Corporate & Securities Law

By Jim Hamilton

The International Auditing and Assurance Standards Board is on target to complete the redrafting of all its 35 international auditing standards by the end of 2008, noted IFAC President Fermin del Valle at a recent IOSCO seminar, and these standards will be effective for financial periods beginning on or after December 15, 2009. Under its Clarity Project, which is a precursor to converged international audit standards, the IAASB is presently redrafting its entire body of audit standards using new drafting conventions. The Clarity Project is crucial to removing barriers to convergence to international auditing standards, said the official, who called the effort one of the most significant milestones in the history of auditing

The Clarity Project has been a major focus of the international regulators' attention over the past two years, with IOSCO and SEC officials coordinating the Board?s activities and discussing proposed standards. PCAOB Chair Mark Olson has said that global auditing standards are inevitable, but that they will be 10 years behind global accounting standards. The PCAOB is currently tailoring its auditing standards to minimize the differences with the standards adopted by the IAASB.

A significant number of countries are currently using international audit standards or are adopting such as national standards or are converging by comparing national standards with international standards to eliminate differences. Even more significant, said the IFAC official, is the fact that this year seventeen international networks of accounting firms, whose member firms perform transnational audits, have implemented a globally coordinated quality assurance program committed to the use of international audit standards.

Broader global organizations are also embracing international audit standards at some levels. For example, The World Federation of Exchanges endorsed the IAASB?s processes for standard setting and recognized the importance of international audit standards. The Financial Stability Forum identified international audit standards as a key standard for sound financial systems and deserving of implementation depending on country circumstances. Finally, he noted that the World Bank uses international audit standards as the benchmark for assessing the quality of national auditing and accounting standards.

As the financial world moves towards international audit standards, the IFAC chief praised the IAASB governance and the Board?s transparent standard-setting process. All proposals and final standards are debated and approved at an open and public IAASB meeting. In advance of each meeting, the IAASB posts the agenda and background materials publicly on its web page. In addition, the IAASB makes all its exposure drafts, final standards, project histories, and audio recordings of its meetings freely available. Proposed auditing standards are normally given a 120-day comment period.

Also, throughout the entire standard-setting process, the IAASB is subject to public interest oversight from the independent Public Interest Oversight Board.
With regard to governance, the IFAC official noted that the PIOB oversees the process of nominating IAASB members. The PIOB is involved throughout this process, including having a representative attend all meetings of the nominating committee where candidates for membership on the IAASB are discussed. The PIOB also has final approval of candidates for these groups. This year, IFAC achieved its goal of creating a balance of 50 percent practitioners and 50 percent non-practitioners on the IAASB.

Full post as published by Jim Hamilton's World of Securities Regulation on June 13, 2008 (boomark / email).