1. Statement of Membership Obligations IFAC Seminar IFAC Compliance Program ICARM Skopje, 23 April 2009 Paul F.M. Hurks RA (Royal NIVRA)

2. About IFAC Foundation 1977, New York City Increasing recognition of IFAC’s work by international organizations Expanding network of 160 member bodies in 120 countries, representing 2.5 million accountants Membership: full, associate Organization: Council, Board, Standard Setting Boards, Committees, Staff (50) (IAASB, IESBA, IAESB, IPSASB, PAIB, DNC, SMPC, NC, CAP)

3. Mission IFAC To serve the public interest, strengthen the worldwide accountancy profession and contribute to the development of strong international economies –Globilization & Public interest –Enhancing economic growth & wealth

4. Strategy IFAC Establishing and promoting adherence to high quality comprehensive set of standards on auditing, ethics, education, and public sector financial reporting (adoption & implementation) Furthering international convergence for transparent financial markets (harmonization is key issue for the profession) Speaking out on public policy issues Education provides foundation (life long learning)

5. Statement of Membership Obligations IFAC IFAC Compliance Program: SMO 1 Quality Assurance SMO 2 Education Standards SMO 3 Auditing & Assurance Standards SMO 4 Standards of Ethics SMO 5 Public Sector Accounting Standards SMO 6 Investigation & Discipline SMO 7 IFRS

6. SMOs Introduction Benchmark to current and potential IFAC members Support the development of high quality accountancy profession Covering IFAC & IASB pronouncements Basis of IFAC Member Body Compliance Program (CAP) Ongoing self assessment for members and associates Bold & grey lettering (obligations & explanations)

7. Best Endeavours Ongoing self assessment towards compliance (monitoring & evaluation) Measurement at country level (member body, government, regulators): encouragement Relevance (sectors) Departure with reason Considering projects and initiatives underway: action plans & progress Sanctions: suspension or expulsion

8. SMO 1 Quality Assurance Implementation of a Quality Assurance Review Program (= QARP) for Audit Engagements (AE) of Financial Statements (FS) Obligations on 3 levels: –Member body (MB): review program: SMO1 –Firm (including a sole practitioner): ISQC1 (license) –Engagement (audit professional, member): ISA 220 (qualification)

9. SMO 1 QARP Mandatory QARP for AE of FS of listed entities (minimum) Mandatory establishing and publishing criteria for all other AE of FS Mandatory including those other AE meeting the criteria in the QARP Best endeavours to encourage and assist other responsible authorities to follow SMO1, when applicable (government, regulators) When scope is narrower, member body should establish QARP for lacking aspects in existing QARPs

10. SMO 1 Control Standards Mandatory establishing and publishingquality control (QC) standards and guidance requiring firms to implement a system compliant with ISQC1 (for audit professionals: ISA 220) Firms are responsible for implementing policies and procedures MB is responsible for a QARP that monitors compliance with those policies and procedures

11. SMO 1 Quality Control Guidance Mandatory program tot assist members to: –Understand objectives –Implement and maintain an appropriate system Guidelines for –Continuous Professional Development (CPD) –Inspection Programs

12. SMO 1 Design a QARP Subject of a QARP can be chosen –a firm –a partner Criteria independent of the choice –adequate system on firm level –compliance at AE level –ref professional standards and regulatory and legal requirements MB should publish scope, design, procedures of QARP and review teams

13. SMO 1 Review Cycle Selection –Cycle approach –Risk based approach Cycle approach –Maximum of three years –Consider quality and effectiveness of internal inspection program Risk based approach –Selection based on risk factors (listed entities, PIE, review results) –Reasonable frequency, even if not selected on risk based approach

14. SMO 1 Review Team (RT) RT guidelines and procedures must be published RT Procedures –Assessment of the system of QC for listed entities –Review of QC policies and procedures & working paper review and discussions with staff to evaluate Compliance with the system Compliance with other regulatory and legal requirements Working paper review includes –Existence & Effectiveness QC system –Compliance with regulatory and legal requirements –Evidence documented –Appropriateness of auditor’s report

15. SMO 1 RT Documentation Sufficient documentation –Evidence review report results –Evidence that review is carried out in accordance with MB guidelines Procedures to retain documentation –Long enough to allow MB or Oversight Body do oversight of the process

16. SMO 1 RT Members Skills and Competence –education, experience, QC-review training Size RT RT Leader –supervision, communication, reporting Ethical requirements –Code of Ethics + national, independence, no reciprocal peers Confidentiality –Exemption for firm members, Code of Ethics + national

17. SMO 1 Reporting Written review report to firm/partner of each assignment including: –Guidance utilized –Comments on system and system compliance –Comments on partner’s compliance to the system –Reasons for negative conclusions and recommendations Timely written response to recommendations and conclusions MB annual report summarizing results and make available for authorities

