The Monitoring Group, a group of global financial regulators, has proposed changes to the system, which could have a big effect on both the public and private accountancy and auditing profession.
IFAC chief executive Fayezul Choudhury told PF: “The public sector impact is very important.
“We may not be where we want to be in terms of public sector financial auditing, but that’s not to say we shouldn’t keep the standards high.”
He said it was “extremely important that the public sector understands any potential implications of changes proposed on that framework” and that it “speaks into it loud and clear”.
IFAC chief financial officer Russell Guthrie expressed concern that if the public sector were not involved it could be overlooked in the new system.
This could mean the public sector would have to find a way to set its own auditing and ethics standards, rather than have the “big bulk” of the work done by the current standard-setters, he said.
“There may not be awareness in the Monitoring Group that these standards are also the basis of public sector audit standards,” he added.
The proposed changes are aimed at making international audit standard-setting more independent, relevant and transparent to better serve the public interest.
They involve combining the current ethics and audit boards into one, enhancing the role of the Public Interest Oversight Board which was set up by the Monitoring Group in 2005. Although, IFAC believes the two boards should remain separate.
At a roundtable event on Monday organised by the Monitoring Group, IFAC, among others, raised concerns that the group’s consultation paper was missing key issues, such as a guiding document for the future standard-setting board. It is expected this could be released in June this year.
IFAC has published its initial reactions to the consultation paper, proposing its own various changes.
The Monitoring Group has been contacted for a comment.
Feedback and comments on the Monitoring Group’s proposals are requested by 9 February.
Current set-up explained:
The standard-setting boards are nominated and largely funded by IFAC.
The current standard setting is done by three separate boards under IFAC, not counting IPSASB.
These boards are the International Auditing and Assurance Standards Board (IAASB), International Ethics Standards Board for Accountants (IESBA) and International Accounting Education Standards Board (IAESB).
The Monitoring Group has said the current standards are good but need to be ready for the future and modernised.
The Monitoring Group includes securities and auditing regulators such as the Basel Committee on Banking Supervision, the European Commission, the Financial Stability Board, the International Association of Insurance Supervisors, the International Forum of Independent Audit Regulators, the International Organization of Securities Commissions, and the World Bank.
According to the Monitoring Group’s position paper, “the reason for dealing with reform in stages is to avoid disrupting or otherwise undermining confidence in the current standard-setting process.
“This would ensure that further changes needed to the governance in the Monitoring Group and PIOB and associated oversight arrangement build on the changes already agreed upon.”
