IFAC: How We Can Help Shape the Future of Developing Nations
Africa Region Learning Workshop – September 28, 2006
By: Russell Guthrie, Director, Quality Assurance and Member Body Relations
Good morning ladies and gentlemen. It is a pleasure for me
to speak to you on this second morning of the Africa Region
Learning Workshop. It is an honor for me to have the opportunity
to share with you today IFAC’s key priorities related to the
development of the worldwide profession. IFAC, as an
international accountancy organization and standard-setter, has a
number of key initiatives underway that focus on the growth of the
accountancy profession and the needs of the profession in
developing nations and transitioning economies. That is the focus
of my discussion today; however, I would first like to thank those
who have made this Workshop possible.
The generous sponsorship of the African Development Bank,
and our co-sponsor, the World Bank, whose commitment to Africa
and to the objectives of this Learning Workshop are greatly
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appreciated. ECSAFA, FIDEF and UNCTAD have also made
important contributions and provided technical guidance as
members of the Organizing Committee.
I would also like to say a special thank you to the staff of
IFAC for their efforts in organizing this workshop, assisting with
travel arrangements and support your work during the breakout
sessions. They are an excellent team and I am proud of both their
professionalism and their friendship.
Most importantly, I would like to recognize the commitment
of you, the participants, who represent 37 African countries. As
professional accountants, representatives of government, and
academia in Africa, your presence here at the Workshop
demonstrates the support and commitment you have for
development and improvement.
I now would like to turn to IFAC and its focus on
development of the profession. With 20 African professional
accountancy bodies as its members, IFAC believed it was critical
to take an active role in this Learning Workshop. In addition to the
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secretariat support provided by IFAC staff in organizing the
Workshop, IFAC’s Developing Nations Committee and the
Compliance Advisory Panel also held meetings here earlier this
week in order to participate in these two days.
If there is one thing that is clear to me when I think of Africa
is its diversity. With its significant geographic size, its diverse
cultures and traditions, and with 53 countries, Africa does face
unique challenges. With such diversity come different needs and
priorities, but at IFAC we believe that through our common goals
we can work together to address key issues and needs that are
fundamental for all professional accountancy bodies.
I would like to now share with you some of the specific
activities is currently undertaking to meet the challenges facing
professional accountancy bodies and practitioners.
The first important initiative was established to strengthen
the profession and support implementation of standards – and this
resulted in the formation of the Developing Nations Committee.
The Developing Nations Committee objectives include:
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•
Development and mentoring of existing and potential
IFAC members
•
Establishing strong working relationships with Donor
Community
•
Providing input to international standard setters on
behalf of developing nations
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Producing guidance to assist in development of
professional accountancy bodies
For an example of this type of guidance, the Developing
Nations Committee launched new guidance November 2005 on
Establishing and Developing a Professional Accountancy Body.
The new guidance, available online through the IFAC website or
on the CD-Rom included in your conference bag, is designed to
assist national and regional accountancy bodies in building
capacity around the world.
Based on feedback received in the past several months, we
have also learned that it is considered a valuable tool for donor and
development agencies in increasing the effectiveness and
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efficiency of development efforts related to the profession. This
guide demonstrates our commitment to building the infrastructure
necessary to contribute to economic growth and stability in
emerging countries and to enhance performance by the profession
globally. I am also extremely pleased to announce that part of the
funding for this event is being used to translate this guidance into
French with the assistance of UNCTAD.
Another sign of IFAC’s commitment to Developing Nations
is evidenced by a recent IFAC Board decision to establish a pilot
program to subsidize the participation of developing nations in
IFAC Boards and Committees. $100,000 has been set aside to
provide financial support to candidates from IFAC member bodies
in developing nations to attend and participate in IFAC standard
setting and other activities.
Another important IFAC initiative grew from IFAC’s
recognition that - even with globalization and its undeniable
impact on every country in the world - it is Small and Medium
Enterprises (SMEs) that drive the growth of national economies.
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They drive job growth, wealth creation and stability. It is a fact in
the United States, in the European Union and a fact in Africa. And
it is our profession’s Small and Medium Practitioners (SMPs) that
provide professional services to these companies.
The SMP Committee, formed in 2005, is a vigorous force
within IFAC. Its members, from both developed and developing
countries, seek to identify and address the most challenging issues
facing SMEs and SMPs.
In July, the committee organized a forum in Hong Kong to
discuss the challenges and opportunities facing SMEs and SMPs.
