Graham Ward, CBE
International Federation of Accountants
Immediate Past President
World Congress of Accountants
Opening Ceremony Speech – November 13, 2006
Mr Prime Minister, Mr Finance Minister, Mr Foreign Minister, Ministers, Members
of Parliament, distinguished members of the speaking faculty this afternoon,
fellow professional accountants, distinguished guests, ladies and gentlemen;
good afternoon and welcome. It is a privilege to be hosted here in Turkey and to
speak to you at this 17th World Congress of Accountants, an event that
symbolizes, the world over, the vibrancy of our profession. I thank especially our
hosts: Mr Mehmet Timur President of Turmob, Dr Masum Turker President of
EAAT, and Prof. Dr. Recep Pendemir, Chairman of Congress and of the
organising committee, for your wonderful hospitality and organisation. I thank
also other government leaders from around the world, those of you who
represent regulators and standard setters, the members of the Turkish profession
and of our profession throughout the world, indeed from 120 countries, for
making the commitment to attend this Congress and to participate in these
important discussions that will shape our future. Today, our profession is 2.5
million members strong, with close to 160 accountancy bodies in 120 countries
and we are continuing to grow and thrive, along with growing and thriving
economies.
In the two years that I have served as IFAC President, I have witnessed and
been a part of unprecedented changes both in the world and in our profession.
We have witnessed the tremendous economic growth of India and China, the
acceptance of 10 new countries into the European Union, and worldwide
commitment to help African nations by doubling aid to $50 billion per year by
2010. Over the last two years, we have also seen the most significant growth in
gross domestic product in Latin America since 1980, averaging better than five
percent per year. This, indeed, is progress – progress to which our profession
can contribute in the years ahead, as it has done in the past.
One notable development in the world that has not received the publicity it
deserves is the recent award of the Nobel Peace Prize to a Bangladeshi
economist, Muhammad Yunus, for pioneering work in giving very small loans –
as small as US $12 – to millions of poor people, such as destitute widows,
landless laborers, rickshaw drivers and beggars. As a result of these loans, some
of the poorest people in the world were able to escape poverty, to feed their
families, and to become financially self-sufficient. Mr. Yunus, however, gave out
more than loans. He gave out hope. Mr. Yunus’ dream of eradicating poverty is
one that I personally share and one that IFAC, as the representative organization
of our international accountancy profession, is dedicated to supporting. This very
important goal is embraced in the theme of this conference: “Accountants:
Generating Economic Growth and Stability Worldwide.”
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There are not, of course, any specific statistics that demonstrate our profession’s
effectiveness in generating economic growth, so I will present it to you in another
light: Without professional accountants, without reliable and credible financial
information that is independently reviewed and verified, growth in almost any
country would be stymied. Where our profession flourishes, so, too, does the
potential for real and meaningful economic growth. This is one reason why the
development of the profession has been a critical IFAC objective and one in
which we are making steady inroads, thanks in large part to the work of IFAC’s
Developing Nations Committee. Newly developed accountancy bodies are
emerging in countries such as Macedonia, Armenia and Mauritius. In addition,
accountancy institutes in countries in other developing nations, such as Estonia,
Latvia, Lithuania, and Papua New Guinea, are gaining momentum and influence,
as they institute programs that foster a high quality profession.
Having a strong accountancy profession is a key aspect of having a strong
financial infrastructure in a country and relates to the ability of that country as a
whole, and also to the individual companies within that country, to raise capital at
a favorable cost.
For developing nations, having a strong financial infrastructure, or, as I like to call
it, an investment climate of trust, means that not only can you attract private
sector capital more easily and at a better price, but you can also attract
assistance from development partners. Therefore, having a strong accountancy
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profession is a real help in the fight against poverty, in that it can help to finance
programs for education, health, energy, clean water, and food, as well as
financing business and growth, thereby enabling standards of living to improve.
