July 21 st 2000
Mr. D B Pearson
Director of Panel Staff
Panel on Audit Effectiveness
c/o The Public Oversight Board
One Station Place
Stamford
CT 06902
Dear Mr. Pearson:
The International Federation of Accountants ( IFAC) is pleased to have this opportunity to comment on
the exposure draft of the report and recommendations of the Panel on Audit Effectiveness (the
report). The report makes specific recommendations to IFAC in chapter 7, and IFAC’s comments deal
mainly with that chapter. However IFAC does wish to comment on the general direction of the Panel’s
recommendations on auditing and particularly the recommendation_ for a separate forensic fieldwork
phase in respect of management fraud.
International
General Comments
As the report realizes, implementation of all its recommendations will require much international cooperation. Most SEC registrants will have overseas operations that may be audited by non US based
auditors, and there is a growing number of foreign registrants. To impose US public interest
requirements on such registrants means applying such requirements to foreign auditors, many of
whom will be subject to differing requirements to protect the public interest in their own countries.
Improving audit effectiveness internationally is possible only through the co-operation of national
governments, national professional bodies and the international firms themselves. International bodies
can play a vital rôle in securing this co-operation, but in the final analysis only national governments
and national professional bodies have the power to impose requirements and enforce them.
Furthermore, national governments operate on the basis of what is in the public interest in their own
countries. Differing cultures and differing strengths of pressure groups and lobbyists mean that
countries, legitimately, might have different views on what the public interest is and what policies and
requirements would meet it.
The report notes that IFAC has an International Auditing Practices Committee (IAPC), whose purpose is
_
Paragraph 3·47
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to establish global auditing standards, which it does through issuing International Standards on
Auditing (ISAs) and International Auditing Practice Statements (IAPSs). To date these standards form
the national auditing standards in 34 countries and are used without significant modification in a
further 35 countries. An audit that has been conducted in accordance with ISAs has also been
conducted in accordance with auditing standards in those countries. IFAC is particularly pleased to note
the recommendation that audit firms implement uniform methodologies throughout the world that use
_
ISAs as the base minimum. The IAPC has ongoing negotiations with IOSCO for an endorsement of ISAs as
a basis for cross-border listing. As part of this, IOSCO has a standing invitation to participate as an
observer in all IAPC meetings. I FAC believes that it is important that all major economies in the world,
and particularly the USA adopt its standards. While it is encouraging that the AICPA has established an
International Auditing Standards Subcommittee to analyze the differences between US and
international standards, the USA has neither adopted international standards nor ensured consistency
between US and international standards. IFAC is establishing procedures to verify that national
accounting bodies adopt ISAs. It would be easier to achieve this if the major economies adopt ISAs as a
minimum for use in their countries.
Under recent initiatives, IFAC will shortly be setting up a voluntary global regulatory structure for
firms that are or intend to be involved in transnational audits. This structure, which will complement
national regulatory regimes, includes requirements for firms to:
•
comply with ISAs as a minimum standard for all audit engagements;
•
comply with the IFAC code of ethics;
•
meet particular standards of training for its employees.
There will be a practice review process and sanctions for firms that fail to meet requirements. At the
same time, IFAC will be creating a Public Oversight Board, to bring outside scrutiny to bear on its
activities which represent the public interest, including the new regulatory structure.
The remainder of this section addresses the recommendations specifically addressed to IFAC.
Public Interest Oversight
As indicated above, IFAC intends to create a Public Oversight Board. This board will monitor IFAC’s
activity in the global public interest. This includes not just the interest of those who invest on stock
exchanges around the world, but all users of accountancy and auditing services.
IFAC notes the recommendation that the board should impose clear and unequivocal minimum
guidelines for self-regulation of the profession in each country._ In many countries the accountancy
profession is regulated by national, or even supra-national legislation. This limits IFAC’s ability to
impose any requirements without the agreement of the relevant governments. Accordingly, any publicinterest body that IFAC sets up is likely to operate in a completely different way from the Public
Oversight Board in the USA. However, IFAC has noted the recommendations included in chapter 6 and
will consider the extent to which they can be incorporated in the modus operandi of its board.
_
_
Paragraph 7·45.
Paragraph 7·44.
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International Auditing Practices Committee
We deal with this topic in a separate section below.
