ROSC 2015
Report On Observance Of Standards
And Codes
Accounting & Auditing
Bank-Fund Joint Initiative on Standards & Codes
Twelve Standards and Codes – financial stability
Macroeconomic policy and data transparency
1. Data Transparency
2. Fiscal Transparency
3. Monetary and Financial Policy Transparency
Financial Sector Regulation & Supervision
4. Banking Supervision
5. Securities Regulation
6. Insurance Supervision
7. Payments Systems
8. Anti-money laundering
Market Integrity – institutional and market infrastructure
9. Accounting
10. Auditing
11. Corporate Governance
12. Insolvency and Creditor Rights
2
2
Figure 1.1. GDP Growth and FDI Inflows
Country Context
• End of civil conflict
• Middle Income Country status
• SL ranked highest in South Asia
for ease of doing business
• Development of the BPO sector
Figure 1.2, Capital Market Development
Relevance to WB Country Partnership
Strategy
Facilitating sustained private and public investment

supporting structural shifts in the economy

improving living standards and social inclusion

improve resilience to climate and disaster risks
Approach
Statutory
Framework
Education &
Training
Accountancy
Profession &
Ethics
Accounting
Standards
Auditing
Standards
Monitoring,
Enforcement
& Oversight
Areas of Focus in ROSC A&A
Institutional
Framework
underpinning
Corporate Reporting
• Laws and regulations for SBEs/SOEs/SMEs,
• SMO for PAOs,
• Codes,
• Standard setting processes,
• Monitoring mechanisms,
• Accounting education
Comparison of
Accounting &
Auditing Standards
• Benchmarking with IFRS and ISA
Actual Reporting &
Auditing Practices
• Independent review of a sample covering listed companies,
SOEs and other SBEs including Banks and insurance cos,
• Review regulators processes and results
Stakeholder needs
and perceptions on
quality of corporate
reporting
• Capital market development
• Access to finance for SMEs
• Oversight of SOEs that are SBEs
6
Stakeholder Consultations
• CASL – main partner
• PFM Steering Committee
• Preparers of financial
statements
• SME and Financial Institutions
• All PAOs
• Auditor roundtables (large and
SMPs separately)
• All regulators (separate
meetings), Registrar of
Companies, Dept of Inland
Revenue
• Auditor General
• DG MOF (SOE)
• Chamber of Commerce
• Statutory Auditing Standards
Committee & Accounting
Standards Committee
• Learning providers
• Ministry of Finance
• DG’s and staff of State
Accounts, Public Finance,
Public Enterprises
7
SLAASMB
Sri Lanka Accounting & Auditing Act
No.15 of 1995
Accounting Standards Committee
Auditing Standards Committee
Companies Act No.7 of 2007
Registrar of Companies
Securities & Exchange Commission
Securities & Exchange Commission Act
Colombo Stock Exchange
Institutional
Framework
Banking Act No.30 of 1988
CBSL Dept of Banking Supervision
Finance Business Act
CBSL Dept of Non Banking Supervision
Regulation of Insurance Industry Act
Insurance Board of Sri Lanka
Inland Revenue Act
Department of Inland Revenue
Ministry of Finance
Constitution & Public Finance Act
Auditor General
8
Finance
Business Act
No 42 of 2012
ROSC
2014
RII Act No,3 of
2011
Convergence to
IFRS 2012
Amendments
to Banking Act
and issue of
directions
Companies Act No
7 of 2007 replaces
CA 15 of 1982
ROSC
2004
9
Global
IASB
(Financial
Reporting
Standard Setter)
Sri Lanka
SLAASMB
CBSL
(Bank and NBFI)
IFAC
(Auditing, Ethics,
Education, Public
Sector Standard
Setter and apex
body for PAOs)
Profession
SEC & CSE
CASL
Registrar of
Companies
Standard
Setter for
A&A
Other Local
Bodies
Accounting
Bodies
AATSL / ICMA
CIMA/ ACCA
State &
Foreign
Universities
IBSL
10
Entities
291
Companies
listed on
CSE
3938
Public
companies
2
unlimited
companies
22
Insurance
Companies
1591
Associations
10 Leasing
Companies
64,423
Registered
Companies
9
Foreign
Entities
48 Finance
Companies
348
Limited by
Guarantee
232
Foreign
Entities
1313
SBEs
24
Commercial
Banks
9 Licensed
Specialised
Banks
Achievements and Challenges
• Achievements
• Contributes to the growth of a
knowledge hub
• Professional Education aligned with
international education standards
Profession
• Challenges
• Growth of profession is mainly
Colombo centric
• Qualification framework is not in
place
• Standard setting process needs to
recognise new professional bodies
12
Achievements and Challenges
• Achievements
• Adoption of international
reporting standards
• Introduction of simplified
standards
Reporting
• Challenges
• Requirement of new skills
• No legal backing for the
simplification agenda
• Dual Reporting – CBSL & Inland
Revenue
• Low capacity SMEs
Achievements and Challenges
• Achievements
Auditing
• Compliance with international
auditing standards
• Introduction of audit quality
assurance
• Challenges
• Registered Auditors
• Low capacity of SMP
Achievements and Challenges
• Achievements
Regulators
• All regulators have increased
capacity and enhanced their
methodologies.
• Challenges
• Continuous improvements to meet
changing needs as goal posts shift
15
Policy Recommendations
Statutory Framework
• Companies Act
• Differential reporting
• Require sufficient information on annual
return
• Information to the Registrar of
companies
• Auditor Categories
• ICASL Incorporation Act
• Registration of practicing audit firms
Local PAOs
• Code of Conduct and disciplinary
procedures of members
Policy Recommendations
Auditing Profession
• Develop policy for re-admitting auditors who
have been out of practice for more than 3
years
• Voluntary merger program for sole
practitioners
Education & Training
• Expand National Quality Framework to
include all PAOs
• Implement structured framework for
monitoring learning providers and employers
• Monitor CPD and sanction non-compliance
• Reduce disparity in service between Western
Province and other provinces
Policy Recommendations
Accounting & Auditing Standards
• Revisit representation of professional accounting
organisations in standard-setting
• Increase influence at international standards setting level
• Increase support for preparers of financial statements
• Customised training for key stakeholder groups
• SMEs, SMPs, CASL, chambers of commerce and providers of
capital must work together to facilitate access to capital
Monitoring, Compliance & Enforcement
• Enhance methodologies, capacity and information sharing
processes
• Enhance SLAASMB reviews to adopt more risk based
methods
• Implement a mandatory audit quality assurance review
process for audit firms to fully implement SLSQC 1
Thank You