When I was elected President two years ago, I indicated then that I would have a
strong focus on developing nations and, in company with IFAC Member Bodies,
volunteers and staff, have worked hard to honor that commitment. We elevated
the previous Developing Nations Task Force to a permanent committee and
provided them with substantial additional resources to undertake development
work. Two international forums were organized, in 2005 and 2006, to obtain input
from developing nations so that we could focus our efforts on what developing
nations truly need. We have also extended our outreach to donor agencies to
determine where IFAC can most effectively and efficiently collaborate on the
development of our profession. An immediate and key focus for IFAC is Africa,
the continent currently suffering from some of the worst poverty in the world. Just
last month, together with the African Development Bank and the World Bank, we
sponsored a learning workshop for government and private sector leaders and
members of the accountancy profession to learn how we can best meet the
needs of this constituency and to let them know how IFAC can support them. For
example, we have developed a tool kit designed to assist governments and
others in establishing a formally recognized profession and, to date, we have
translated that tool kit into Spanish and French.
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One of the other commitments I made two years ago was to strengthen IFAC’s
public interest role. What I realize, more than ever, is that this is not a one-time
goal. It is area on which we must continually focus. As accounting professionals,
it requires us to ask ourselves again and again, “What can we do better
tomorrow?” This is a question that IFAC’s leadership, together with its
independent standard-setting boards, has asked itself over and over again,
particularly in light of the business and accounting scandals that shook the world
in the 1990s and the early 21st century. While the regulatory climate changed
dramatically in countries such as the United States, as a result of those scandals,
the profession itself also undertook a number of initiatives to build and maintain
public confidence in its work. I’d like to comment for a moment on just a few of
those global initiatives.
One key initiative was the formation of the international Public International
Oversight Board, in February 2005, which I believe is one of the most significant
events in the history of our profession. Its Chair, Professor Stavros Thomadakis,
his fellow Board members and their secretariat have advanced an agenda that
takes account of the views of international regulators worldwide and is designed
to enhance international standard setting by IFAC’s Public Interest Activity
Committees: the International Auditing and Assurance Standards Board, the
International Accounting Education Standards Board, and the International Ethics
Standards Board for Accountants. Over the course of the past two years, each of
these boards, along with IFAC’s International Public Sector Accounting
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Standards Board, has increased public interest input, for example, through
independently chaired Consultative Advisory Groups, comprised of relevant
stakeholders who can provide meaningful input on their work programs. Meetings
of these boards were also opened to the public and their full agenda materials
are now published on the IFAC website. These changes alone, I believe, make
us one of the most transparent standard-setting organizations in the world, if not
the most transparent.
These boards have also cooperated with the PIOB in updating them on their
work plans and refining their due process procedures. These due process
procedures were approved by the PIOB at its meeting in September, providing a
clear message that these independent standard-setting boards are operating in
the public interest.
In addition to public interest input and oversight, IFAC also considers the needs
of smaller firms and of small and medium enterprises (SMEs) in the development
of international standards. We all are well aware that SMEs are, together, the
economic engine that fuels growth, jobs, and ultimately individual prosperity and
security, in developing as well as in developed countries, in all parts of the world.
In the European Union, SMEs represent 95.77 percent of the businesses. These
figures are mirrored globally, with SMEs representing 97 percent of the total
companies in the Asia-Pacific region and 99.7 percent of all employers in the
United States. Because of their sheer scale when taken as a whole and the
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dramatic effect that successful SMEs can have on national and international
economies, their issues must be at and remain at the forefront of IFAC’s
priorities. Our focus, through the IFAC Small and Medium Practices (SMP)
Committee and other groups, is to develop practical guidance that is universally
and easily available to accountants worldwide; to make sure that the voices of
SMPs and SMEs are heard by standard-setting boards; and to provide forums for
the exchange of ideas on how we can all better support one another. An
international forum on the topic, held in July in Hong Kong, provided direction to
us on how we might effectively achieve these goals.
In addition to standard setting, IFAC serves the public interest by supporting and
promoting convergence to international standards. To operate effectively in a
global world, we do need to follow global standards.
The globalization of economic activity has resulted in an increased demand for
high quality, internationally comparable financial information. By reducing
differences in financial reporting requirements for participants in international
capital markets, we can remove barriers to international capital flows and
facilitate cross border investment. It is for these and other public interest reasons
that, over the past two years, IFAC’s standard-setting boards have stepped up
their efforts to pursue international convergence. And, I am happy to report, we
are meeting with success.
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Over the last few years, the movement to use international accountancy
standards, rather than national standards, has gathered momentum and more
and more jurisdictions have started to replace national standards with
international standards.
