Convergence with International Standards on Auditing International Auditing and Assurance Standards Board Convergence with International Standards on Auditing John Kellas, IAASB Chairman CReCER Regional Conference June 14, 2007 1

Agenda Why convergence matters The challenges of convergence Meeting the challenges of convergence Conclusion

Acceptance Wide acceptance of international standards “Wong” Report 12 Key Standards for Sound Financial Systems

Benefits International investors International regulators Applicable to listed and unlisted entities International regulators Auditing firms Educators and learners

Convergence vs. Adoption Meaning of “convergence” Adoption is preferred approach All the advantages of convergence All countries may contribute to standard-setting process Fastest way to eliminate / minimize differences

Challenges Starting point Authority of standard setters Established national standard setting process vs. new economies Authority of standard setters Standard setting no longer a function of most IFAC member bodies Cultural differences

Challenges (Cont.) Philosophical differences Rules vs. principles / objectives The scope of the standards Application of standards to all types and sizes of entity by all sizes of audit firm Translation Frequency and complexity of changes

Meeting the Challenges Working in partnership with national standard setters National standard setters to address matters of domestic concern Guidance on modifications to ISAs issued in July 2006 Composition of the IAASB Dialogue with ‘stakeholders’ IAASB Consultative Advisory Group and others Development of high-quality standards

High-Quality Standards High-quality standards are: Clear Not capable of different interpretations Capable of translation Enforceable Designed to achieve a high-quality audit ‘Jurisdictionally neutral’ Strike a balance between principles and rules Subject to due process Subject to public oversight

Conclusion Adoption of international standards should be supported by International Quality Control Standards IFAC Code of Ethics for Professional Accountants Implementation guidance and advice Training and education Monitoring and enforcement

Conclusion (Cont’d) 100+ countries use, base their standards on, ISAs Significant announcements by Canada, China, India and the USA Project to adopt ISAs in the European Union Contribution of IFAC Member Bodies in Latin America is recognized

International Federation of Accountants www.ifac.org 1