An international monitoring group overseeing accounting standard-setters has issued a report that found the International Federation of Accountants has carried out a series of reforms in recent years, but outlined some steps it should pursue in the future.

The reforms were prompted by an erosion of confidence in the wake of the financial reporting and auditing problems that occurred around 2002 after the problems with companies like Enron and WorldCom were uncovered. This erosion led IFAC  and a group of six regulatory and international financial public interest institutions (which subsequently became known as the Monitoring Group) to begin a dialogue in 2003 regarding the importance of having high-quality audits of financial statements and the need to restore and enhance public confidence in financial reporting and auditing. The result of this dialogue was the IFAC reforms.

The Monitoring Group members include the Basel Committee on Banking Supervision, the European Commission, the Financial Stability Board, the International Association of Insurance Supervisors, the International Organization of Securities Commissions (IOSCO) and the World Bank.

The provisions of the IFAC reforms described changes to the structure and processes for the standard-setting boards and committees within IFAC that develop standards for auditing, auditor independence, accountant ethics, accountant education, and so forth. The objective of the Reforms was to increase confidence that these activities were properly responsive to the public interest and would lead to the establishment of both high quality standards and practices in auditing and assurance. To this end the reforms called for the Monitoring Group to perform a review of the implementation of the reforms. The Monitoring Group began the review in 2009.

The Monitoring Group concluded that virtually all of the changes in diversity, transparency and accountability called for by the reforms have been implemented. Those include opening meetings to the public and posting meeting papers and summaries of meetings on the Web, and having greater diversity of practitioners and non-practitioners on the boards. However, there are several near-term matters that are within the context of the reforms that would bring enhancements to the standard-setting, oversight and monitoring work and further the aims of the reforms with respect to diversity, transparency and accountability.

There are also two longer-term matters that go beyond the context of the reforms which the Monitoring Group will keep under review and consideration. The Monitoring Group will keep under review whether standard-setting boards that operate within an accountant’s professional membership organization can carry out the responsibilities that ultimately come with international standard-setting in the public interest.

The Monitoring Group will also keep under review whether there could be potential synergies associated with the two accountability functions now present for international standards; namely, the Monitoring Group for international audit-related standards and the Monitoring Board for International Financial Reporting Standards.

“We welcome the publication of this report, and we appreciate the collaborative manner in which the Monitoring Group has undertaken the review, as well as their recommendations,” said IFAC CEO Ian Ball in a statement. “We are in complete agreement that international standard-setting in the public interest is a challenge that requires ongoing continuous improvement, and we look forward to working with the Monitoring Group in determining how the recommendations they have raised can best be addressed.”

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