Unknown Unknown Nomor - Tahun 2013 tentang the work of IFIAR. Governance MEETINGS AND WORKSHOPS In 2013, IFIAR moved to one annual Plenary Meeting and one Interim Meeting. All Members were invited to attend IFIAR's annual Plenary Meeting which was held in Noordwijk, the Netherlands, in April 2013. IFIAR's first Interim Meeting was held in Paris, France, in late October and was attended by the Officers, Advisory Council and the Chairs of the Working Groups. OFFICE BEARERS In April 2013, Lewis Ferguson, Board Member of the United States Public Company Accounting Oversight Board (PCAOB) was elected Chair of IFIAR and Janine van Diggelen, Head of Audit &amp; Reporting Quality Division, Netherlands Authority for the Financial Markets (AFM) was elected as Vice-Chair. Lew Ferguson succeeded Paul George, Executive Director of Conduct at the UK FRC, as IFIAR Chair. Lew Ferguson had previously served as Vice-Chair of the organization until April 2013. Both the Chair and Vice-Chair were elected to serve two year terms which will expire at the conclusion of the 2015 IFIAR Plenary Meeting. The Officers are assisted and advised by a seven member Advisory Council. During the 2013 IFIAR Plenary Meeting, IFIAR Members from Germany (AOC), Japan (FSA/CPAAOB) and Spain (ICAC) concluded their terms as Advisory Council Members. The Netherlands (AFM) also rotated off the Advisory Council as Officers and Members of the Advisory Council are prohibited from being from the same jurisdictions. As of April 2013, the current Advisory Council Members are Abu Dhabi (ADAA), Australia (ASIC), Canada (CPAB), France (H3C), Singapore (ACRA), Sri Lanka (SLAASMB) and the United Kingdom (FRC). WORKING GROUPS IFIAR currently has the 6 following Working Groups: Enforcement Working Group - Chair: Takashi Nagaoka, FSA, Japan - Vice Chair: Claudius Modesti, PCAOB, USA - Responsible for providing a forum for the Members' enforcement officials to exchange information on effective approaches for investigating and adjudicating alleged auditor misconduct, as well as emerging trends in such enforcement matters. Global Public Policy Committee (GPPC) Working Group - Chair: Brian Hunt, CPAB, Canada - Responsible for coordinating IFIAR's ongoing dialogue with the member firms of the GPPC, which comprise the six largest international audit networks (BDO, Deloitte Touche Tohmatsu, Ernst &amp; Young, Grant Thornton, KPMG and PricewaterhouseCoopers). Inspection Workshop Working Group - Chair: Tim Volkmann, APAK, Germany - Responsible for organizing the annual Inspection Workshop in coordination with an IFIAR Member serving as the Workshop host. International Cooperation Working Group - Chair: Doug Niven, ASIC, Australia - Responsible for considering the ways in which IFIAR Members can cooperate and share information relating to audit firm and audit engagement inspections and identifying areas where IFIAR Members can work more efficiently in collaboration. Investor Working Group - Chair: Steven Harris, PCAOB, US - Responsible for organizing IFIAR's dialogue with investor representatives. Standards Coordination Working Group - Chair: Bernard Agulhas, IRBA, South Africa - Responsible for establishing a forum for IFIAR Members to share views and concerns about pronouncements from the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA), with a view to helping members consider and incorporate concerns from other members in their submissions to the IAASB or IESBA. - The SCWG is also responsible for the preparation of IFIAR comment letters on these matters. Chair's Report Lew Ferguson IFIAR Chair In 2013, IFIAR has been focused on changes in the governance and operation of the organization that should enhance its ability to play a larger role in the quest to improve audit quality around the world. These changes began with a number of amendments to IFIAR's Charter and in its operations in order to streamline how the organization makes decisions and conducts its business. The organization continues to build on the activist tradition of its past leadership, especially of the previous Chair, Paul George, and to pursue new ways to increase cross border cooperation in audit oversight. I became Chair of IFIAR at the April 2013 Plenary Meeting, and Janine van Diggelen, became IFIAR's Vice-Chair. IFIAR is grateful to the Autoriteit Financiele Markten (AFM) for their generosity in hosting that event in Noordwijk, the Netherlands. The plenary meeting was attended by 141 regulators from 42 jurisdictions, as well as six observers, and a number of distinguished speakers, members of the profession and investor representatives. At that meeting, we also welcomed five new Members on the Advisory Council: the Australian Securities &amp; Investments Commission (ASIC, Australia), the Haut Conseil du commissariat aux comptes (H3C, France), the Accounting and Corporate Regulatory Authority (ACRA, Singapore), the Accounting and Auditing Standards Monitoring Board (SLAASMB, Sri Lanka), and the Financial Reporting Council (FRC, United Kingdom). They join existing Council Members the Canadian Public Accountability Board (CPAB, Canada) and the Abu Dhabi Accountability Authority (ADAA, Abu Dhabi). The Advisory Council, together with the Officers and IFIAR's Treasurer, Frank Schneider of Switzerland's Federal Audit Oversight Authority (FAOA), comprise the day-to-day management structure of IFIAR. The contributions of the Advisory Council Members and Frank to IFIAR's success have