Meeting Updates and Operation Matters

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1 TO: FROM: COUNCIL BOB MEDNICK CHAIR COMPLIANCE ADVISORY PANEL RUSSELL GUTHRIE DIRECTOR QUALITY ASSURANCE AND MEMBER BODY RELATIONS SUBJECT: ANNUAL REPORT FROM THE COMPLIANCE ADVISORY PANEL Section 1 Report Overview 1.1 This report outlines the activities of the IFAC Compliance Advisory Panel (CAP) and Compliance staff since November Section 2 Meeting Updates and Operation Matters 2.1 During 2008, the CAP met 4 times and held one conference call: January 21-22, 2008 in Mumbai, India April 7-8 in Kampala, Uganda. July in Amsterdam, Netherlands; this meeting included a joint session with the Developing Nations Committee. August 18, conferences call. October in New York, USA. 2.2 In January 2008, the CAP welcomed two new members Mr. James Dickson (Australia) and Mrs. Caroline Kigen (Kenya). 2.3 In February and March 2008, the Member Body Development team welcomed two new staff members Ms. Daria Koukhar as a Technical Manager and Mr. Joseph Bryson as an Associate. Section 3 Significant Project Status/Updates Reporting to PIOB 3.1 The CAP, as a Public Interest Activity Committee, is subject to oversight by the Public Interest Oversight Board (PIOB) and has regularly reported to it on the progress of the Compliance Program. During the past 12 months, the CAP Chair and Director, Quality Assurance and Member Body Relations (Director QA-MBR) have met twice with the PIOB during its meetings in New York and Madrid, at which time they specifically updated the Board on the Part 3, Action Plans phase, of the Program, proposed Policy Statements for Regional Organizations and Accountancy Groupings, revised CAP Terms of Reference, and a revised CAP Chair Roles and Responsibilities document. 3.2 The CAP also submits the minutes of its meetings to the PIOB as part of its ongoing reporting to the Board and has had a PIOB representative in attendance at 3 of its 4 meetings and during the August conference call.

2 Membership Criteria 3.3 In November, 2007 the Board approved the CAP s proposed changes to the IFAC membership criteria as set-out in the IFAC By-laws. The Council is asked to approve these changes in the Agenda Item Part 3, Action Plans 3.4 Part 3 of the Compliance Program commenced in At the time of the Council meeting last year, the focus of the Program was on issuing broad Policy Recommendations to members and associates that served as a basis for them to develop more detailed Action Plans. During the past twelve months over 100 of IFAC members and associates, primarily in developing countries, have received Policy Recommendations, and are in various stages of preparing their Action Plans. Part 3 Process 3.5 Since professional accountancy organizations are continuously responding to ongoing changes in their environment, all IFAC members and associates, regardless of level of development, will be required to prepare Action Plans that set out key steps and activities to support ongoing convergence to and the implementation of international standards and practices including specific timelines, responsibilities, and necessary resources for the successful execution of planned actions. 3.6 Because it is crucial for each Action Plan to be fully owned by the member or associate, Action Plans should be consulted internally and approved by the organization s governing body.. Moreover, as Action Plans will reflect each organization s unique circumstances, it is natural that they will vary in their objectives, content and level of detail, consistent with differing national environments and stages of development. 3.7 In the spirit of open two-way communication, many members and associates have submitted early drafts of Action Plans for a preliminary review by the staff and CAP. This has enabled the staff to provide early feedback pointing out the need for clarification and commenting on proposed timelines (especially where they seem too ambitious), responsibilities and required resources. 3.8 The development of an Action Plan is only the first step in a longer and ongoing process to achieve and/or maintain meaningful convergence with international standards and practices. Over time, Action Plans will be periodically updated to reflect actions completed and new actions to be addressed. Supporting Materials and Communications about Part Consistent with the Compliance Program s commitment to transparency, all Action Plans will be published on the IFAC website when finalized. To ensure general consistency in presentation, members and associates are required to follow the format in the Action Plan template provided by the staff, though actual language and level of detail may vary In addition to this template, staff has prepared a set of supporting materials further assistance in the process including Guidance Notes and an illustrative Action Plan