Quality Assurance over Auditing
IFAC’s International Professional Practice Statement No 1 Assuring the Quality of Professional
Services requires all IFAC members to have in place a scheme of external review of audit firms. The
reviews are to cover not just the audits of listed companies, but all audits (statutory and nonstatutory) and all assurance services. The review can be either a peer review conducted by another
audit firm, or a review by the member body itself.
Firms joining IFAC’s new regulatory structure will be required to submit themselves to an external
quality assurance review as a condition of membership. However, IFAC is conscious of the regulatory
burden on audit firms, who may already be subject to a multiplicity of such reviews. Where
practicable, and where it would not weaken the process, IFAC will seek ways of working with existing
review schemes.
Ethics and Independence
It is intended that the proposed Public Oversight Board would include
its remit.
IFAC’s
ethical standards within
Education
The quality assurance review for members of the Forum of Firms is intended to include evaluation of
the education and training of staff working on transnational audit clients. In many countries the
educational standards for auditors are set out by state or national governments, and it would be
unrealistic to expect IFAC to do more than make recommendations for changes in accounting or auditing
syllabi to those governments.
By-Country Monitoring, Investigations and Discipline
It is a requirement of IFAC membership that all member bodies use their best efforts to have IFAC
pronouncements implemented in their countries. However, in many countries the various regulations
that govern the profession are laid down by legislatures rather than by the profession, whilst in others,
federal systems restrict the ability of national professional bodies to impose rules. As regards the
recommendation concerning the regulatory requirement over global financing, this is something that is
probably better addressed to national governments. It is something that is outside the scope of most
accountancy bodies, and does not appear to be directly related to audit effectiveness.
This year IFAC has set up a Compliance Committee with the mandate to:
•
keep under review the relevance, sufficiency and efficacy of the membership obligations of IFAC
and the extent to which the member bodies comply therewith and to carry out such work as will
enable them to execute these duties and to make recommendations to the Board and Council of
IFAC;
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•
compare and contrast the investigative and disciplinary processes of member bodies and their
adequacy and efficacy, to report on these and make recommendations to the Board and Council
of IFAC;
•
consider how member bodies might best be encouraged, or if necessary, required to comply more
closely with such obligations and, thus, to assist in the achievement of the objectives of IFAC in
the public interest;
•
devise schemes that would assist member bodies to comply more closely and to consider whether
additional powers are required to enforce compliance with membership obligations.
Participation by IFAC-Sponsored Group of Audit Firms
The recommendations here seem to have more to do with regulators’ desires to track firms’ activities
than with audit effectiveness directly. If firms are not already required to provide such information to
regulators or competition authorities then there is no justification for making its provision a condition
of membership of the new regulatory structure.
Monitoring of the Global Auditing Profession
IFAC believes this recommendation should be addressed to national accountancy bodies and
government agencies and commissions. Only they would be able to provide the information that
would allow such monitoring.
Reporting to the Public
It is intended that the Public Oversight Board publish an annual report. It will be up to the Public
Oversight Board to determine what matters it considers relevant and appropriate to include in its
annual report.
The supply of non-audit services to audit clients
The Panel’s report sets out reasons both supporting and opposing an exclusionary ban on non-audit
services. IFAC’s Ethics Committee has considered this issue exhaustively during the development of its
Exposure Draft, which is currently under public scrutiny. Based on its work to date, the Committee
believes that the provision of other services is acceptable provided there is in place a framework
requiring the auditor to assess the risks to independence of the service and take appropriate steps to
mitigate those risks. The relevant paragraphs of the current ED (which should be read in the context of
the whole document) provide discussion around examples of situations which may be so pervasive as
to prevent the auditor maintaining independence and others where safeguards can be employed to
mitigate the risk.
Provision of other services to assurance clients
8.108 The provision of other services to an assurance client benefits both the client and financial statement
users. Because it increases the reporting accountant’s understanding of the client’s business, it can result in a
better assurance engagement. The provision of other services may, however, create risks to the reporting
accountant’s independence. New developments in business, the evolution of financial markets, rapid changes
in information technology, and the consequences for management and control, make it impossible to draw up
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a comprehensive list of all situations where providing other services to an assurance client might impair
independence and of the different safeguards that might mitigate those risks. A reporting accountant may,
therefore, provide services beyond the assurance engagement as long as there are sufficient safeguards to
preserve independence.
Preparing accounting records and financial statements
8.109 Preparing an assurance client’s prime records or financial statements presents a self-review risk to
independence when the financial statements are subsequently the subject of an assurance engagement.
