Recognizing the need for reliable information in domestic and cross-border securities offerings and other fundraising activities, the International Auditing and Assurance Standards Board (IAASB) today released new International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus.

Companies seeking to access capital markets commonly include pro forma financial information in their prospectuses as a key element to enable investors and others to better assess the investment opportunities presented. Pro forma financial information included in an issuer’s prospectus illustrates the impact of a proposed acquisition, equity or debt issuance, or other transactions on the issuer’s historical financial information as if such event or transaction had occurred at an earlier selected date.

“Pro forma financial information included in prospectuses plays an important role in informing the public’s investment decisions in today’s increasingly global capital markets. Enhancing public confidence in how such financial information has been produced is therefore especially important,” said Prof. Arnold Schilder, Chairman of the IAASB. “The IAASB is confident that this new standard will help meet the public interest need for harmonized practices internationally in this area,” Prof. Schilder added.

The new ISAE 3420 provides comprehensive guidance on the nature and extent of a practitioner’s work when engaged to report on the compilation of pro forma financial information. Among other matters, it establishes minimum benchmarks for suitable criteria for the compilation of such information. It also covers related engagement acceptance and reporting considerations. ISAE 3420 is effective for assurance reports dated on or after March 31, 2013.

About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

#              #              #

The International Ethics Standards Board for Accountants (IESBA) is proposing changes to its Code of Ethics for Professional Accountants (the IESBA Code) to provide additional guidance to professional accountants in business and in public practice concerning conflicts of interest, and to make revisions to provide more comprehensive guidance in identifying, evaluating, and managing conflicts of interest.

The IESBA approved this project in October 2009.  It examined two sections of the IESBA Code that address conflicts—Section 220, for professional accountants in public practice, and Section 310, for professional accountants in business. In the IESBA’s view, the approach to be taken by a professional accountant in public practice and a professional accountant in business should be broadly similar.  The proposal recognizes, however, that conflicts of interest will typically arise in different circumstances for accountants in public practice, particularly because a conflict of interest may arise from professional services provided by other members of the accountant's firm.

Ken Dakdduk, IESBA Chair, notes, “The proposed changes will provide more specific requirements and guidance for a professional accountant in applying the conceptual framework when identifying, evaluating, and managing conflicts of interest. This includes a clearer description of what is meant under the IESBA Code by the term ‘conflict of interest.’ The changes should assist professional accountants in early identification of a potential conflict of interest, and prompt accountants to evaluate their ability to be objective in that situation and meet the other fundamental principles in the IESBA Code.  From the perspective of the public, timely identification of potential conflicts of interest can provide affected parties with more time to engage an alternative service provider.”

The proposed guidance also calls for professional accountants in business to be alert to interests and relationships that a reasonable and informed third party would be likely to conclude might compromise compliance with the fundamental principles. Further, the IESBA proposal would strengthen the guidance on threats created by compensation and incentive arrangements.

How to comment
The IESBA invites all stakeholders to comment on its proposals. To access the exposure draft and submit a comment, visit the IESBA website at www.ethicsboard.org. Comments on the exposure draft Proposed Changes to the Code of Ethics for Professional Accountants Addressing Conflicts of Interest are requested by March 31, 2012.

About the IESBA
The International Ethics Standards Board for Accountants (IESBA) is an independent standard-setting board that develops and issues, in the public interest, high-quality ethical standards and other pronouncements for professional accountants worldwide. Through its activities, the IESBA develops the Code of Ethics for Professional Accountants, which establishes ethical requirements for professional accountants. The structures and processes that support the operations of the IESBA are facilitated by IFAC. Please visit www.ethicsboard.org for more information.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

The International Auditing and Assurance Standards Board (IAASB) today released International Auditing Practice Note (IAPN) 1000, Special Considerations in Auditing Financial Instruments, to provide important practical assistance to auditors when addressing valuation and other considerations pertaining to financial instruments. Financial instruments is an area of financial reporting involving complex issues and which has come under particular focus due to the recent difficult financial market conditions.

“The IAASB remains focused on supporting financial stability and high-quality financial reporting by continuing to help enhance the consistency of audits.  Accordingly, IAPN 1000 provides important material that will assist auditors in understanding the nature of, and risks associated with, financial instruments, and the different valuation techniques and types of controls that may be used by entities in relation to them. It then highlights important audit considerations that may be relevant throughout the audit process,” noted Prof. Arnold Schilder, IAASB Chairman. “The IAPN is relevant to audits of entities of all sizes, as all entities may be subject to risks of material misstatement when using financial instruments.”

