IFAC Member Body Compliance Program
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Presentation given by Manuel Sánchez y Madrid, Chair of the IFAC Compliance Advisory Panel, and Russell Guthrie, IFAC Executive Director, Quality and Member Relations, at the International Organization of Securities Commissions (IOSCO) Technical Committee Meeting in March 2012.
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IFAC Member Body Compliance Program
- 1. Member Body Compliance Program Manuel Sánchez y Madrid Chair, Compliance Advisory Panel & Russell Guthrie Executive Director, Quality and Member Relations IOSCO Technical Committee Meeting Amsterdam, The Netherlands March 14, 2012 Page 1 | Confidential and Proprietary Information
- 2. Presentation’s Overview • IFAC’s role and membership profile • Overview of the Compliance Program • Transparency and information gathering • Way forward Page 2 | Confidential and Proprietary Information
- 3. Background What is IFAC? • Global organization for the accounting profession, dedicated to the public interest • Comprised of 167 members and associates in 127 countries • Members and Associates are Professional Accountancy Organizations (PAO) • Represents 2.5 million accountants in public practice, business, government and academia Page 3 | Confidential and Proprietary Information
- 4. Background IFAC Member Countries Page 4 | Confidential and Proprietary Information
- 5. Background What does IFAC do? • Develops international standards through independent standard setting boards • Advocates adoption and supports implementation of international standards • Supports the development and improvement of the profession • Provides guidance for professional accountants in business and small and medium practices Page 5 | Confidential and Proprietary Information
- 6. Background How does IFAC do it? KEY ACCOUNTABILITY OVERSIGHT CONSULTATION/ADVICE Monitoring IFAC Group COUNCIL Public Audit Nominating Interest Committee Committee Oversight Board IFAC IFAC Regulatory BOARD Liaison Group Planning and Finance Committee Forum Consultative Consultative Consultative Consultative of Firms Advisory Advisory Advisory Advisory Group Group Group Group Professional Professional Small and International International International International Transnational Accountancy Accountants Medium Compliance Auditing and Accounting Ethics Public Sector Auditors Organization in Business Practices Advisory Panel Assurance Education Standards Accounting Committee Development Committee Committee Standards Standards Board for Standards Committee Board Board Accountants Board Page 6 | Confidential and Proprietary Information
- 7. Background Who are IFAC members? • Professional Accountancy Organizations (PAOs) – Operate in different regulatory environments – Have different range of responsibilities – Often authority is not with the PAO but government or regulator – Different level of development • All subject to the same benchmark – the SMOs Page 7 | Confidential and Proprietary Information
- 8. Member Body Compliance Program Compliance Program: A Brief History • Prior to 2004 – IFAC was a loose federation of PAOs • Program and Compliance Advisory Panel launched in 2004 as part of IFAC Reforms • Established Statements of Membership Obligations (SMOs) • PIOB oversight – observers at meetings since 2007 Page 8 | Confidential and Proprietary Information
- 9. Member Body Compliance Program 7 Statements of Membership Obligations SMO1 Quality Assurance SMO2 International Education Standards SMO3 International Standards on Auditing SMO4 International Code of Ethics SMO5 International Public Sector Accounting Standards SMO6 Investigation and Discipline SMO7 International Financial Reporting Standards Page 9 | Confidential and Proprietary Information
- 10. Understanding the SMO Applicability Framework Degree of responsibility for an SMO area Direct Shared No Responsibility Implement all the For the elements for Use best endeavors requirements of the which MB has direct to: SMO responsibility follow the approach for "Direct" a. Encourage those In exceptional responsible for the situations departures AND requirements to are possible if can be follow this SMO in justified from the public For the elements for implementing them; interest perspective which MB has no direct and and need to be responsibility follow the documented approach for b. Assist in the "No Responsibility " implementation where appropriate Page 10 | Confidential and Proprietary Information
- 11. Member Body Compliance Program Focus on Encouragement and Continuous Improvement Self -Assessment Overview of national Benchmarking against the 7 regulatory and standard- SMOs setting framework Action Plan Strategic document illustrating a PAOs progress toward, or continued compliance with, SMO requirements Page 11 | Confidential and Proprietary Information
- 12. Impact / Achievements Transparency – Website Publication Page 12 | Confidential and Proprietary Information
- 13. Impact / Achievements Action Plan Status CATEGORY STATUS JAN 2011 JAN 2012 3rd Iteration Published 0 26 2nd Iteration Published 27 68 1st Iteration Published 90 65 Total Published 117 159 Drafts in Review 24 2 Work in Progress 23 6 TOTAL 164 167 Page 13 | Confidential and Proprietary Information
- 14. Impact / Achievements Valuable Information Page 14 | Confidential and Proprietary Information
- 15. Impact / Achievements Enforcement – since 2005 • 57 suspension warnings • 18 suspensions • 9 expulsion warnings • 5 expulsions Page 15 | Confidential and Proprietary Information
- 16. Impact / Achievements Beginning of the Road • Action Plans as first step: • Transparent plans for continuous improvement • Annual updates • Monitoring of progress by CAP • Influencing action and transformation • Time and resources needed to achieve meaningful change Page 16 | Confidential and Proprietary Information
- 17. Impact / Achievements Intersection with Development Agenda • CAP and staff outreach • Working with Regional Organizations • Peer Reviewer and Institutional Support to ROSC Accounting and Auditing Reports – SMOs used as benchmarks in ROSC reviews – PAO Action Plans linked with Country Action Plans • Professional Accountancy Organization Development Committee Page 17 | Confidential and Proprietary Information
- 18. Member Body Compliance Program Going Forward • SMO Revisions – in Progress, expected Nov 2012 • Monitoring Progress and Action Plan Updates • Further transparency on adoption and infrastructure gaps • Continued interaction with the donor community, ROs/AGs and the PAO Development Committee • Leverage the information gathered – improve presentation and user friendliness Page 18 | Confidential and Proprietary Information
