Message from the chairman
Exercises in Public Interest Standard Setting
The 2003 IFAC Reform Proposals were designed “to strengthen international assurance, audit, ethic and education standards setting processes, achieve convergence to international standards and ensure that the international accountant profession is responsive to the public interest”. This agreement, which led to the creation of the PIOB and constitutes the basis for its actions, defines the PIOB’s objective as “to increase the confidence of investors and others that the public interest activities of IFAC (including the setting of standards by IFAC Boards and committees) are properly responsive to the public interest.” With this objective as the guiding principle, the PIOB has continued during the year under review to oversee the activities of the Public Interest Activity Committees (PIACs), as well their respective Consultative Advisory Groups (CAGs) and the Nominating Committee of IFAC. In light of their public interest sensitivity, the PIOB has particularly focused on the work of the IAASB and the IESBA, where very significant projects have been discussed. It has also followed the nomination processes for members of the PIACs, and especially of the independent chairperson of the IESBA. The PIOB appreciates the quality of the work undertaken in these boards and committees.
Apart from the technical work undertaken in the PIACs, a few projects deserve special mention, as they respond to various public interest concerns that have been voiced during the financial crisis.
The concern of the accounting world to give an adequate response to the information needs of the wider constituency of users of financial statements such as institutional investors, lenders and creditors, regulators and others, is the subject of an important proposal on “auditor reporting”. This proposal developed in the IAASB reflects the idea that the auditor’s report should better facilitate the assessment of the functioning of the audited firm and express opinions on elements that are essential to establish a reasoned opinion on that firm: elements such as the appropriateness of management’s going-concern assumptions, material uncertainties, remuneration reporting and valuation of goodwill or of financial instruments are some of the more salient features that may be included or expanded in the future auditor reports and will strongly contribute to the informative and decision-making value of the reports.
By making auditor reporting more responsive to these wider needs, the proposed standard not only will contribute to the public confidence in audited financial statements, but at the same time may highlight the role of the auditor’s report as a privileged source of information about the overall position of the audited entity.
Of equal importance is the ongoing work on Suspected Illegal Acts, a significant proposal developed by the IESBA. The attention paid to this controversial subject clearly testifies to the Board’s awareness of its role as standard setter in the public interest.
In both cases the public interest has been the motivation behind the standard-setting process and, in that sense, is the object of special attention of the PIOB.
During 2012, considerable attention has gone to the two consultations that have been launched: one by the PIOB, mostly dealing with the oversight process; and the other by the Monitoring group, relating to the functioning of the overall system of standard-setting and its oversight. These public consultations and the ensuing positions that the bodies concerned will adopt will constitute clear beacons for the future development of the overall standard-setting structure and processes. Although changes and improvements are desirable to achieve higher effectiveness, the overall structure has proved to be robust and provides an adequate balance between the different objectives and interests involved.
In 2012, Aulana Peters retired from the PIOB Board. Her seven years of relentless effort and dedication to the PIOB deserve a very special word of gratitude. I would also like to give a very special welcome to Jane Diplock, who joined the Board in March 2012.