A group of securities regulators from around the world is defending the need to safeguard the independence of the accounting standard-setting process.

The International Accounting Standards Committee Foundation Monitoring Board was recently established as a way to improve the governance and public accountability of the International Accounting Standards Board by providing input from government financial regulators.

In a newly released statement on accounting standards and standard-setting, the group of government regulators defended the independence of the accounting standard-setting board. Both the IASB and its U.S. counterpart, the Financial Accounting Standards Board, have come under pressure from both politicians and banking interests to adjust fair value and mark-to-market accounting standards as a way to stem the financial crisis.

“Financial standards and regulations created or modified in the midst of any crisis should be considered carefully,” said the monitoring board’s statement. “This is particularly true with regard to the current review of accounting standards because these standards play an important role in public company financial disclosures, and these financial disclosures, in turn, are an important part of the foundation upon which fair and efficient capital markets are based.”

The monitoring board proceeded to outline a set of principles underpinning accounting standards and accounting standard-setting. The standards need to be relevant, reliable, understandable and comparable. The statement also called for independence and transparency in the standard-setting process.

“While it is useful to consider the intersection of banking supervision and financial reporting in light of the recent banking crisis, accounting standards should not be allowed to become a surrogate for robust bank risk management or effective bank supervision,” said the monitoring board.

The Trustees of the IASC Foundation welcomed the monitoring board’s statement. “The monitoring board’s principles remind us that financial standards play an integral role in the economy by striving to provide unbiased, transparent and relevant information about the economic performance,” said Gerrit Zalm, chairman of the trustees, in a statement. “We at the IASC Foundation and the IASB are committed to ensuring that our response to the financial crisis is measured against that objective.”

The trustees recently wrote to the Group of 20 leaders, who will be meeting later this week in Pittsburgh, to emphasize, “The Trustees and the IASB are committed to taking all of the actions necessary within their sphere of responsibility to deal with the issues arising from the financial crisis.”  The trustees believe that the fundamental principles outlined by the monitoring board provide an important contribution in reminding the trustees, the IASB, and stakeholders of the important role that accounting standards play in the functioning of capital markets and the economy at large.

Ernst & Young chairman and CEO James Turley indicated he felt the monitoring board would play a helpful role in improving the governance of the IASB during a webcast that the firm presented Tuesday. “I think the monitoring board is an excellent development at the IASB,” he said. “They’re off to a good start.” He acknowledged that some critics of the IASB have charged that there is too much U.S. or U.K. representation on the board, and not enough representation from countries in Asia. He believes the monitoring board will help address those concerns. “We’re in a G-20 world, not a G-7 world,” he said. “It represents the G-20 world we have today.”

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