3 based on early submissions and already published plans to illustrate the desired tone and content of a meaningful Plan During 2008, the staff has also regularly communicated the status of Part 3 in IFAC newsletters, reports to the Board, and in outreach activities. Furthermore, many members have shared their experiences with the Part 3 process and how it has enabled them to better focus their activities, accelerate convergence discussions, and better communicate their plans to their membership and other key stakeholders. The Staff has started collecting these statements to make them available to all IFAC members and associates on the Compliance Program website. Part 3, Action Plans Published 3.12 In early July, the Compliance Program reached an important milestone with the publication of the first six completed Action Plans on the IFAC website. Nine more were published at the end of September bringing the total of finalized Action Plans to 15. The CAP and staff congratulate these bodies on this significant achievement and the leadership they have shown in further enhancing the quality and credibility of the global accountancy profession. Suspension Considerations 3.13 In June, the CAP reported to the Board the names of 11 members and associates that had not confirmed their Policy Recommendations within the required three-month timeframe. However, as a result of proactive outreach by the staff to these bodies, 9 of them subsequently confirmed their Policy Recommendations while two members had to be sent formal suspension warning letters. They also confirmed their Policy Recommendations shortly thereafter (and before the September Board meeting) and avoided being suspended by the Board. Recommendations for New IFAC Members and Associates 3.14 Based on the Compliance Staff s recommendation, agreed to by the Compliance Advisory Panel, the Board is recommending that Council approve 7 existing IFAC associates as members and 3 other organizations as new associates. Expressions of Interest 3.15 Compliance staff continually receives expressions of interest about IFAC membership from various accountancy organizations. May 31 is the deadline for applicants to submit all completed membership application materials. Given the number of expressions of interest received each year, strict adherence to this deadline is critical to allow sufficient time for the staff to complete its due diligence process, review its recommendations with the CAP, and put forth recommendations to the IFAC Board. Regional Organizations and Accountancy Groupings 3.16 In February 2008, the Board approved new policy statements drafted by the CAP for Regional Organizations (RO) and Accountancy Groupings (AG). The revised policies

4 ROs and AGs Accountability Framework 3.17 The staff is developing an Accountability Framework for ROs and AGs that, similarly to the Compliance Program for members and associates, will focus on encouragement and continuous improvement. The Framework will require ROs to submit quarterly and AGs to submit annual self-assessments of their activities to fulfill their obligations to IFAC. At the same time, the Compliance staff will report on IFAC s activities to fulfill its obligations to the ROs and AGs. The proposal will be discussed on November 10, 2008 at the meeting of ROs and AGs. New Accountancy Groupings Acknowledged by IFAC 3.18 At its September meeting, the Board approved the recommendation of the staff and CAP to acknowledge the following two organizations as new AGs: Fédération Internationale des Experts Comptables Francophones (FIDEF) Fédération des Experts Comptables Mediterranéens (FCM) In addition, in October the CAP discussed initial assessment of the application for AG status from the European Federation of Accountants and Auditors for SMEs (EFAA). Executive Country Briefings 3.19 In 2007, the Compliance staff began preparing Executive Country Briefing papers to better inform the IFAC President and Chief Executive about IFAC members and associates with whom they would be meeting. The briefings are based on information gathered through the Compliance Program and include information about local progress with regard to each SMO area. The briefings also contain information about public oversight arrangements as well as general economic and other relevant information gathered from diagnostic reports prepared by donor agencies and on relevant websites. Section 4 Critical Environmental Issues 4.1 With the Compliance Program now in the Part 3, Action Plan phase, the CAP and staff are becoming increasingly aware that members and associates, especially those operating in developing countries, will not have the financial and technical means to achieve all the actions they know are necessary. As a result, the support of regional organizations and developed bodies acting as mentors and the development of implementation tools will become increasingly important. In addition, encouraging national governments and donor agencies to invest in the accountancy profession will be crucial. The success of developing bodies in the meaningful execution of their Action Plans will, therefore, significantly depend on (1) their ability to clearly communicate their challenges, required actions, and need for resources and (2) the willingness of governments, donor agencies and developed bodies to provide assistance wherever possible.

5 Section 5 International Relations & Communications 5.1 During the last twelve months, Compliance staff and the CAP have participated in the following relationship building, representation and advocacy activities. Members, Associates and Other Professional Accountancy Organizations 1. London, UK: The Director, Quality Assurance and Member Body Relations (QA-MBR) attended the ACCA International Assembly in November 2007 and made a presentation on the IFAC perspective on regulation and compliance. 2. Tirana, Albania: The Deputy Director, Member Body Development (MBD) attended a conference marking the 10 th anniversary of the Institute of Authorized Chartered Auditors of Albania (IEKA), an IFAC associate, in December 2007, and made a presentation on IFAC Membership Obligations and the Compliance Program. 3. Mumbai, India: At its meeting in January 2008, the CAP received a presentation from and had discussions with the leadership of the Institute of Chartered Accountants of India (ICAI). The CAP and staff also participated in an interactive session/workshop with approximately 35 CFOs from India and prominent members of ICAI. 4. Seoul, Korea: The Director, QA-MBR attended a seminar organized by the Korean Institute of Certified Public Accountants in January 2008 and made a presentation on the IFAC view of the regulation of the profession and the Compliance Program. 5. Dar es Salaam, Tanzania: The Deputy Director, MBD made a presentation in April 2008 on IFAC Membership Obligations and the Compliance Program at a conference on Auditors Obligations. 6. Kampala, Uganda: At its meeting in April 2008, the CAP received presentations from and had discussions focused on their Action Plans with the leadership of the Institute of Certified Public Accountants of Uganda (ICPAU) and the National Board of Accountants and Auditors (NBAA) from Tanzania. 7. Kathmandu, Nepal: The Director, QA-MBR met with the Institute of Chartered Accountants of Nepal in May 2008 during a CAPA Executive Committee meeting, as part of the membership application due diligence process, in May. 8. Bangkok, Thailand: The Deputy Director MBD made a presentation in June 2008 on the IFAC perspective on IFRS for SMEs at a conference of the Federation of Accounting Professions, sponsored by the Thai IFAC member body. 9. Amsterdam, Netherlands: At its meeting in July 2008, the CAP received a presentation from and had discussions with the leadership of Royal NIVRA (Netherlands) focused on their development work in developing countries. 10. MBD staff met with the leadership and technical staff of the following IFAC members to discuss their progress on the Part 3, Action Plan process: a. Lusaka, Zambia: The Zambia Institute of Chartered Accountants in April; b. Ljubljana, Slovenia: The Slovenian Institute of Auditors in July; c. Sofia, Bulgaria: The Institute of Certified Public Accountants of Bulgaria in July; d. Warsaw, Poland: The Accountants Association in Poland and the National Chamber of Statutory Auditors in July;

