Category: Accounting Profession Issues and Trends

IFAC Takes Up the Challenges of the Regulators

November 2000

IFAC has been in the standard-setting business for 23 years. Its international pronouncements have gained general recognition for their high quality, relevance, and appropriateness in the drive for global harmonisation.

But IFAC has also come in for criticism. Sceptics have claimed, with some justification, that IFAC "lacks teeth" and remains relatively impotent within a world of increasingly powerful regulators.

In response to this challenge, IFAC is introducing a new compliance and regulatory regime to bolster the profession's self-regulatory capacity and strengthen the global financial framework within which the profession operates.

Pressure from the regulators has been a major force in developing the "new look" IFAC.
In a drive to protect cross-border capital movements, regulators have focussed on the need for increased consistency, transparency and comparability of financial information. Although the profession cannot be blamed if national standards and levels of regulation are inadequate, accountants and auditors have nevertheless come under the regulators' spotlight. Questions have been raised about quality and consistency of work. The US SEC has expressed doubts about the adequacy of the profession's self-regulatory processes around the world and advocated the establishment of an international regime.

IFAC has therefore launched a two-prong assault to encourage compliance within the profession and to strengthen the global financial architecture in which the profession operates.

Firms which carry out transnational audit work will be eligible for membership of the new IFAC Forum of Firms (FOF). Membership obligations include compliance with international standards and the IFAC ethical code, and submission to periodic quality review.

An IFAC Compliance Committee has also been created to work closely with those responsible for practice review within the FOF and to monitor and encourage compliance with international pronouncements by national professional bodies.

On the broader scene, IFAC is working with regulators, international agencies and others in a drive to encourage national governments to introduce the organs, systems and controls which make for good governance. The International Forum on Accountancy Development (IFAD), launched by these various interested parties last year, will strengthen accounting capacity and capability at the national level and build a platform for a strong global financial architecture.