been invaluable. The significant achievements of IFIAR at the 2013 Plenary included: ratification of Charter changes primarily focused on enhancing IFIAR's ability to conduct meaningful work through revision of the organization's decision-making procedures; confirming that communications would be made pursuant to a written communications policy, and creation of an Enforcement Working Group. The Members also approved the 2013-2015 Officers' Work Plan. The Plan's highlights include the addition of several new topics on which the Officers hope to focus IFIAR's Members for discussions and thought leadership; a focus on outreach to new members and developing audit regulators; and enhanced interaction with various constituents and standard setters. In 2013, IFIAR relied heavily on its Working Groups and focused on enhancing the interaction with, and support for, the Working Groups. In March 2013, the Federal Audit Oversight Authority (FAOA) of Switzerland kindly hosted the annual IFIAR Inspection Workshop in Zurich, and welcomed 118 participants, representing 38 of IFIAR's then 44 Members. In October 2013, the Officers, Treasurer, Advisory Council and Working Group Chairs met at IFIAR's first Interim Meeting to engage in a high-level dialogue concerning the management of the organization. Approved by the Members at the Bangkok Plenary Meeting, the Interim Meeting is one of the many governance innovations implemented in 2013. IFIAR thanks the Haut Conseil du commissariat aux comptes (H3C) for hosting the first, very successful Interim Meeting as well as three in-person Working Group meetings immediately preceding the Interim Meeting. The Officers found that the Interim Meeting provided a forum for a meaningful discussion of issues important to IFIAR's management, and also served to enhance collaboration among the various Working Groups. Another innovation in the area of governance was the creation of a Work Plan for each Working Group and a dashboard for use by the Officers and the Advisory Council. The dashboard shows the status of work being done by the Working Groups; the interaction among the Working Groups; as well as the progress toward the accomplishment of the goals identified by the Working Groups. These tools will be supplemented by effectiveness reviews of the Working Group Chairs and the Officers. The 2013-15 Work Plan and governance changes made in 2013 were designed to encourage IFIAR to communicate more effectively with standard-setting bodies, international organizations and the general public. Taking advantage of a heightened focus in this area and a revised process for communication, IFIAR submitted it's first-ever comment letter in 2013, responding to IAASB's proposed and revised standard on auditor reporting. In addition, IFIAR continued and expanded its engagement with other international bodies with a shared interest in audit quality. The Standards Coordination Working Group participated in its first face-to-face meetings with representatives of the international standard setters: the IAASB and IESBA. In 2013, IFIAR conducted the second annual survey of its Members' inspection findings, building on the lessons learned in conducting the same survey in 2012. The results will be released in 2014. Based in part on these surveys, IFIAR intensified its dialogue with the Financial Stability Board (FSB) and its members in 2013 on IFIAR's efforts to encourage action by global audit firm networks to improve their audit performance. IFIAR's Officers attended four FSB meetings in 2013 on external audit relating to large financial institutions, and have committed to keeping the FSB apprised of IFIAR actions taken to improve audit quality, including continuing to brief the FSB on IFIAR's surveys of inspection findings. The Officers have also deepened IFIAR's dialogue with the International Organization of Securities Commissions (IOSCO), which takes an active interest in the integrity of audits of companies raising capital in the global markets. IFIAR maintained its active role as a member of the Monitoring Group, and participated in its meetings in 2013. Increased focus on regular and transparent communication with the general public was another important priority for IFIAR in 2013. A major highlight of the next plenary meeting will be the presentation, and anticipated approval, of a new communications policy to be followed by a press plan to implement this new policy. In addition, the Officers addressed several important audiences, developed a set of general purpose slides on IFIAR for use by Members who wish to speak publicly about the organization and its accomplishments and made substantial improvements to the website. The Officers' Work Plan and summaries of the Working Group Work Plans were made public for the first time on IFIAR's website to support enhanced transparency of IFIAR's activities. Immediately after the 2013 Plenary Meeting, an Outreach Team was created to facilitate IFIAR's efforts to interest and attract new members by establishing contacts with non-member regulators, providing them information about the benefits of IFIAR membership, and assisting them in their development as they aspire to set up their regulatory body in a way that qualifies for IFIAR membership. The Team is ably staffed by representatives from the AOC (Germany), the FRC (United Kingdom) and H3C (France). The Outreach Team furthered its efforts by meeting in person with a number of prospective members