Page 1 | Confidential and Proprietary Information IFAC Compliance Program – Adoption and Implementation of International Standards Sylvia WY Tsen Director, Quality and Member Development IESBA Meeting New York, USA December 12, 2012

Page 2 | Confidential and Proprietary Information Statements of Membership Obligations (Revised Nov 2012) Acknowledged framework for “Professional accountancy organization” –Development agencies (World Bank, etc), governments reforming national frameworks –Aspiring IFAC member bodies 7 Statements of Membership Obligations (SMOs) –5 groups of international standards: IAASB, IESBA, IAESB, IPSASB, IASB –2 relating to Quality Assurance and Investigation and Discipline mechanisms Applicability Framework

Page 3 | Confidential and Proprietary Information SMO Key Concepts – Applicability Framework Degree of responsibility for an SMO area Direct Shared No Responsibility Implement all the requirements of the SMO In exceptional situations departures are possible if it can be justified from a public interest perspective and need to be documented Implement all the requirements of the SMO In exceptional situations departures are possible if it can be justified from a public interest perspective and need to be documented For the elements for which Member Body has direct responsibility, follow the approach for "Direct" AND For the elements for which Member Body has no direct responsibility follow the approach for "No Responsibility " For the elements for which Member Body has direct responsibility, follow the approach for "Direct" AND For the elements for which Member Body has no direct responsibility follow the approach for "No Responsibility " Use best endeavors to: a.Encourage those responsible for the requirements to follow this SMO in implementing them; AND b. Assist in the implementation where appropriate Use best endeavors to: a.Encourage those responsible for the requirements to follow this SMO in implementing them; AND b. Assist in the implementation where appropriate

Page 4 | Confidential and Proprietary Information SMO 4: Key Concepts and Requirements MBs shall identify and undertake actions to have the IESBA Code of Ethics adopted and implemented in their jurisdictions MBs shall notify their members of the new, proposed, and revised provisions of the IESBA Code of Ethics and other pronouncements issued by the IESBA. MBs are encouraged to comment on IESBA exposure drafts Given the importance of consistent, high-quality ethical standards, MBs should not apply less stringent standards than those stated in the IESBA Code of Ethics

Page 5 | Confidential and Proprietary Information Compliance Program Mandatory participation in the Compliance Program Action Plan submission: plans to demonstrate ongoing actions to further SMO requirements Based on “Self-Assessments” against SMOs –Regulatory and standard-setting framework –Benchmark against SMOs and reference underlying international standard Transparency – action plans and self-assessments published Compliance Advisory Panel Subject to oversight by PIOB

Page 6 | Confidential and Proprietary Information SMO 4 and IESBA Code – Adoption Challenges Complexity Other national requirements Anglo Saxon legal tradition vs local? Lack of ongoing process for adoption Quality of adoption process Translation and dissemination Recent emphasis on ISA and IFRS adoption

Page 7 | Confidential and Proprietary Information SMO 4 and IESBA Code – Implementation Challenges Lack of resources to develop tools, resources, implement Level of development of the accountancy profession Country-level concepts of “independence”, “objectivity” etc Education and training –Curricula –Case studies and other appropriate education tools Investigation and disciplinary processes

Page 8 | Confidential and Proprietary Information Compliance Program – Strategic Outlook Maintaining momentum and credibility of the Compliance Program –Monitoring member body action plans Request for information on the status of adoption and implementation of international standards How to report on status of adoption and implementation –Dashboard reports (PFNs) Revisions to self-assessment questionnaires –Types of questions to identify modifications, differences –Level of detail

Page 9 | Confidential and Proprietary Information Example of Dashboard Report – Information Gathering for Monitoring and Evaluation

Page 10 | Confidential and Proprietary Information Example: Extract for SMO 4