Member Body Compliance Program Russell Guthrie, Executive Director IESBA Meeting New York, USA October 19, 2011

Member Body Compliance Program A Brief History Program and Compliance Advisory Panel launched in 2004 as part of IFAC Reforms Established 7 Statements of Membership Obligations (SMOs): QA, Education, ISAs, Ethics, IPSASs, I&D, IFRS PIOB oversight

Compliance Program Focus Strategic Considerations Supporting continuous improvement of strong PAOs through SMOs Influence PAOs’ agendas and actions Information and knowledge sharing Collaboration with stakeholders

Compliance Program Focus Continuous Development and Improvement Part 1 – Information Gathering: Overview of regulatory and standard-setting framework in a member’s jurisdiction Part 2 – Self-assessment: Benchmarking against the 7 SMOs Part 3 – Own Strategy: Action Plans for development & continuous improvement in addressing the SMOs

Action Plans as first step: Impact / Achievements Beginning of the Road Action Plans as first step: Transparent plans for continuous improvement (153 out of 163 published) Annual updates by all member bodies Monitoring of progress by the CAP Time and resources needed to achieve meaningful change Outreach activities and policy advice provided by the IFAC Staff

Impact / Achievements Enforcement – since 2005 To date – key focus on commitment to and participation in the Compliance Program Enforcement Actions 43 suspension warnings 18 suspensions 9 expulsion warnings 5 expulsions

Uptake of the Code of Ethics Russia –Drivers of Local Modifications Working on adoption of the recent Code Adoption environment: Ethics Committee of the Audit Council under Min Fin Independence rules must eventually be aligned with Russian legislation Initial proposal to start with existing Russian CoE (based of old and abbreviated version of IESBA Code) and then make necessary additions Auditors and accountants need different Codes IFAC Staff providing guidance and analysis to PAOs, Large Firms, MoF

Uptake of the Code of Ethics Latin America – Multiple Stakeholders Challenges: Barriers of legal, institutional, cultural and financial nature Lack of ongoing mechanism for adopting and implementing changes Lack of current translation makes it difficult to discuss with regulators, analyze independence requirements and organize relevant communications and trainings To achieve meaningful change a thorough cultural change is needed IFAC coordinates formation of a Latin America Review Committee to facilitate translation at the regional level

Uptake of the Code of Ethics France – More Stringent Requirements Ministry of Justice adopts ethical requirements for CNCC: Requirements for CNCC endorsed by MinJus in consultation with AMF (securities market regulator), and the H3C Requirements are considered to be more stringent than IESBA Code CSOEC drafts its ethical requirements to be approved by Ministry of Economy and Finance Direct incorporation of IESBA code impossible due to a different structure (Ordinance of 1945, OEC bylaws, other doctrinal texts) Both French Bodies are planning to promote the adoption of the recent IESBA CoE to the Government

Uptake of the Code of Ethics Malawi – Direct Adoption IFAC Member sets the ethical requirements through a mandate implied by general consensus Adopted IESBA Code of Ethics in 2008 without any modifications Issuing the current IESBA CoE with Jan 2012 effective date Action Plan focus on implementation support

Uptake of the Code of Ethics Overarching Themes CoE clearly used as a major point of reference Strong awareness among PAOs Adoption challenges Principles and rules at a national level often embedded in legislation, regulation and member body governance documents Implementation challenges Overcoming cultural barriers

Tracking of Adoption – Challenges Complex National Environments Government (MinFin, Ministry of Justice) Regulators (Capital Market, Insurance, Banking) Professional accountancy organizations Cultural differences, even different understanding of the concept of morality

Tracking of Adoption – Challenges Differing MB Constituencies Auditors: Big firms SMPs Professional Accountants in Business Management Accountants Public Finance Accountants Accounting Technicians

Different than Standards that Tend to be Adopted en Block Tracking of Adoption – Challenges Different than Standards that Tend to be Adopted en Block

Other Matters of Interest Moving Forward SMO Revisions Clarified no best endeavors where PAO has direct responsibility Removed “no less stringent standards” langauge How do we best track and articulate “adoption” of CoE and/or key independence provisions

Other Matters of Interest Moving Forward Who is will determine whether local modifications are substantive (i.e., lead to different outcomes)?

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