Over 130 participants from 35 countries attended the conference,
and their deliberations identified two significant challenges facing
SMEs and SMPs: SMEs need financial reporting standards that are
appropriate for their users’ needs and reduce the associated cost of
compliance; and, in an increasingly globalized economy, SMPs
should continue to explore new ways to support the growth and
accountability of SMEs.
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To help address these challenges, IFAC’s SMP Committee is
taking a two-pronged approach to helping SMEs and SMPs
converge and comply with international auditing and accounting
standards – this approach includes helping to shape the form and
content of international standards and providing practical
assistance to SMPs and SMEs that have to use such standards.
For example, the SMPC is developing a guide to
International Standards on Auditing for SMEs and a web-based
knowledge resource for SMPs. Additionally, IFAC continues to
respond to exposure drafts of international standard setters where
an SMP or SME focus is needed.
In addition to the SMP and Developing Nations activities, are
IFAC’s efforts to encourage quality in all that we do as a
profession. Quality, for each professional accountant, begins with
education and so I will mention some of the work of our Education
Board.
IFAC’s International Accounting Education Standards Board
seeks to bring consistency to accountancy education, training and
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certification around the world. Our global environment does, I
believe, demand this kind of consistency. How else can we assure
the public that a professional accountant practicing in the United
Kingdom or France is as qualified as one practicing in Kenya or
Senegal?
The Education Board has issued the International Education
Standards which address the vital topics of education prior to
qualification, the minimum education requirements to become a
member of the professional body, the final assessment of
professional competence and capabilities, the specific competence
requirements for auditors and continuing professional education.
Another area of focus for the Education Board is ethics
education. Last month, the Education Standards Board issued an
information paper entitled Approaches to the Development and
Maintenance of Professional Values, Ethics and Attitudes in
Accounting Education Programs. The paper, which was the result
of a wide-ranging research project into ethics education in the
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worldwide accountancy profession, is designed to stimulate
discussion and debate on the subject of ethics education.
This information paper served as the basis for the Education
Standards Board to develop a proposed International Education
Practice Statement entitled Approaches to Developing and
Maintaining Professional Values, Ethics and Attitudes. The
proposed practice statement provides guidance to IFAC member
bodies on how to achieve good practice in developing and
maintaining professional values, ethics and attitudes in accordance
with International Education Standards and suggests that member
bodies may adopt an approach to ethics education based on the
IAESB’s Ethics Education Framework. In addition, since ethics
education is a lifelong commitment that begins when an individual
begins training to become an accountant, and continues throughout
a professional accountant’s career, the proposed new practice
statement also provides guidance for member bodies on ethics
education through continuing professional development.
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In addition to the information paper and the practice
statement, the Education Standards Board is preparing a toolkit on
ethics education to assist member bodies, academic institutions and
others in instilling a strong ethical foundation in the accountants of
tomorrow.
Underpinning all of these activities is IFAC’s Member Body
Compliance Program. IFAC has established a rigorous Member
Body Compliance Program to provide clear quality benchmarks for
professional accountancy bodies and to require the identification of
required actions which all assist our members in continuously
improving standards, quality control and support to members of
profession. Through this program, IFAC seeks to contribute to the
quality of financial reporting and thus to building sound market
economies by facilitating convergence to international standards.
Indeed, making best endeavors to converge national and
international standards is a requirement for IFAC member bodies
as set out in IFAC’s Statements of Membership Obligations
(SMOs). The SMOs, which also require member bodies to
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implement quality assurance and investigation and discipline
programs, form the basis of IFAC’s Member Body Compliance
Program. These are the requirements for IFAC members and we
are also prepared to take actions, and indeed have taken actions, to
suspended or expel bodies that do not participate in the program or
demonstrate persistent non compliance, I want to emphasize that
the program is focused on encouragement and improvement and
making progress.
Part 1 of the Compliance Program, a fact-based questionnaire
to assess the regulatory and standard-setting frameworks in the
home countries of each of IFAC’s members and associates, is now
complete. This portion of the program provides information on the
roles and responsibilities of IFAC members – which vary from
jurisdiction to jurisdiction. Responses from all active members
and associates have been posted on the IFAC website.
Part 2, the SMO Self-Assessment Questionnaire, was
launched last December and approximately 35 responses been
published with more to follow during this year. The responses
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from these questionnaires are important for several reasons: they
provide a global snapshot of the accountancy profession from both
a regulatory and standards perspective. Additionally, they can be
used to help IFAC gauge where it needs to focus its efforts to
support the development of the profession and to work to achieve
convergence.
