IFAC Focuses on Independence; Releases Two Exposure Drafts

The independence of auditors was the focus of an international forum hosted by the Ethics Committee of the International Federation of Accountants in Brussels on Oct. 11

The forum's participants included more than 150 regulators, standard-setters, leaders of accountancy organizations and members of the profession. The group discussed IFAC's ongoing work to clarify and update the group's IFAC Code of Ethics for Professional Accountants. Participants also emphasized the need to educate not only members of the profession but also regulators, management, boards and audit committees on the expectations of independent auditors.
Suggested ways to enhance the code included:

• Addition of implementation guidance, including examples of appropriate and inappropriate safeguards to independence threats;
• Addition of guidance with respect to public-interest entities and the ethics concepts that apply to such entities;
• Increased clarity regarding the application of the code with respect to tax services; and,
• Consideration of embracing ethical compliance within a quality control framework.

"The consensus of forum participants was that convergence could best be achieved through a principles-based approach to ethical standards," said Ethics Committee chairman Richard George, in a statement. "One of our greatest challenges, however, is the need to balance the principles-based approach with the rules-based approach that has been historically favored."IFAC also issued an exposure draft dealing with the reporting of budget and actual financial information in general purpose financial statements. The exposure draft, "ED 27: Presentation of Budget Information in Financial Statements ," applies to entities that are required to make publicly available the approved budgets for which they are held accountable. It proposes the disclosure of the original and final approved budgets and actual financial information on a comparable basis to the budget.
Another exposure draft, "ED 28: Disclosure of Financial Information about the General Government Sector ," was issued as part of work to support convergence of International Public Sector Accounting Standards and statistical bases of financial reporting, where such convergence is appropriate.

Comments on both exposure drafts are due by Feb. 10, 2006. The drafts may be viewed in their entirety at www.ifac.org/EDs.