
Last, the accounting and auditing profession acting through its international, regional and national professional bodies and us, the large firms, collectively or individually, we must continue to work to raise standards.

12. Implementation of the Vision
Broad Guidelines
Having concluded that implementation of the Vision requires major change in many countries, it follows that some minimum structure is needed to ensure co-ordination and provide support to the activities at a country level.
Overall supervision of the implementation of the Vision is assumed by IFAD. IFAD establishes broad guidelines for implementation of the Vision, for reviewing priorities and for establishing overall timetables. It will report regularly and publicly on progress.
The International Steering Committee has day to day responsibility for action.
It monitors the progress of implementation of the Vision at country level in relation to all five of the components of the financial reporting framework referred to above; high quality financial reporting standards, a strong culture of corporate governance, a strong accounting and auditing profession, a well established regulatory environment and a comprehensive education system.
We are presently performing the benchmarking in each of the key areas so as to identify the gaps and allow for the creation of a specific and detailed action plan covering all the priority areas.
To affect the implementation of the action plan, a Country Steering Committee will be established for each participating country.
Specific Objectives
Country Implementation
Examples of Potential Focus Groups

13. Implementation of the Vision
Now let’s move on...
The Forum has met already 3 times, June 99, October 99 and March The International Steering Committee met for the first time mid-March. It is currently in the phase of identifying countries that would volunteer to implement the Vision. The next meeting will be, here, today in Hong-Kong.
In that respect, many actions are required at different level to convince governments and other actors of the benefits of significantly improving global financial stability.
I would now be pleased to respond to your questions.