at the Public Company Accounting Oversight Board's International Institute in November 2013, and has been planning for a second in-person outreach event during the 2014 Inspection Workshop in Kuala Lumpur. IFIAR continued to move ahead expeditiously in the four areas of thought leadership outlined in the 2013-15 Work Plan: - an examination of whether the economic model of the auditing firm contributes to or detracts from audit quality; - drivers and measurable indicators of audit quality; - the future role of audit and role and function of the audit report; and - the role of audit committees and communication between regulators and audit committees. Work in the Investor and GPPC Working Groups was expanded to include discussion of the role of audit committees and how to facilitate and inspire communication between regulators and audit committees. A survey of the extent to which IFIAR Members have been sharing information was carried out by the International Cooperation Working Group. The results will be used to facilitate discussions initiated in that Working Group, as well as in the Enforcement Working Group, on a possible Multilateral Memorandum of Understanding on cooperation and the exchange of information between audit regulators. In 2013, the Officers began preparations for a survey that will review two of IFIAR's Core Principles, and that review will be conducted in 2014 to give the IFIAR Members and the public more knowledge about how riskbased inspections are conducted around the world and how findings are communicated to audit firms and remediated by them. The newly formed Enforcement Working Group carried out a Pilot Survey of enforcement regimes of the Members of the Working Group. It is expected that this pilot will develop into a full survey of the enforcement regimes of all IFIAR Members. At the midpoint of our two-year term as IFIAR Officers, Janine and I believe that the organization made important strides in 2013 and is poised to make ever greater contributions to the world of audit oversight in 2014. We have an ambitious agenda for the year ahead, but my experience with IFIAR gives me confidence that we will accomplish much. I look forward to working with you. IFIAR'S Activities in 2013 During 2013, IFIAR held one Plenary Meeting, an Interim Meeting and an Inspection Workshop. HIGHLIGHTS FROM THE IFIAR PLENARY MEETING Noordwijk, the Netherlands April 15-17, 2013 large auditing networks contribute to, or detract from, audit quality. The Work Plan also proposes the establishment of an Enforcement Working Group to facilitate cooperation and information sharing on enforcement issues. The Members elected Lewis Ferguson, Board Member of the US Public Company Accounting Oversight Board (PCAOB), as Chair and Janine van Diggelen, Head Audit &amp; Reporting Quality Division at the Netherlands AFM, as Vice-Chair for twoyear terms. Paul George, Executive Director of Conduct at the UK FRC, completed his term as IFIAR Chair and the Members expressed their appreciation of Paul's excellent leadership. Members from Australia, France, Singapore, Sri Lanka and United Kingdom were elected to the IFIAR Advisory Council. - IFIAR Members updated the IFIAR Charter to improve IFIAR's governance and operations. The Charter changes will facilitate decision-making, the expression of membership views and outreach efforts. - The Members agreed to the Officers' Work Plan for 2013 to 2015, which emphasizes increased public outreach through comments on proposed international auditing standards, interaction with other international organizations with an interest in audit matters, and increased contacts with the media. The Work Plan encourages IFIAR thought leadership in areas such as appropriate measures of audit quality, and how the governance structures and business models of - IFIAR Members heard from four prominent investor representatives. The Dutch Investors Association addressed recent auditor oversight developments in the Netherlands and the issue of going concern; the USS Investment Management Ltd. focused on auditor independence, audit quality and audit firm rotation; Hermes Equity Ownership Services discussed professional scepticism; and the founder and CEO of Monex Group Inc. addressed the readability of the audit report. - IFIAR discussed important auditrelated issues with the Global CEOs of the six largest international audit networks, such as how to measure progress in improving audit quality, achieve consistency of execution in audits and encourage an environment conducive to audit quality. - IFIAR Members shared their findings from recent audit inspections, agreed to conduct a second survey of Members' inspection findings and discussed recent developments in audit policy. - IFIAR Members heard from, and provided feedback to, the International Ethics Standards Board for Accountants (IESBA) on issues including IESBA's - governance, agenda and on-going projects. - IFIAR also welcomed the admission of audit regulators from Indonesia and Slovenia, bringing the total number of IFIAR Members to 46. HIGHLIGHTS FROM IFIAR's WORKING GROUPS Enforcement Working Group The Enforcement Working Group ('EWG') was launched in July 2013 in response to the IFIAR Members' agreement to promote stronger coordination in the area of investigations and enforcement of regulatory standards and laws, in order to enhance investor protection and improve audit quality. The group provides a forum for enforcement