CHINESE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
RELEASE CEREMONY FOR CHINESE ACCOUNTING STANDARDS SYSTEM
FOR BUSINESS ENTERPRISES AND CHINESE AUDITING STANDARDS
SYSTEM
REMARKS BY IAN BALL
CHIEF EXECUTIVE, INTERNATIONAL FEDERATION OF ACCOUNTANTS
BEIJING, CHINA – FEBRUARY 15, 2006
Thank you very much, Dr Chen, for that kind introduction.
As the IFAC President, Graham Ward, said earlier, we are both pleased and
greatly honored to be here today as the Ministry of Finance of the People’s
Republic of China and the Chinese Institute of Certified Public Accountants
announce their intention to converge Chinese auditing standards with
International Standards on Auditing.
Your enormous achievements to date in strengthening the Chinese accountancy
profession through convergence towards international standards should not be
viewed as an isolated event. It is significant and fundamental to the further
development of your country’s capital markets and is, I believe, fully consistent
with the reforms the People’s Republic of China has advanced in the last decade.
The reforms, including opening your door to increased trade, authorizing the
private ownership of business entities, and encouraging foreign direct investment
by the establishment of free enterprise zones in coastal regions, have enhanced
your country’s role and reputation in the global markets. Adhering to high-quality
auditing standards is another way to strengthen your financial architecture and
confidence in your capital markets.
International Auditing and Assurance Standards Board Chairman John Kellas will
address you in a few moments on the work of the IAASB and on International
Standards on Auditing. The focus of my comments today is on IFAC, on our
initiatives to strengthen our standard-setting processes, and on the significance
of your most recent actions.
Let me first turn to IFAC, for those of you who may have limited knowledge about
our organization. IFAC is comprised of 160 member organizations in 120
countries, most of which are national professional accountancy institutes, such
as the CICPA. These member bodies represent more than 2.5 million
accountants worldwide in business, industry, public practice, government, and
academia. IFAC’s mission is, in brief, to protect the public interest in order to
contribute to economic growth and social stability worldwide. The primary means
by which we accomplish this is through our international standard-setting
activities.
In addition to setting International Standards on Auditing, IFAC, through its
independent standard-setting boards, also establishes ethical, education and
public sector accounting standards. Our ethical and education standards also
support high-quality performance by auditors. The IFAC Code of Ethics for
Professional Accountants is frequently updated to ensure that all professional
accountants – whether in public practice, business or government – have clear,
relevant and high-quality ethical guidance. The Code specifically addresses
those areas where the public interest is most significant, for example, matters
relating to auditor independence. The International Accounting Education
Standards Board establishes the standards necessary to ensure that
professional accountants are properly trained, both prior to their professional
certification and throughout their careers. Most recently, guidance on audit
competence has been developed.
IFAC standard setters well recognize that use of our guidance is dependent on
its quality, which, in turn is dependent on our due process. John Kellas will be
discussing this in greater detail, but I think it is important to emphasize three
characteristics of our standard-setting processes:
1) The processes are highly transparent;
2) The individuals who have been selected to serve on our standard-setting
boards have been selected because they are the best person for the job,
meaning they have the necessary skills and expertise; and
3) Projects are prioritized based on their contribution to the public interest.
Over the last year, all of IFAC’s independent standard-setting boards – the
IAASB, the International Ethics Standards Board for Accountants, the
International Accounting Education Standards Board and the International Public
Sector Accounting Standards Board – have enhanced the transparency of their
operations, increased input from stakeholders and the public, and strengthened
their consultative processes. All of these boards have public members serving on
them. They have consultative advisory groups comprised of relevant
stakeholders who can provide meaningful input on the work programs of each
group from a public interest perspective. And each makes publicly available on
the IFAC website agenda items and background materials for its meetings, as
well as exposure drafts of proposed standards. These initiatives make these
standard-setting groups among the most transparent in the world, and their due
process, with significant public input, demonstrates that these boards are looking
outward to the needs of investors and others who rely on the work of accountants
and auditors.
I believe that the CICPA and its standard setters, like all standard setters
worldwide, should continue to look outward, as it is doing, to consider the needs
and expectations of both domestic and foreign investors. As you respond to
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those needs, you will continue to build confidence in your accountancy
profession and in your markets.
Public interest oversight is another means of enhancing credibility. As IFAC
President Graham Ward pointed out, in February 2005, an independent
international Public Interest Oversight Board, comprised of members nominated
by international organizations and regulators, was formally established to provide
public interest oversight of the IAASB, Ethics and Education Standards Boards
and the IFAC Member Body Compliance Program. This oversight will give the
public greater confidence both in the standard-setting process and in the work
output itself – the standards.
Before I close, I would like to comment on the work of IFAC’s International Public
Sector Accounting Standards Board, which develops International Public Sector
Accounting Standards (IPSASs) and whose work is closely related to that of the
International Accounting Standards Board. These IPSASs are designed to
improve public sector financial management and accountability. This is an
increasingly important area of IFAC activity. Public sector financial reporting is an
activity which can contribute much to global economic management, when
upwards of 30 percent of resources in most economies are consumed by the
public sector. Ultimately, the consequences of poor financial reporting and poor
financial management within governments are arguably even more serious than
a loss of confidence in securities markets.
An important IPSASB objective is facilitating convergence with International
Financial Reporting Standards, upon which the IPSASs are based. Our aim is
that governmental reporting and private sector reporting should be as
comparable as possible. We look forward to continuing to work with the Ministry
of Finance and the CICPA in this area, and we value very much your interest and
your contribution in this area.
In closing, I would like to emphasize that China’s commitment to high-quality,
internationally respected, accounting and auditing standards that are consistent
with those developed by the IAASB and IASB, provides inspiration to those
countries who also aspire to strengthen their financial systems and build investor
confidence.
There are numerous benefits to the actions you are taking today –
 Investors will have better information for decision making.
 Companies too, will have improved management information for decision
making.
 In addition, Chinese companies are likely to have better access to capital,
particularly from foreign sources; the cost of capital may be reduced as
well.
 Your country will have increased access to international capital markets.
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There will also be greater credibility and improved economic prospects for
the accountancy profession.
Lastly, your country can further enhance its competitiveness, which, in
turn, can lead to greater prosperity for all citizens.
I would like to conclude by saying that, with your release today on the new
standards of accounting and auditing, you are positioning China to have an even
better future.
I congratulate the Ministry of Finance and the CICPA for their leadership, for their
foresight, and for the very great achievements that today’s ceremony celebrates.
Thank you.
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