IAPNs are non-authoritative documents that do not impose additional requirements on auditors beyond those included in the International Standards on Auditing (ISAs), nor do they change the auditor’s responsibility to comply with all ISAs relevant to the audit. In finalizing IAPN 1000, and in response to stakeholder concerns, the IAASB evaluated the clarity and appropriateness of the authority of the existing International Auditing Practice Statements (IAPSs). The IAASB decided to withdraw the existing category of pronouncements known as IAPSs and to establish IAPNs, as reflected in the amended Preface to the International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements. Accordingly, the six existing IAPSs were also withdrawn as the IAASB determined that they were largely outdated and inconsistent with the text of the clarified ISAs. “The IAASB will be considering in its forward plans matters covered in some of the extant IAPSs, for example the relationship between auditors and banking supervisors, as it develops standards, new IAPNs, or other forms of guidance in the future,” commented Prof. Schilder.

“The IAASB understands that the quality and consistency of audit practice is helped not only through new standards but by other tools that can be used in developing training programs, internal guidance or corresponding national material. New IAPN 1000 helps serve this aim,” explained James Gunn, IAASB Technical Director. “In developing this practical guidance, the IAASB itself gained a deeper understanding of the challenges in this complex area, which will be used to further inform its future work.”

About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

#          #          #

The Small and Medium Practices (SMP) Committee of the International Federation of Accountants (IFAC) today released the second edition of its Guide to Practice Management for Small- and Medium-Sized Practices (PM Guide). First released in 2010 and developed with CPA Australia, the new edition of the guide features guidance on several new topics, including cloud computing and updated resources for further reading.

“As trusted advisors and small businesses themselves, small practitioners need to be well-versed in all areas of operating a practice. The PM Guide can help SMPs achieve proficiency in a variety of areas to ensure their sustainable, long-term success,” said SMP Committee Chair Sylvie Voghel. “Only by properly managing their practices can SMPs successfully compete in today’s market for professional services.”

To help practitioners improve the management of their accounting practices, this guide includes an extended case study, a sample office procedures manual, and numerous checklists and other worksheets. The comprehensive guide is comprised of eight standalone modules that include developing a growth strategy, managing staff and client relationships, risk management, succession planning, and more. It is intended to help IFAC members support their SMP constituents, and can be used for education and training. An updated companion guide to help members make the best use of the PM guide will be released in early 2012.     

IFAC is grateful to its member bodies Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili and Certified General Accountants Association of Canada for providing some of the funding for the PM Guide’s development.

The updated PM Guide can be downloaded free of charge from the SMP Publications and Resources area of the IFAC website. Filter by language to find translations of the first edition. Visit the Small and Medium Practices web pages for access to additional resources, aligned with the topics in each module of the PM guide (see Relevant Links—Practice Management).

About the SMP Committee
The SMP Committee of the International Federation of Accountants represents the interests of professional accountants operating in small- and medium-sized practices and other professional accountants who provide services to small- and medium-sized entities (SMEs). The committee develops guidance and tools, and works to ensure the needs of the SMP and SME sectors are considered by standard setters, regulators, and policy makers. The committee also speaks out on behalf of SMPs to raise awareness of their role and value, especially in supporting SMEs, and the importance of the small business sector overall.

About IFAC     
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

#   #   #

It is my pleasure to be here today at this important initiative of ESMA. It brings together international and European leaders responsible for standard setting, supervision and enforcement for today’s capital markets.

The International Auditing and Assurance Standards Board (IAASB) is a global independent standard-setting body. It serves the public interest by setting high-quality standards for auditing, review, other assurance, quality control, and related services. Through its standards, the IAASB seeks to enhance the quality and consistency of practice throughout the world and strengthen public confidence in the auditing and assurance profession at the global and local levels.

I was appointed IAASB Chairman in 2009, when work to establish the clarified International Standards on Auditing (clarified ISAs) was just completed. Many had thought the IAASB program would be much more subdued than it had been. Of course, that has not been the case.

The PAIB Committee submitted its Comment Letter for the International Integrated Reporting Council (IIRC)’s Discussion Paper, Towards Integrated Reporting: Communicating Value in the 21^st Century. The PAIB Comment Letter provides the perspective of a preparer of internal and external business reporting. Among other recommendations, it highlights the need for how-to guidance for preparers to help them develop or redesign their internal processes to ensure readiness, and suggests that materiality needs to be defined in relation to investors and wider stakeholders.