officials to exchange information on effective approaches for investigating and adjudicating alleged auditor misconduct, as well as emerging trends in such enforcement matters. Through monthly conference calls, the EWG has initially focused on conducting a Pilot Survey on the Enforcement Regimes ('Pilot Survey') of the EWG Members. The purpose of the Pilot Survey is to develop an understanding of the mandates, objectives, and legal authority of EWG Members' enforcement regimes, with the goal of sharing information and fostering discussion of current and emerging enforcement issues, methodology, and techniques. Aggregated results of the Pilot Survey will be shared at the next IFIAR Plenary Meeting in April 2014. A broader survey of all IFIAR Members concerning their enforcement regimes will be developed based on the experience gained through the Pilot Survey. In December, the EWG began work on drafting a Multilateral Memorandum of Understanding ('MMoU') on enforcement cooperation, in close cooperation with the International Cooperation Working Group. Intensive discussion at the EWG has identified that most of the difficult issues to be resolved are common across areas other than enforcement, which has led to a decision to wait for the time being for the result of the high-level policy discussion at the ICWG. The EWG may resume the project at an appropriate time in the future. The EWG is chaired by Takashi Nagaoka from the Financial Services Agency of Japan. Claudius Modesti of the Public Company Accounting Oversight Board in the United States serves as Vice-Chair. The EWG also includes IFIAR Members from Australia, Finland, Germany, Netherlands, Portugal, Switzerland, Chinese Taipei, and the United Kingdom. GPPC Working Group Through IFIAR's Global Public Policy Committee (GPPC) Working Group, IFIAR carries out an ongoing dialogue with the six largest international audit networks with the objective of improving audit quality on a global basis. During 2013, the GPPC Working Group met with representatives from each of the six GPPC networks on three different occasions (February, June and October) to discuss a variety of topics, including: - Processes followed and findings arising from the networks' 2012 internal quality monitoring reviews; - Challenges and potential solutions for developing a mutually acceptable framework for collating and analyzing the data obtained from engagement file reviews. The intended purpose of this framework is to provide a consistent and reliable basis for identifying audit quality issues and assessing the effectiveness of investments made by the networks to improve in these areas over time; - Approaches to root cause analysis and conclusions reached; - Actions taken by the networks to improve the effectiveness of engagement quality control reviews, the quality of group audits, the design and execution of substantive analytical procedures, tests of internal control, and audits of fair value measurements and revenue recognition. In addition, at the April 2013 Plenary Meeting in Noordwijk, IFIAR Members and GPPC network representatives, including four Global CEOs, discussed the importance of consistently executing high quality audits, the sustainability of the profession, and how to measure reliably progress made in improving audit quality. The GPPC Working Group is chaired by Brian Hunt, CEO of the Canadian Public Accountability Board (CPAB), and includes IFIAR Members from Australia, France, Germany, Japan, Netherlands, Singapore, the UK and the USA. Inspection Workshop Working Group A core activity of independent audit regulators is the ongoing inspections of audit firms. With Member countries from all continents, IFIAR is in a unique position to provide a forum through its annual Inspection Workshops for independent audit regulators to meet and discuss inspection processes, learn from each other, and consider similarities and differences among their inspection practices and methodologies. This information sharing leads to a better understanding of the Members' respective oversight regimes and the identification of better practices in inspecting audit firms. It also promotes greater consistency across regulators, and provides opportunities to discuss approaches to overseeing global audit firms in a coordinated manner. IFIAR's 7th Inspection Workshop was held in March 2013 in Zurich. The two and half day Workshop started with a key note address by Philip Turner, Director of Policy in the Monetary and Economic Affairs Department of the Bank for International Settlements (BIS). After that, the IFIAR Chair and Richard Thorpe, FSB Advisor on Accounting and Auditing, provided an overview of the results of a survey conducted by IFIAR at the request of the FSB in relation to findings from IFIAR Members' inspections. This was followed by a panel discussion with senior leaders from various jurisdictions to explore their views on the results of the IFIAR survey, and how they might impact the individual inspection regimes. Day two of the Workshop started with a presentation by the Chair of the IFIAR GPPC Working Group, providing an update of the work of the group. This was followed by two break-out sessions on key topics being discussed with the GPPC (professional scepticism, group audits, engagement quality control review (EQCR), and revenue recognition) and on GPPC network firms' efficiency programs, including activities like off-shoring. The 13 elective sessions on day two and