18. SMO 1 Correction & Discipline MB requires correction to member’s system, policies and procedures if not compliant MB should take disciplinary actions with failing members MB must be clear about linkage between conclusions and corrections –CPD, system, engagements, persons, number of peers –reprimands, fines, suspension, expulsion, publication

19. SMO 2 Education Standards (IESs) IAESB provides consistent global framework of education Promotes convergence in accountancy education processes and in application of technical and practice standards Supports greater mobility of accountants by portability of qualifications Contributes to co-operation among member bodies Develops guidance for education and development of professional accountants and accounting technicians IAESB members include practicing accountants, academics, representatives from business and the public Transparency in standard-setting process (observers from international accounting academic community and UNCTAD) Different approaches around the world

20. SMO 2 Education Standards (IESs) SMO 2 – comply with and promote IFAC IES IES 1 – entry requirements IES 2 – content of professional education IES 3 – professional skills IES 4 – values, ethics and attitudes IES 5 – practical experience IES 6 – assessment of professional competence IES 7 – continuous professional development (CPD) IES 8 – competences for audit professionals

21. SMO 2 Framework IESs Framework –objectives and operating procedures –new ED Introduction –purpose, scope and development of IES –discussion about way standards may be adopted and applied

22. SMO 2 IES 1 Requirements for entry to a program of professional accounting education and practical experience Aim to ensure students have background to have reasonable chance of achieving success

23. SMO 2 IES 2 Prescribes knowledge and competences candidates require to function as a professional accountant –Accounting, finance and related knowledge –Organizational and business knowledge –IT knowledge and competences Degree or professional qualification At least two years full time study

24. SMO 2 IES 3 Prescribes the mix of professional skills required –Intellectual skills –Technical and functional skills –Personal skills –Interpersonal and communication skills –Organizational and business management skills General education helps to develop these skills

25. SMO 2 IES 4 Prescribes the professional values, ethics and attitudes required Prescribes minimum subject areas Acknowledge different approaches will reflect national and cultural environment

26. SMO 2 IES 5 Aims to ensure candidates have the necessary practical experience to become a professional accountant Minimum of 3 years’ practical experience Guidance of experienced professional accountant Record of experience and review

27. SMO 2 IES 6 Final assessment before qualification as a professional accountant Test of theoretical knowledge and practical application of knowledge Reliable and valid

28. SMO 2 IES 7 Mandatory CPD for all professional accountants Foster commitment to lifelong learning Facilitate access to CPD opportunities Establish benchmarks for development and competence of professional accountants Monitor and enforce CPD 120 hours, three year rolling period Three approaches: –Input approach –Output approach –Combination approach

29. SMO 2 IES 8 Audit of historic financial information All IES1-7 and additional advanced knowledge Graduate level Audit specific skills Application of ethics in an audit context Specific work experience

30. SMO 3 IAASB Standards Assurance Framework Standards & Practice Statements Timely and accurate translation and dissemination Responsibility for adoption and implementation –Adoption in national standards or convergence between national standards and IAASB Standards (encouragement, persuasion) –Assistance with implementation (promotion, guidelines)

31. SMO 4 Ethics Standards IESBA Standards: Code of Ethics MB should avoid less stringent standards, unless it is prohibited by law or regulation Timely and accurate translation and dissemination Responsibility for adoption and implementation –Adoption in national standards or convergence between national standards and IESBA Standards (encouragement, persuasion) –Assistance with implementation (promotion, guidelines)

32. SMO 5 IPSASB-Standards MB should notify members of all IPSASs: International Public Sector Accounting Standards –guidelines, studies, papers) Timely and accurate translation and dissemination Responsibility for adoption and implementation –Adoption in national standards or convergence between national standards and IPSASB Standards (encouragement, persuasion) –Assistance with implementation (promotion, guidelines)

33. SMO 6 Investigation & Discipline MB should provide rules for I&D against breaches of professional standards and rules Both for members & firms Misconduct –criminal activity, disrepute profession, breaches of standards and ethics, professional negligence (cumulative), unsatisfactory work

34. SMO 6 Investigation & Discipline Sanctions based on a just and effective investigative and disciplinary regime (by MB, law, regulator): –Reprimand –Loss or restriction of practice rights –Fine / payment of costs –Loss of professional title (designation) –Exclusion from membership

35. SMO 6 Investigation & Discipline Provision of information and guidance for members Liaison with outside bodies Investigative powers & processes Disciplinary process Rights of representation & appeal Administrative processes

36. SMO 7 IFRS MB support the work of IASB by notifying members of every IFRS Timely and accurate translation and dissemination Responsibility for adoption and implementation –Adoption in national standards or convergence between national standards and IAASB Standards (encouragement, persuasion) –Assistance with implementation (promotion, guidelines)

37. ICARM Policy Compliance program: Questionnaires Part I & II Action Plan (7 SMOs) Policy Directives (IFAC CAP) Membership application (associate) To be achieved before 31 May 2010