ROSC 2015 Report On Observance Of Standards And Codes Accounting & Auditing

Twelve Standards and Codes – financial stability Macroeconomic policy and data transparency 1. Data Transparency 2. Fiscal Transparency 3. Monetary and Financial Policy Transparency Financial Sector Regulation & Supervision 4. Banking Supervision 5. Securities Regulation 6. Insurance Supervision 7. Payments Systems 8. Anti-money laundering Market Integrity – institutional and market infrastructure 9. Accounting 10. Auditing 11. Corporate Governance 12. Insolvency and Creditor Rights Bank-Fund Joint Initiative on Standards & Codes

Country Context End of civil conflict Middle Income Country status SL ranked highest in South Asia for ease of doing business Development of the BPO sector Figure 1.1. GDP Growth and FDI Inflows Figure 1.2, Capital Market Development

Objectives of the ROSC Support Sri Lanka’s growth by:  Improving the investment climate Strengthen private sector transparency and accountability Strengthen regulators  Supporting structural shifts in the economy and social inclusion  Strengthening the public sector

Approach Monitoring, Enforcement & Oversight Auditing Standards Accounting Standards Accountancy Profession & Ethics Education & Training Statutory Framework

6 Global IASB (Financial Reporting Standard Setter ) IFAC (Auditing, Ethics, Education, Public Sector Standard Setter and apex body for PAOs) Sri Lanka SLAASMB CBSL (Bank and NBFI) SEC & CSE Registrar of Companies IBSL Profession CASL Standard Setter for A&A Other Local Bodies AATSL / ICMA Accounting Bodies CIMA/ ACCA State & Foreign Universities

Stakeholder Consultations CASL – main partner PFM Steering Committee Preparers of financial statements SME and Financial Institutions All PAOs Auditor roundtables (large and SMPs separately) All regulators (separate meetings), Registrar of Companies, Dept of Inland Revenue Auditor General DG MOF (SOE) Chamber of Commerce Statutory Auditing Standards Committee & Accounting Standards Committee Learning providers Ministry of Finance DG’s and staff of State Accounts, Public Finance, Public Enterprises 7

Achievements and Challenges Achievements Contributes to the growth of a knowledge hub Professional Education aligned with international education standards Challenges Growth of profession is mainly Colombo centric Qualification framework is not in place Credibility of SME financial reporting Structural Changes 8

Achievements Adoption of international reporting and auditing standards Introduction of simplified standards Introduction of audit quality assurance Issuance of updated Corporate Governance Code Increased capacity and efficacy of regulators Challenges Requirement of new skills No legal backing for the simplification agenda Dual Reporting – CBSL & Inland Revenue Registered Auditors/ low capacity SMPs Investment Climate Achievements and Challenges

Achievements Professions Support to the Public Sector – Reporting standards/Training/Qualification SOEs following IFRSs Challenges SOEs – quality and timeliness of reporting Public Sector 10

Companies Act Differential reporting Require sufficient information on annual return Information to the Registrar of companies Auditor Categories ICASL Incorporation Act Registration of practicing audit firms Statutory Framework Code of Conduct and disciplinary procedures of members Local PAOs Policy Recommendations

Develop policy for re-admitting auditors who have been out of practice for more than 3 years Voluntary merger program for sole practitioners Auditing Profession Expand National Quality Framework to include all PAOs Implement structured framework for monitoring learning providers and employers Monitor CPD and sanction non-compliance Reduce disparity in service between Western Province and other provinces Education & Training Policy Recommendations

Revisit representation of professional accounting organisations in standard-setting Increase influence at international standards setting level Increase support for preparers of financial statements Customised training for key stakeholder groups SMEs, SMPs, CASL, chambers of commerce and providers of capital must work together to facilitate access to capital Accounting & Auditing Standards Enhance methodologies, capacity and information sharing processes Enhance SLAASMB reviews to adopt more risk based methods Implement a mandatory audit quality assurance review process for audit firms to fully implement SLSQC 1 Monitoring, Compliance & Enforcement

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