three of the events covered the following topics: inspections of bank audits, common elements of a risk-based inspection approach, evaluation of firms' action plans, inspection reporting, inspection findings relating to the audit of goodwill impairment, quality control procedures for audit inspections, recruitment of inspection staff, substantive analytical procedures, professional judgment, use of IT-experts in the review process, reviewing audits of groups headed by 'letterbox companies', working effectively with corporate reporting review teams and the inspection of a firm's policies and procedures to ensure independence. In order to better meet the expectations of participants with different levels of experience, some of these sessions were offered, for the first time, at different levels (basic/advanced). The attendees of the Inspection Workshops are generally managers of inspections programs and their senior staff, representing almost all IFIAR Members. This broad attendance reflects the high -level interest and value of the Inspection Workshops. The next Workshop will be held in March 2014 in Kuala Lumpur at the invitation of the Audit Oversight Board of the Securities Commission of Malaysia. IFIAR's Inspection Workshops are prepared and led by the Inspection Workshop Working Group. The Group is chaired by Tim Volkmann of the German Auditor Oversight Commission, and includes IFIAR Members from Australia, Canada, France, Japan, Norway, UK and USA. International Cooperation Working Group The International Cooperation Working Group ('ICWG') considers and reports to the IFIAR membership on ways in which Members can cooperate and share information on Members' activities so as to enhance the effectiveness and efficiency of audit oversight processes and contribute to audit quality. In particular, the ICWG identifies areas where IFIAR Members can work more effectively in collaboration than in isolation, and then designs and implements work streams to facilitate such collaboration. During 2013, the main activities of the ICWG have been: - Developing a draft multilateral memorandum of understanding for the sharing of information between IFIAR Members in the context of areas such as investigations and - enforcement, inspections and registration of auditors; - Conducting a survey of IFIAR Members to assist IFIAR Members in understanding the extent and effectiveness of information sharing currently taking place between those regulators; - Finalizing a paper for IFIAR Members containing considerations to assist Members in relation to cooperation between audit oversight regulators in exceptional circumstances where increased communication and exchange of information would serve the public interest consistent with those regulators' mandates, other than in response to a request for information from another audit regulator; - Developing pro forma requests for information under bilateral arrangements; and - Exchanging information on developments on international cooperation in the jurisdictions and regions of Working Group Members. The ICWG is chaired by Doug Niven from ASIC of Australia and includes IFIAR Members from Canada, France, Italy, Japan, Korea, Singapore, Sweden, Switzerland, the United Kingdom and the United States. Investor Working Group During 2013, the Investor Working Group continued its efforts to enhance IFIAR's dialogue with investors by hosting IFIAR's sixth investor session and increasing the transparency of IFIAR's work with investors. The Investor Working Group began 2013 by issuing a background paper in preparation for IFIAR's 2013 Plenary Meeting in Noordwijk. The paper was prepared to provide invited investor panelists and the IFIAR membership with background on potential topics for discussion, as well as the format for the investor session at Noordwijk. In addition, the Investor Working Group circulated in advance of the meeting written materials from the panelists as well as their bios to the membership. The investor session for 2013 was divided into two parts: the first was a session with the plenary and the second was a jointsession with IFIAR's Standards Coordination Working Group (SCWG). The investor panelists for both were Elizabeth Fernando, Head of Equities, USS Investment Management Ltd. (USS); Paul Lee, Director, Hermes Equity Ownership Services; Oki Matsumoto, Chairman and Chief Executive Officer, Monex Group Inc.; and Jan Maarten Slagter, Managing Director, Dutch Investors' Association. The session with the plenary consisted of presentations by the panelists followed by questions and answers. The joint-session with the SCWG focused on the panelists' suggestions as to how the auditor might best improve audit quality and protect investors, particularly from a standards perspective. This joint-session with the SCWG marked the first IFIAR session where investor representatives and standard setters interacted at an IFIAR meeting. Following the Noordwijk Plenary Meeting, the Investor Working Group created and posted on the IFIAR public website a library of investor presentations at previous IFIAR plenary meetings. This library includes a quotation from each of the presenters and either a copy of their presentation or an executive summary of their presentation. The Investor Working Group will continue to add to this library on an annual basis after each investor session in order to provide the public with access to the information discussed during all IFIAR investor