6 e. Lisbon, Portugal: Ordem dos Revisores Oficiais de Contas in September. Regional Accountancy Bodies and Multinational Events 1. Prague, Czech Republic: The Director, Quality Assurance and Member Body Relations (QA-MBR) participated in a regional Chief Executives and Presidents meeting of 13 members and associates from Central and Eastern Europe in April. 2. Kathmandu, Nepal: The Director, QA-MBR made a presentation to the CAPA Board about the Part 3, Action Plans phase of the Compliance Program in May. 3. New York, USA: The CAP Deputy Chair made a presentation on the progress of the Compliance Program at the forum with representatives of four prominent emerging economies Brazil, China, India and Russia (BRIC) organized by IFAC in May. 4. Port of Spain, Trinidad and Tobago: The Deputy Director, Member Body Development (MBD) made a presentation on Quality Assurance at a conference of the Institute of Chartered Accountants of the Caribbean and participated in a regional Chief Executives and Presidents meeting of IFAC members from the Caribbean in June. 5. Paris, France: The Technical Manager, MBD made a presentation on the Part 3, Action Plan phase and key success factors in the process at a workshop during the French Congress of Accountants attended by several francophone professional institutes from Europe, Africa and Asia. Development Banks, Regulatory Bodies and Other Key Stakeholders 1. Dubai, UAE: The Director, QA-MBR made a presentation on the Compliance Program at the IOSCO Emerging Markets Committee workshop in December New York, USA: The Director QA-MRB made a presentation on the current status of the Compliance program to the IFAC Regulatory Liaison Group in January. 3. Zagreb, Croatia: An IFAC representative participated in the World Bank ROSC dissemination workshop in April. 4. Bangkok, Thailand: The Deputy Director MBD participated in a World Bank ROSC dissemination workshop in June. 5. Cape Town, South Africa: The CAP Chair made a presentation on the IFAC Compliance Program at a meeting of the International Federation of Independent Audit Regulators in September. 6. Moscow, Russia and São Paulo, Brazil: The Director, QA-MBR participated in meetings of the Regulatory Working Group in July and October. 7. Member Body Development staff provided input and comments on the development of the World Bank ROSC reports for the following countries: a. Benin b. Congo, DR c. Egypt d. Ethiopia e. Kyrgyzstan

7 f. Laos g. Madagascar h. Malawi i. Mali Other IFAC Activity Groups 1. New York, USA: The CAP Chair attended the IFAC sponsored World Accountancy Forum in December New York, USA: The Director, QA-MBR provided an update on the Compliance Program to the Transnational Auditors Committee at its January 2008 meeting. 3. New York, USA: The Technical Manager MBD provided an update on the progress of the Compliance Program to the Small and Medium Practices Committee in June. 4. Brussels, Belgium: The Director, QA-MBR made a presentation on the Compliance Program to the Steering Committee of the International Ethics Standards Board for Accountants in June. 5. Amsterdam, Netherlands: The CAP held a joint technical session with the Developing Nations Committee in July. Section 6 Conclusion 6.1 The CAP has scheduled four meetings in 2009 as follows: 1. January Thailand 2. April 30-May 1 Canada 3. July USA 4. October Chile 6.2 The CAP and staff would like to express our appreciation to the IFAC Board, members, associates, regional organizations, and acknowledged regional groupings for their continued support of the Compliance Program. Through their active support and participation during 2008, the Part 3, Action Plans process is now well underway and 10 new members and associates are being brought to the Council for its approval. 6.3 The CAP looks forward to continuing to work closely with all of these constituents and other interested parties on continuing to improve the quality of professional practice around the world.

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