So far, more than 100 countries worldwide, up from 70 countries just a few years
ago, have adopted International Standards on Auditing (ISAs) or are using them
as the basis for national auditing standards. IFAC’s Code of Ethics for
Professional Accountants is also increasingly being adopted or integrated into
member body codes.
In addition, I am very pleased to report to you that, at its General Assembly meeting
last month, the World Federation of Exchanges announced its endorsement of the ISA
standard-setting process. This endorsement by the World Federation of Exchanges,
which represents 57 securities and derivative markets that account for more than 97
percent of world stock market capitalization, provides important recognition of the high
quality of the IAASB’s standards and of the reforms that we have implemented over
the past three years to protect further the public interest and to enhance the
transparency of the IAASB and of our other standard-setting boards. Further support
for ISAs has come from the International Organization for Supreme Audit Institutions –
INTOSAI. Earlier this year, INTOSAI’s Professional Standards Committee signed a
memorandum of understanding, with the IAASB, which enables that Committee to use
ISAs as the basis for the guidelines it is developing for public sector financial audits.
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To strengthen support for convergence at the national level, in July, the IAASB
developed new guidance for national auditing standards setters that adopt its
standards with limited modifications. Its most major work, however, centers
around clarity.
To ensure that its standards are clear and understandable the world over, the
IAASB has undertaken a significant project to improve the clarity and structure of
its standards. Beginning in October 2005, it issued four exposure drafts of
proposed standards re-drafted using its new drafting style. An additional three
EDs in the new clarity style were approved at the IAASB’s October 2006 meeting
and it is anticipated that five more EDs will be issued in the new style by the end
of the year. You should see a steady stream of additional exposure drafts
throughout 2007, and it is expected that the final standards will be issued
throughout 2007 and 2008. The standards will have a common effective date.
That date still has some flexibility as we wait to see if the ambitious program can
be maintained. It is currently proposed that the new standards will be effective for
financial periods commencing on or after December 15, 2008. We hope that this
new style will not only make the standards more understandable, but also make
them better capable of being translated and used in countries throughout the
world.
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It is important to keep in mind that the need for high quality financial information
is as important for governments 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.
To enhance governments’ credibility, both nationally and overseas, they 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
operation of government and can assure the public that government resources
are managed effectively. Thus another important aspect of IFAC’s work is its
program to strengthen public sector financial reporting and financial
management. This is accomplished 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.
An important IPSASB objective is facilitating convergence with International
Financial Reporting Standards, upon which the IPSASs are based, and with
statistical bases of financial reporting. Last year, the IPSASB issued exposure
drafts further to converge its standards with International Financial Reporting
Standards and with statistical reporting bases. The IPSASB is making great
strides in its convergence efforts. An increasing number of governments and
entities worldwide, including the World Bank and NATO, are using IPSASs. In
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June of this year, the United Nations General Assembly also approved a
package of financial management reforms that called for UN agencies to use
IPSASs for their financial statements. In addition to these initiatives by major
international organizations, smaller public sector entities around the world are
also adopting IPSASs.
Finally, I would like to comment on a third priority I promised to focus on during
my tenure as IFAC President and that is the need to deliver quality in all that we
do. Quality is indeed a driving factor in the implementation of one of IFAC’s
newest and most ambitious undertakings: its Member Body Compliance
Program.
The Member Body Compliance Program was established in 2003 to support and
encourage IFAC members and associates, throughout our world, in their best
endeavors to meet the requirements for membership in IFAC. These include
promoting and incorporating international standards, issued by IFAC and by the
International Accounting Standards Board, into national standards; and
implementing quality assurance and investigation and discipline programs to
monitor compliance with applicable professional standards.
Part 1 of the Compliance Program, a fact-based questionnaire to assess the
regulatory and standard-setting frameworks of IFAC member bodies, is now
complete. Responses have been submitted by all active IFAC members and
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associates and are posted on the IFAC website. Part 2, the SMO SelfAssessment Questionnaire, was launched last December and more than 130
member and associate responses have been received so far.
The responses to these two questionnaires provide a valuable global snapshot of
the accountancy profession from a regulatory and standards perspective.