8.110 A reporting accountant can have a spectrum of involvement in the preparation of a client’s accounting
records or financial statements. At one end of the spectrum, a reporting accountant may prepare prime
accounting records, do the bookkeeping and prepare the financial statements as well as report on them. Or a
reporting accountant might help the client prepare the financial statements by calculating the trial balance or
assisting in the calculation of the closing entries (accruals, bad debts, depreciation, etc.). At the other end of
the spectrum, a reporting accountant would not participate in any part of the preparation process. Even in that
case, a reporting accountant who detects omissions in an assurance client’s proposed disclosures will normally
suggest and draft any amendments required. This is part of the assurance engagement mandate and should not
be considered as the provision of another service. While management is always responsible for the
presentation of the financial statements, only rarely will the reporting accountant have had no hand whatsoever
in their presentation or drafting.
8.111 Reporting accountants are often asked to prepare accounting records or financial statements,
particularly by entities not large enough to employ internal accounting staff. It is the responsibility of
management to ensure that accounting records are kept and financial statements are prepared, although they
may hire a reporting accountant to help discharge that responsibility. Where a reporting accountant providing
such assistance has made management decisions, the risk to independence cannot be resolved by any
safeguards other than the refusal to perform the assurance engagement.
8.112 Some countries do not prohibit the provision of such services by legislation or local professional
requirements. Instead, the safeguards reside in having the reporting accountant carefully analyze the work done
in the preparation of records and statements and then considering what separate safeguarding procedures are
required. The reporting accountant should always remain extremely cautious in such situations and document
clearly the position adopted. All the other safeguards as described earlier should be considered.
Valuing assets or liabilities
8.113 If a reporting accountant has valued matters material to an assurance engagement and the valuation
involves a significant degree of subjectivity related to the subject of that engagement, there is a risk to
independence requiring appropriate safeguards.
If client management does not accept full responsibility for the valuation, the risk to independence cannot be
resolved by any safeguard other than the refusal to perform the assurance engagement.
Acting for the client in the resolution of a dispute or litigation
8.114 In certain circumstances, professional accountants assist their assurance clients in the resolution of a
dispute or litigation.
8.115 When choosing to act for an assurance client in the resolution of a dispute or litigation, a reporting
accountant should – as in the case of expert services – give particular attention to:
(a)
the materiality of the amounts involved in the litigation in relation to financial statements; and
(b)
the degree of subjectivity inherent to the case concerned.
Where the amounts involved are material in relation to the financial statements, or the degree of subjectivity
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inherent in the case concerned is too high, the reporting accountant should refrain from acting for the client in
the resolution of the dispute or litigation.
8.116 A reporting accountant who decides to accept an engagement to act for a client in the resolution of a
dispute or litigation, should determine what safeguards should be adopted to address the risk involved. The
reporting accountant should consider the existing safeguards within the practice in relation to the engagement
team and take any steps necessary to preserve its independence. Such steps may include the use of different
partners and separate teams, each having separate reporting lines, and additional review procedures sufficient to
ensure that independence is preserved.
Recruiting senior management for the client
8.117 The recruitment of senior management, such as key financial and administrative staff, for an
assurance client may give rise to both self-interest risks and client influence risks. It is acceptable for a
reporting accountant to advertise for and interview prospective staff and to produce a list of potential
candidates. But, in every case, the decision as to whom to hire should be left to the client.
Promotion of shares
8.118 Dealing in, or the active promotion of, shares or other securities of an assurance client poses a risk to
independence that cannot be resolved by any safeguards other than the refusal to perform the assurance
engagement.
The Ethics Committee will, of course, consider the points raised in the report, together with the
comments its receives on the exposure draft before issuing the independence rules in their final form.
Elsewhere in this letter we discuss the issues affecting the IAPC and express our view that standards
should guide the application of professional judgement rather than supplant it by hard and fast rules.
We urge the Panel to adopt a similar view as it formulates its position on this issue.
International Auditing Practices Committee
General Comments
From an international perspective, the Report is disappointing in the sense that it fails to address in a
meaningful way the importance and significance of international auditing standard-setting. With the
exception of Chapter 7, the Report’s recommendations are based on US experience and narrowly
directed to the US standard-setting bodies, regulators, and other parties. This is understandable, in that
the Panel was set up to consider the effectiveness of the audits of companies listed on US stock
exchanges, but is unfortunate because the reality of the global economy is that the profession needs to
support, and strive for, global solutions. The Report may serve to divert attention away from
strategies to promote the global harmonization of auditing standards. The Panel’s views on the
appropriate role of a national standard-setting body in a global business environment would be
welcomed.