- 19. Discussion Summary • The Program drives the adoption and implementation support of international standards – PAOs are instrumental in supporting the adoption and implementation of auditing and financial reporting standards and ethical requirements • IFAC staff have deep technical knowledge of professional, regulatory and legal environments in over 120 countries – IFAC staff = 7 full time technical staff devoted to Program and development of the profession in emerging economies • How can this contribute to the work of IOSCO? Page 19 | Confidential and Proprietary Information
- 20. www.ifac.org/ComplianceProgram www.ifac.org Page 20 | Confidential and Proprietary Information
Editor's Notes
- Global organization for the accountancy professionComprised of 167 Members and Associates in 127 countriesMembers and Associates are Professional Accountancy OrganizationsRepresents 2,5 millions accountants in public practice, business, government, and academiaThe color may be uniform but there are different ways to effectively organize the profession, different legislative frameworks, different stakeholder expectations and capacity Green – membersYellow – associates onlyGrey – no IFAC representation
- To accomplish these goals IFAC has the following Boards and Committees . . .Going to focus on Compliance Program
- The profession is organized differently in various jurisdictions , operate in different legislative frameworks, and is subject to different stakeholder expectations and capacity In comparison members of IOSCO are a relatively homogenous group of securities regulators. Also the IOSCO MMoU system is based on a very clear premise of possessing or not the necessary legal authority for cross border cooperation and enforcement. Regardless of the differences, all IFAC members are subject to the same set of benchmarks – the SMOs. In applying them, however, we recognize that our member bodies operate under different national legal and regulatory frameworks, and are comprised of professionals working in different sectors of the accountancy profession.
- Program and Compliance Advisory Panel (CAP) launched in 2004 as part of IFAC reforms. PIOB Oversight – Observers at CAP meetings since 2007Established the 7 Statements of Membership Obligations (SMOs) which serve as the Program’s basis and provide framework / benchmark for member bodies and aspiring members
- The SMOs are alignedwith the underlying International StandardsRecentrevisionproject in progress
- As noted before, we recognize we recognize that our member bodies operate under different national legal and regulatory frameworks, and are comprised of professionals working in different sectors of the accountancy profession. In applying the SMOs we take that into consideration and use the applicability framework that provides a guide to member bodies on actions they are required to take depending on their degree of responsibility for the areas covered by an SMO: Where member bodies have direct responsibility, they are required to implement the requirements or, in exceptional circumstances, explain reasons for departure on public interest grounds. Where member bodies have no responsibility, they are required to use their best endeavors to comply with the requirements.Where member bodies have shared responsibility, they are required to implement those requirements for which they have direct responsibility and use best endeavors for those requirements for which they have no responsibility
- The Compliance Program key focus is to encourage continuous improvement and developmentEvaluate the extent to which members are meeting the SMO requirementsAssist members in adopting and implementing international standards and best practicesDemonstrate progress being made and how the SMO requirements are being addressed through the Action PlansPromote transparency through publication of responses on the IFAC website. Action Plans are prepared by member bodies for their own use and reflect their specific national frameworks, priorities, processes and challenges. As a result, Action Plans vary in objective, content and level of detail. The key is that the member bodies takes full ownership of the plan which is the only way for the Action Plan to be successfully implemented.
- Why transparency is important:The self-assessment responses are available to anyone who wants to review such information Regulatory Input – the Program can assist regulators and other key stakeholders in achieving their objectives by providing a transparent assessment of the current status of adoption of international standards and best practices in their jurisdictions.
- The vast majority of members have published their action plans. The CAP and staff constantly monitor the timeliness of submissions - enforcement action can happen at any time when the member body is non-responsive for more than 2 months
- Progress File Notes – Internal Use of Dashboards with Traffic LightsThrough the Compliance Program IFAC gathers and publishes a great deal of information relating to the work of its member bodies around the world and the developments within national professions. This information can be leveraged by donors, regional bodies, regulators and indeed mentors interested in development of the profession.Improve presentation and user friendlinessG-20 Adoption Status Updates – verification with relevant member bodiesProgress File Notes – Internal Use of Dashboards with Traffic Lights
- Regardless of the focus on encouragement and improvement enforcement options include suspension warning, suspension, and expulsion from membership for lack of commitment to the Compliance Program.They have been very effective in mobilizing the response of member bodies.
- The Action Plan phase is still just the beginning of the process. The goal is actual change reflected by the completion of the action steps identified in the plan. Through the member body requirements contained in the SMOs, the Program has made a substantial contribution to transforming IFAC into a global professional organization that is demonstrating its commitment to strengthen the accountancy profession around the world.As indicated before, the Program serves as an engine to drive behavior in a positive way to achieve the successful adoption and implementation of international standards and best practices.