sessions. The Investor Working Group views the creation of this public resource as an important contribution to IFIAR's goal of increasing the organization's public profile. The Investor Working Group also increased its membership in 2013 when Canada joined the group. In addition, in November 2013, Steve Harris, Working Group Chair, gave a presentation to the United States Public Company Accounting Oversight Board's (PCAOB) International Institute in Washington, DC, a meeting attended by nearly 100 representatives of auditor oversight bodies from 34 jurisdictions around the world. Mr. Harris provided an overview of the work of the Investor Working Group and encouraged the nonIFIAR member audit oversight bodies to join the organization. This presentation was part of IFIAR's external outreach to new Members. By the end of 2013, the IWG had already recruited a number of high level panelists for the IWG's seventh investor session to be held during IFIAR's 2014 Plenary Meeting. This panel will include an investor, a GPPC CEO, and, for the first time, audit committee chairs, and will focus on communications between auditors and audit committees. Given the positive response to the background paper prepared by the IWG for the Noordwijk investor session, the IWG also was in the process of producing a background document for the 2014 investor session. The document will provide suggested topics for discussion and background information on initiatives and requirements in IFIAR Members' jurisdictions related to the role of, and auditor communications with, audit committees. The background paper will ask the panelists to focus on the following three topics: What do investors expect from audit committees? How can audit committees and auditors best meet the needs of investors? How can audit regulators assist audit committees in performing their jobs? In order to have a historical record of what has occurred at prior investor sessions, the IWG also is preparing a document summarizing the content of all of these sessions, including the topics discussed and the recommendations made by previous panelists. The IWG concluded 2013 by considering a possible revision of its terms of reference by expanding the scope of the group's work to include interaction not only with investors but with other stakeholders as well (e.g. audit committees, economists, academics). These revised terms of reference will be presented to the full IFIAR membership in 2014. The IWG is chaired by Steve Harris, Board Member of the United States' Public Company Accounting Oversight Board (PCAOB) and includes IFIAR Members from Canada, France, Japan, Korea, the Netherlands and the United Kingdom. Standards Coordination Working Group The SCWG consists of 13 Member organisations / countries, three of whom became Members in December 2013. The Working Group is chaired by the Independent Regulatory Board for Auditors from South Africa. The SCWG held 13 conference calls during the 2013 calendar year. In addition to those full SCWG conference calls, six SCWG task force conference calls were held to discuss the International Auditing And Assurance Standards Board's (IAASB) proposed ISA 720 (Revised), the IAASBs proposed Consultation Paper, A Framework for Audit Quality, the IAASBs document issued: Clarified International Standards on Auditing -Findings from the Postimplementation Review, as well as the IAASBs proposed Strategy and Work Program for 2015-2019 and the IFIARs comment letter to be submitted to the IAASB on their exposure draft: Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISA). Members discussed the IAASB Exposure draft (Consultation Paper, A Framework for Audit Quality) with a view for Members to provide comments to the IAASB and to provide inputs to the SCWG Chairman who served as a member of the IAASB Task Force on Audit Quality. A separate conference call was also held on June 7, 2013 to consider the Consultation Paper. Members discussed the IAASB Exposure drafts (Proposed ISA 720 (Revised) and Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISA)) with a view for IFIAR to submit a comment letter to the IAASB. Separate conference calls to discuss proposed ISA 720 (Revised) and the development of an IFIAR comment letter thereon were held on January 14 and February 21, 2013. Discussions thereon were also held during various full SCWG conference calls. It was decided not to issue an IFIAR joint comment letter to the IAASB on proposed ISA 720 (Revised). A separate conference call to discuss IFIAR's comment letter to be submitted to the IAASB on their exposure draft issued: Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs) was held on November 7, 2013. Discussions thereon were also held during two of the 13 full SCWG conference calls held on October 9, 2013 and November 15, 2013. IFIAR issued their first comment letter to the IAASB on Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs) on December 12, 2013. Given the highly technical nature of the matters on the agenda of the SCWG, Members discussed (berlaku 28 March 2014)
Pasal 60
26 March 2014.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
2.1 Basis of presentation
The financial statements of the IFIAR Verein have been prepared in accordance with the 'International Financial Reporting Standard for Small and Medium-sized Entities' (IFRS for SMEs) issued by the International Accounting Standards Board. They have been prepared under the historical cost convention.