In many cases, the research findings do not appear to support the nature and extent of the
recommendations. By its own admission, the findings of the quasi-peer reviews supported the view
that audits are effective. In most cases, the number of problems identified were few, and certainly well
within the “reasonable assurance” audits are designed to provide. The Panel itself accepts that level as
a “sufficiently high standard of responsibility for auditors to protect the public interest”. The Panel’s
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other research in addition to the quasi-peer reviews may have provided the support for some of the
recommendations, but, if so, the Panel’s reasons for making a number of the recommendations are not
well articulated. Implementing the Panel’s recommendations will not be without cost and the Panel
needs to be convinced that its recommendations do respond to a valid public interest need and that the
solutions are practical and cost-effective. We are not convinced that those criteria have been met in all
cases.
The recommendations favor detailed standards and rules as a solution to perceived problems. When
standards become too detailed and specific there is a risk of the opposite result; rather than improve
performance, auditors may focus on applying the “rules” rather than use judgment to achieve the
desired objective. More definitive and specific auditing standards may have limited effect in improving
performance, and perhaps even have the opposite effect, because so much of performance is
contingent on attracting people with the appropriate mix of analytical and soft skills to the profession,
and developing the appropriate attitudes and culture within both the firms and the profession. There
may well be a need to improve auditing standards in certain areas, but it is important that the
standards serve to guide the application of appropriate judgement rather than supplant judgement
with detailed procedures that may not be warranted in the circumstances.
The IAPC has been considering whether its standards continue to reflect best practice and provide
sufficient guidance to auditors. It has set up a project to consider the current audit risk model and the
way it is applied in practice. In doing so it will be considering the Panel’s findings. It will also be
considering similar research carried out by various national standard setting bodies.
The Report recommends a number of areas where standards should require more definitive and
detailed procedures to support the audit of annual financial statements. Is the Panel convinced that
this is the best use of the auditing standard-setters’ resources? The capital markets increasingly look
to and use many other sources of more timely information than the financial, or even the interim,
financial statements. That is not to say that the confirmatory role of the audited annual financial
statements is not vital to the effective functioning of capital markets, but the relevance of the
assurance function may be better served by devoting resources to issues related to how the profession
can provide assurance on continuous reporting, focussing more on the reliability of underlying
systems and processes than on periodic financial reports. Yet, if the auditing standard-setters respond
to all of the recommendations in the Report, their resources will be virtually fully occupied for many
years. At a minimum, it would be useful for the Panel to assign priority to the many recommendations
contained in the Report.
Rôle of Management and Those Charged with Governance
We were disappointed that the Report fails to recognize in a meaningful way the importance of
management and those charged with governance (including audit committees and boards of directors) in
ensuring the credibility of the financial reporting process. While recognizing that there have been other
recent studies and reports addressed to other players, such as the Blue Ribbon Committee on Audit
Committees, the Report is drafted in a manner that places sole responsibility on the auditor. The
financial reporting process works, and investors are protected, only when all parties
involved—auditors, management, governing bodies, regulators, analysts, and others—fulfill their
responsibilities. Acknowledgement of the key roles other parties play would provide balance to the
overall Report.
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Going Concern
We were quite disappointed that the Panel’s recommendations on going concern did not recommend
that US auditing standards move beyond their existing approach with respect to going concern and
adopt the principles in the new ISA on going concern. The ISA is supported internationally, and,
arguably, is a much stronger and more proactive standard. The US standard does not require auditors to
design procedures to identify potential going concern problems, but instead merely require auditors to
consider evidence that they have obtained from other procedures. Only if that evidence indicates
potential going concern problems are auditors required to carry out procedures specifically addressed
to the appropriateness of the going concern assumption. The Panel’s recommendations do not
challenge that. Rather, the Panel asks only for more guidance on the types of procedures that might be
performed when considering management’s plans for mitigating the adverse effects of conditions and
events that raised the auditor’s substantial doubt.
By contrast, the new ISA requires auditors specifically to consider the appropriateness of the going
concern assumption and to perform procedures to identify potential going concern problems even
where evidence from other procedures has not indicated any such problems. It is not clear why the
Panel accepted a weaker position with respect to the auditor’s responsibility with respect to going
concern, particularly in view of the fact that there is now a generally accepted international standard
that directly challenges that passive stance. A more proactive approach is also entirely consistent with
the firms’ new methodologies that encourage the auditor to look forward and think about business
risks that might affect the entity’s ability to meet its objectives beyond the current financial reporting
period.
