IFAC Public Discussion

To further promote and facilitate accountants' adherence to high ethical and independence standards, the International Ethics Standards Board for Accountants (IESBA), an independent standard-setting board within IFAC, has proposed changes to the IFAC Code of Ethics for Professional Accountants. The changes, outlined in an exposure draft (ED) with the same title, focus on enhancing the clarity of the Code. The proposed changes make clear the specific requirements that are contained in the Code and refine the application of the Code's conceptual framework. The ED can be viewed at http://www.ifac.org/eds (scroll down to IESBA). 

It is vital that the views of SMPs on this ED get heard. You will note page xiii of the ED invites you to state whether considerations regarding the audits of small entities have been dealt with appropriately.

Hence, the IFAC SMP Committee encourages you to:

1. Post your comments, however brief, to this discussion board as soon as possible; and

2. Submit your comments officially by October 15, 2008 either by email to edcomments@ifac.org or by fax +1 (212) 286-9570 or by letter to IFAC, 545 Fifth Avenue, 14th floor, New York, NY 10017, USA.

Dear Aleem,

I am the Senior Technical Manager supporting the IFAC SMP Committee. I appreciate your views whichg are very timely. The SMP Committee discussed its next steps regarding micro-entity financial reporting at its last meeting here in New York just a few weeks ago.

At that meeting the committee resolved to keep a close watch on the evolution of the IFRS for Private Entities (the IASB has just relabelled it this from IFRS for SMEs). We understand from the IASB (see http://www.iasb.org/Current+Projects/IASB+Projects/Small+and+Medium-sized+Entities/Small+and+Medium-sized+Entities.htm) that the final standard will be simpler than the ED. We intend taking a look at the final standard and reconsider its suitability for those micro-entities that are required by local regulation to produce general purpose financial statements (GPFS). 

The committee also resolved to look into the case for encouraging micros that do not have to produce GPFS to consider producing financial statements using IFRS for PEs or some other guidance (such as UNCTAD/ISAR's SMEGA Level 3 - see http://www.unctad.org/Templates/Page.asp?intItemID=2918&lang=1). Such an entity may gain from voluntarily producing such information including: to assist with financial control; to reduce the risk of fraud; and to satisfy the information needs of (potential) stakeholders like banks.

Best wishes,

Paul Thompson

Dear accountants,

For a light-hearted look at our profession see this clip from the Late Show - http://www.cbs.com/latenight/lateshow/video_player/index/php/951363.phtml?

The clip starts immediately after the 16 second long Saturn advert.

Which reason gets your vote?

As part of its Clarity project (see http://www.ifac.org/IAASB/ProjectHistory.php?ProjID=0024) the IAASB is currently redrafting ISQC1 and ISA 220. Following a period of public exposure the Board will be considering the project task force's suggestions on how to accommodate ED comments at its June meeting. The relevant papers are at http://www.ifac.org/IAASB/Meeting-BGPapers.php?MID=0142&ViewCat=0938.

To assist the SMP Committee in its dialogue with the IAASB the committee is seeking SMPs views on some of the questions raised in Agenda Item 3-A, in particular:

1.  Do you agree with the Task Force's position to revert to the extant definition of "engagement quality control reviewer?" (A.2 Definition of Engagement Quality Control Reviewer, paragraphs 10-12)

2. Do you agree with the Task Force's proposal to add guidance as assistance to SMPs, related to when requirements for an engagement quality control reviews may not apply? (A.4 Application of Requirements for Engagement Quality Control Reviews in an SMP Environment, paragraphs 16-17)

(a) that no change be made to the Authority of this ISQC 1 to permit a departure from a requirement;

(b) with the addition of application material to assist SMPs; and

(c) that providing implementation guidance specific to SMPs on the application of the requirements would be beyond the clarity mandate?

(I. Application of ISQC 1 (Redrafted) to all Firms, paragraphs 47-52)

The IAASB has recently completed the first phase of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the new drafting conventions. For more information about the IAASB Clarity Project, go to http://www.ifac.org/IAASB/ProjectHistory.php?ProjID=0024.

The object of redrafting the ISAs is to make them more readily understood, applied and enforced. Key elements of the clarity drafting conventions include: establishing an objective for the auditor with respect to the subject matter of each standard; clearly distinguishing requirements from guidance on their application; avoiding ambiguity through eliminating the present tense to describe actions by the auditor and using more imperative language where a requirement was intended; and other structural and drafting improvements to enhance the overall readability and understandability of the standards.

The IAASB is on track to complete the Clarity project by the end of 2008. When completed, 32 ISAs as well as International Standard on Quality Control 1 will have been redrafted. Subject to any comments on exposure, the final standards will become effective for audits of financial statements for periods beginning on or after December 15, 2009. Redrafted ISAs currently on exposure can be viewed by going to http://www.ifac.org/EDs.

While welcoming many aspects of this project the IFAC SMP Committee is concerned about the increased number of requirements and its impact on the cost of conducting an SME audit. We welcome your views, in particular:

1. Do you believe the redrafted ISAs will increase the cost to complete an SME audit? If yes, by approximately what percentage?
2. Do you believe the redrafted ISAs will improve the quality of SME audits?
3. Do you believe any benefits from the redrafted ISAs (in terms of improved quality audits) will outweigh any additional costs of completing an SME audit?