Lastly, but perhaps most importantly, the responses to the
questionnaires will lead into Part 3 of the program – Development
of Actions Plans. Member bodies will be required to develop
action plans to close any gaps between current practice and the
SMO requirements. These action plans will demonstrate the
international accountancy profession’s willingness to be
accountable for its actions to meet high standards, to deliver
quality and to protect the public interest – all important
responsibilities in the changing and complex environment in which
we all work.
I now want to make a few comments about IFAC
membership. One of IFAC’s objectives is to have a high quality
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professional accountancy body in every country in the world. As
you can see from this map where countries without representation
are indicated with light colors, we have important work to do in
Central and South America, in Central Asia, in Southeast Asia.
And we have the most work to do in Africa – there are over
30 countries where the profession is not represented within IFAC.
This represents both an opportunity and a challenge. This is not an
easy task or one we can accomplish on our own. We need the
sustained efforts of governments, professional bodies, educational
institutions and donor assistance to make this objective a reality.
There is good news – several African professional bodies are
making good progress and are actively working on their
application and related compliance questionnaire requirements. We
hope to consider a number of applications from the African
continent during 2007. We look to the Developing Nations
Committee, existing IFAC members and our regional accountancy
bodies to mentor potential members.
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I would like to emphasize that the IFAC membership
requirements have been significantly strengthened in the past three
years through the Member Body Compliance Program, which is
overseen by the Public Interest Oversight Board for IFAC.
Generally, the application process can take between 6 to 9 months.
This includes preparation of the application and related compliance
questionnaires, obtaining sponsorship from an IFAC member,
having the application reviewed by staff, the Developing Nations
Committee and the Compliance Advisory Panel – all this must take
place before a recommendation is made to the IFAC Board and
Council in November each year. The staff and the CAP have made
a policy decision that only those applications submitted by May 31
each year will be considered for recommendation to the Council in
November of that calendar year. We therefore strongly suggest that
applicants submit materials in January or February to permit
adequate time for these review processes. Normally, professional
bodies will join IFAC as Associates with an agreed action plan
based on our Statements of Membership Obligations. Associates
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are expected to demonstrate clear progress on these action plans
and would generally be considered for full membership during a
period of one to three years based on progress on the action plan.
We also recognize that there are countries where the
profession is not appropriately organized, or where the profession
does not yet really exist. We are committed, through our
Developing Nations Committee, to support the capacity building
needed in these countries and to eventually mentor them through
the membership process at the appropriate time.
Later this morning you will hear from Honorable Henry
Obwocha on the Role of Government. I just want to mention here
that IFAC clearly recognizes the vital role the profession has to
play in the public sector. In Africa, as in many countries, the
public sector accounts for more than 50% of annual GDP and
therefore public sector accountability and transparency is an
important priority. IFAC’s work to strengthen public sector
financial reporting and financial management is accomplished
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largely through the International Public Sector Accounting
Standards Board, known as the IPSASB.
The IPSASB develops International Public Sector
Accounting Standards, which are designed to improve public
sector financial management and accountability.
To enhance government’s credibility, both nationally and
overseas, governments need to report their financial position and
performance and their cash flows in a transparent and high quality
manner. Such information is vital to the efficient operations of
government and can assure the public that government resources
are managed effectively. These efforts should be supported by a
sufficient number of professional accountants working in the
public sector.
It is important to keep in mind that the need for high quality
professionals and information from governments is as important as
it is for business and industry. Without a financial structure that
engenders confidence, a government’s infrastructures may crumble
and with them, the ability to support its citizens.
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So this is a brief description of some of the work that IFAC is
doing to assist our members and all professional accountants and
we welcome your participation and support. And, we also
recognize that our work involves listening and learning and indeed
that is the purpose of these two days.
Let me conclude my remarks by reminding you of the vital
role of the professional accountants in supporting economic
growth. The bedrock of our international commercial system is
high quality financial information: information based on ethics and
integrity, on high quality international accounting and auditing
standards and on the work and sound judgment of both internal and
external professional accountants. Credible and reliable financial
information is fundamental to investment. It builds investor
confidence which, in turn, facilitates business development,
contributes to job growth and leads to individual financial
prosperity.
Fundamental to achieving this growth and prosperity is
achieving our goal of having an IFAC member body in each
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country of the world – and to transform the map of Africa today
with IFAC members into the map of Africa IFAC members of
tomorrow.
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