IFAC STRUCTURE REFORM

INTRODUCTION The background to these reform proposals lies in the decline in confidence in financial reporting and in the accounting profession associated with corporate collapses and failures in financial reporting and auditing in a number of countries. The consequence of this has been greater regulation of the profession in many countries in an attempt to restore public and investor confidence in financial reporting. While the events themselves have not occurred in all countries, they have significantly influenced the international regulatory environment in a way that requires a response. The address by the President of the International Federation of Accountants (IFAC) at the World Congress of Accountants in Hong Kong, November 2002, stated that there was a need to move towards a system of mixed regulation of the profession. The proposals below are IFAC’s response to the decline in confidence in financial reporting and auditing and the changed regulatory environment. These changes are designed to lead to higher quality standards and as a consequence enhanced performance by the accounting and auditing profession. This in turn should contribute to greater confidence in the quality of financial reporting and auditing. These • Proposals reflect the continuing commitment of the profession to its public interest role and to the goal of global convergence to high quality standards. Underpinning these proposals are a number of core values and beliefs. First, that the accounting and auditing profession has an obligation to serve the public interest. Secondly, that global convergence to high quality accounting, auditing and other professional standards is in the public interest. Thirdly, that transparency in standard setting leads to higher quality and more widely accepted standards. This paper does not seek to consider options or to explain the rationale for the design of the reform proposals. Rather, it should be seen as the product of the development process described below, which involved extensive discussion and consultation with a wide range of parties both internal and external to IFAC, and is intended to be a proposal that all parties involved can agree will help ensure that IFAC’s standard setting activities reflect the public interest and address the concerns of the regulatory community. • Following corporate collapses and failures in a number of countries in the early part of the century, there was a decline in confidence in financial reporting and in the accountancy profession. As a result, regulation of the profession increased in many countries in an attempt to restore public and investor confidence in financial reporting. • In response to these events, in November 2003, the Council of the International Federation of Accountants (IFAC), with support from global regulators, unanimously approved the IFAC Reforms. They were developed through consultations with international regulatory agencies, other international and regional organizations, IFAC member organizations, and the accounting profession. • The reforms were designed to: • Strengthen standard-setting processes; • Achieve convergence to high-quality international standards in auditing, professional ethics, and accountancy education, as a means to support effective and efficient capital markets—leading to lower costs of capital, higher investment, greater innovation, and more job opportunities;