Forensic Audit Phase
We are particularly concerned with the recommendations for a “forensic phase” in each audit,
discussed in Chapter 3, for the following reasons:
•
The reasons for recommending such a radical solution are not well articulated in the report. The
Panel accepts the premise that reasonable, not absolute assurance, is an appropriate benchmark
to protect the public interest and that the profession is adequately meeting that benchmark. Yet
the recommendations in Chapter 3 would undoubtedly “raise the bar”, at least in the eyes of the
public. Furthermore the report endorses the current risk based approach as increasing audit
quality. This approach focuses on an assessment of the risks or a misstatement (whether due to
fraud or other reasons) occurring, and assessment of the controls in place to prevent or detect and
correct these happenings. The “forensic” procedures are designed to test for fraud independently
of any assessment of the risks or the controls.
•
There is a very real possibility that the introduction of a “forensic” phase to the financial
statement audit may serve to increase the expectation gap regarding the auditor’s ability to detect
fraud, in particular, management fraud. While recognizing that it is always difficult to measure
such things, the cost of adding these procedures to each and every audit may exceed the benefit of
the added assurance that can be provided, yet most users would likely expect a much higher level
of assurance (perhaps even bordering on “absolute assurance”) regarding fraud detection because
they are paying more (at least in theory) for the added work effort.
•
The recommendations in Chapter 3 appear disconnected from recommendations in Chapter 2 that
address similar issues arising from “earnings management”. Chapter 2 contains a series of
recommendations on, for example, auditing revenues and auditing estimates and judgments. If
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these recommendations were implemented, there may not continue to be a need for the “forensic”
phase discussed in Chapter 3.
•
The use of the word “forensic” suggests procedures designed to gather evidence for a case to be
heard by the courts. Forensic accountants called in to investigate an entity have the advantage of
knowing that a fraud has occurred. They know that if they continue probing long enough they
will be able to come across evidence of the fraud. Auditors, by contrast, do not know whether a
fraud has occurred; they could probe forever and still not find any evidence of a fraud, simply
because there has been no fraud. This means that auditors would have to cease carrying out
“forensic type” work at some point, despite not having found evidence of fraud. Furthermore,
forensic accountants often have some initial indication of the areas where fraud has occurred and
so can, initially at least, limit their procedures to those areas. Auditors would have to assume that
fraud is likely to occur in each and every area, and conduct their tests accordingly.
•
Unlike the auditor who neither assumes that management is honest nor dishonest but is entitled
to accept documents as genuine, the forensic auditor generally assumes the role of an
“investigator” and challenges all information he comes across by systematically checking all such
information. Unless there are a number of specific, clearly defined procedures that should be done
in every audit (i.e., “lift the hood and kick the tires” type procedures), it is unclear how standards
could be written in a way to provide appropriate parameters to the decision process needed to
determine the nature and extent of “forensic” procedures that would be appropriate in a
particular circumstance (e.g. how would the concept of materiality apply to this forensic phase?).
Forensic fraud specialists typically undergo specialist training to identify and conduct the
appropriate specialist procedures. It is not clear that the majority of auditors have undergone
similar training.
•
There is no recognition of the responsibility of those charged with governance to exercise
oversight of management in respect of the possibility of management fraud, or the responsibility
of management to design, implement and monitor procedures to minimize the risk of fraud. The
addition of a “forensic phase” shifts the focus on to the auditor. We would prefer that there is
consideration given to public reporting by those charged with governance and by management of
their assessment of the internal control environment and the adequacy of fraud prevention
controls. If desirable, the auditor could be asked to report on this report.
•
The recommendations for a new “forensic phase” to the audit come at a time when the efficacy of
the introduction of SAS 82 is just being assessed and, therefore, may be premature. It is not clear
from the Report whether the Panel has obtained evidence that supports the view that SAS 82 is
not effective, has not met its objectives, or is not being appropriately applied in practice.
Obviously the Panel has its own view. However, we are aware that research was commissioned
by the AICPA on the effects of SAS 82 but do not believe that the results have yet been made
public. It would be unfortunate if those research findings contradicted the Panel’s view. We hope
that the results of the academic research will be available before the Panel finalizes its report.