Additionally, they help IFAC to gauge where it needs to focus its development
work. Lastly, but perhaps most importantly, the responses to the questionnaires
demonstrate our global 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 this era of globalization and in this complex
environment in which we all work.
Responses to the Compliance Program will also assist IFAC in understanding
where further assistance or development is needed. Action plans will be
developed by IFAC members and associates, with assistance from the
Compliance staff.
IFAC has also stepped up its support for the 1.3 million professional accountants
in business who are members of IFAC member bodies, in some very meaningful
ways. One of our greatest challenges has been how to promote and support
quality practices by such a vast, diverse and influential group of professionals.
We met this challenge by co-badging publications with member bodies and other
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entities that have a specialized expertise, by establishing a new focus on the
development of best practice guidance for this constituency and by introducing,
just this past October, a unique global search engine, called IFACnet – A
KnowledgeNet for Accountants in Business, that is populated with guidance,
publications and other resources, from both member bodies and IFAC, and is
targeted specifically to accountants in business. We will be expanding IFACnet
early next year to accommodate information for small and medium practices and
eventually will expand it to serve the entire profession.
Another significant way in which IFAC promotes quality throughout the profession
is through our work with the Forum of Firms. Large accounting firms with
international networks face the ongoing challenge of delivering quality across
borders. Membership in the Forum helps these firms to meet this challenge by
requiring them to adhere to ISAs, to the IFAC Code of Ethics, and to the IAASB’s
International Standard on Quality Control 1. The importance of adhering to these
standards was further emphasized in a new Forum Constitution, approved by
both the Firms and the IFAC Board earlier this year.
Have we completed our work on promoting quality? No, and indeed it may never
be fully finished. Have we, however, made significant progress? Yes. And you
needn’t just take my word for it. Charles Niemeier, a member of the US Public
Company Accounting Oversight Board, pointed out at a recent conference:
“I am proud to say that the accounting profession has courageously looked at its
involvement with these problems [Enron and similar scandals] and has accepted
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the need to change. It has faced its shortcomings and is learning from them. And
with that acceptance, the accounting profession has moved beyond the problems
of the past and entered a new phase where accountants will no longer accept
being minimum compliance experts. Instead, accountants are becoming the
promoters of best practices…”
All of us here have a role to play in building confidence in financial information
and financial infrastructures and in promoting best practices. Yet we also have a
role to play in communicating how those infrastructures and practices work to
protect the public interest. Clear information about the financial reporting process
needs to be presented to those who rely on – or want to rely on – the information
that results from it. Additionally, clear information about the economic policy
framework, the regulatory environment, and economic development is essential
to sound business decisions. Thus, while I urge you to continue to take action in
this area, it is equally important to communicate those actions to the public who,
ultimately, will benefit from them.
During my term as President, I have had the opportunity to speak with many of
you here today, and with other member bodies whose resource constraints do
not enable them to be with us now. Much of our conversation was about the
promotion of quality within the profession, and how we could work best together
to accomplish this. Indeed, I have traveled to over 60 countries and met with
more than 70 member bodies and another dozen potential members, as well as
with heads of state and other government leaders. This experience has clearly
demonstrated the very hard work of accountancy institutes in supporting all
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professional accountants in carrying out their roles responsibly and in ensuring
that serving the public interest remains the most important priority.
If we continue to commit to putting the public interest first and to living our
profession’s values of integrity, transparency and expertise, our profession will
continue to thrive, and in so doing, contribute to greater prosperity throughout our
world. I look ahead with great optimism for this profession of ours and I hold hope
that we will continue to provide the value expected of us, delivering it with the
greatest pride each and every day.
This World Congress is a global congress. Globalization has brought us together.
Globalization has taken hold in a way that, I believe, can enrich the whole world.
Each of us in this room is caught in the whirlwind of globalization, as we strive to
meet the needs of new and emerging economies, and of local and multinational
companies in all nations around the globe. Let us take advantage of the unique
opportunity presented to us here at this World Congress, to meet with colleagues
from around the world, along with government representatives, regulators,
standard setters, and donor agencies; to seek solutions to poverty; and to give
the public a voice in all that we do. We must continue to listen so that we can act
in the best interests of the public good. By doing so, and by doing so together,
we truly will make a great contribution to Generating Economic Growth and
Stability Worldwide.
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Thank you very much indeed for your attention.
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