•
The IAPC has an exposure draft out for comment that effectively incorporates the principles found
in SAS 82 into international standards. We believe that the approach adopted in that exposure
draft addresses adequately the problems that fraud creates for auditors of financial statements.
Any findings of the Panel on the effectiveness of SAS 82 would be most welcomed.
Paragraph 2·44 recommends that auditors should perform tests to support assessing inherent risk
below maximum. It is unclear what “tests” auditors could perform. Undoubtedly, the auditors’ work
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to obtain knowledge of the entity’s business and control environment, including an assessment of the
entity’s business risks, are important evidence to justify auditors’ inherent risk assessments, but it is
unclear what “tests” can be performed. The issue may be more one of documentation than “testing”.
The Report does make many interesting observations with regard to the conduct of audits, and the
IAPC will be considering them in setting out its future agenda. Some of the items that the Report has
identified have already found a place on the agenda, and others are likely to be examined as part of the
examination of the current audit risk model referred to above.
IAPC’s Membership and Proceedings
The current process for identifying members for all our Committees requires our Nominating
Committee to solicit names of prospective members from our member body constituents. The
Nominating Committee reviews CVs of all potential candidates and recommends names to the IFAC
Board for approval. Maximum terms of service for all Committee members are set out in the IFAC
Constitution and limit participation to two consecutive terms, unless the member is then invited to
Chair the Committee. We believe that this process adequately ensures that membership appointments
represent an international perspective of highly competent people from a variety of countries, which
brings a true international perspective to the debates of the Committees. (It is interesting to note that
of the 14 members of IAPC who have served for the last three years, 11 have served, or are currently
serving, on their national auditing standards boards, and of those, 4 have served as chairs of their
national boards.)
The agenda of IAPC is set by the Committee after consultation with a number of outside parties,
including the national standard setting bodies and staff of committee members and the IAPC’s own
Consultative Advisory Group (CAG). C AG includes representatives from the World Bank, the Basel
Committee on Banking Supervision, the UNCTAD, IOSCO, and the Federal Reserve Board. While we will
encourage the Public Oversight Board to review and comment on the IAPC agenda, we believe that
determination of its agenda is best left in the hands of the IAPC.
We have noted the Panel’s recommendation that IAPC deliberations be open to the public; indeed, the
IASC has set a precedent in this area. The IAPC has already debated this issue and will no doubt revisit it
at a future meeting. The logistics of offering open meetings needs to be balanced with the benefits that
IAPC, and other IFAC committees, have found from meeting in various parts of the world. We fully
accept that open meetings would certainly give an appearance of greater openness and responsiveness,
and would allow outsiders to attend should they wish to do so. They may also help in avoiding the
perception that the IAPC is a body that works only to benefit accounting firms or the accountancy
profession in general. The IAPC’s operations already have a great deal of openness with the existence of
the CAG and the bodies that already have observer status. Nonetheless, the IAPC is considering options
such as opening its meetings, using the internet to broadcast proceedings, making agenda papers
available, etc. but, the desire for further openness cannot come at the expense of using the committee’s
time most efficiently and effectively.
Panel’s recommendations also suggest that the basis for actions and dissenting views be disclosed. The
basis for action is currently reported elsewhere in IAPC news. Once a standard has been approved for
release by at least a 75% majority of the voting members we do not accept that detailing the arguments
for a dissenting view or views adds weight to the final decision. The issues being debated are usually
contentious and often result in minority views, especially when international experiences and
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perspectives are added to the equation. Publishing only the dissenting views, without publishing
statements by those accepting a standard indicating why they found the arguments in favor persuasive
risks giving a biased view of the debate and undue weight to a minority position, especially as a
supermajority is needed to pass a standard. When the IAPC publishes a new ISA or IAPS it also
publishes its reasons for issuing the document and the changes to any previous material on the subject.
The comments it has received on the exposure draft are also a matter of public record. More recently,
with the publication of its standard on assurance engagements, the IAPC published an explanatory
memorandum setting out the arguments on the major issue that arose from its work on that project.
The IAPC will continue to publish its reasons for issuing documents in their final form, and will seek to
ensure that the reasons include sufficient information and discussion for those who want a fuller
understanding of its deliberations.
We hope that these comments are helpful and will assist the panel in its deliberations. Should the
panel wish to discuss any of the matters raised in this letter, please do not hesitate to contact either
the IFAC chief executive, Peter Johnston, or me.
Sincerely yours,
Tsuguoki Fujinuma
President—International Federation of Accountants.
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