2.2 Cash
The measurement basis for cash amounts is the balance at the IFIAR Verein bank account.
2.3 Receivables
Receivables are recognised at the transaction price, with a provision if deemed necessary.
2.5 Revenue recognition
Revenue comprises the Membership fees of the Members of the IFIAR Verein. Revenues are recognized on an accruals basis.
2.6 Foreign currencies
The functional and presentation currency for the IFIAR Verein is the Euro. Exchange rates to foreign currencies are set at the date of the transaction, or as of balance sheet date.
2.7 Assumptions/key sources of uncertainty
There were no significant assumptions made or key sources of uncertainty in the preparation of these financial statements.
3 Operational expenditure
The operational expenditure is analysed by organisation and against budget below; it is analysed by category against the previous year on the face of the Statement of Comprehensive Income.
| | FRC | PCAOB | AFM | Other | 2013 | Budget | Difference |
| | € | € | € | € | € | € | € |
| Staff costs | 53,016 | 183,990 | 65,083 | 0 | 302,089 | 320,000 | (17,911) |
| Travel expenses | 4,966 | 38,762 | 13,341 | 0 | 57,069 | 60,000 | (2,931) |
| Meeting expenses | 4,341 | 208 | 0 | 0 | 4,549 | 5,000 | (451) |
| Audit expenses | 0 | 0 | 0 | 1,577 | 1,577 | 6,000 | (4,423) |
| Website | 265 | 191 | 0 | 1,875 | 2,331 | 5,000 | (2,669) |
| other expenses | | | | | | | |
| Operational expenditure | 62,588 | 223,151 | 78,424 | 3,452 | 367,615 | 396,000 | (28,385) |
Staff costs are slightly below budget but slightly increased compared to 2012 reflecting secretariat work levels largely in line with expectations over the year. Other expense items were largely in accordance with budget and expectations in a similar fashion; the cost of the audit was €2,577 with a reduction of the audit accrual of €1,000 in the year reducing the cost as indicated.
4 Revenue
Revenue for the year/period to 31 December comprised:
| | 2013 | 2012 |
| | € | € |
| 44 Members paid €9,000 (2012: 40 Members paid €9,000) | 396,000 | 360,000 |
| 0 Members were allowed a fee waiver and paid a reduced amount of €2,500 (2012: 1 Member) | 0 | 2,500 |
| 2 Members joined during the year and paid fees reflecting their length of Membership (2012: 3 Members) | 13,500 | 15,750 |
| Total revenue | 409,500 | 378,250 |
5 Receivables
€33,770 of receivables (2012: €11,263) were outstanding at 31 December 2013. Receivables comprised membership fees from IFIAR Members. All late fees will be discussed with the Membership at the IFIAR Plenary, to the extent they have not been paid before the Plenary.
6 Accruals
The accruals at the end of the period comprised operational expenses incurred but not invoiced at the year-end by AFM and PCAOB as follows:
| | PCAOB | AFM | Other | 2013 | 2012 |
| | € | € | € | € | € |
| Staff costs | 94,427 | 65,083 | | 159,510 | 166,642 |
| Travel expenses | 21,077 | 13,341 | | 34,418 | 21,004 |
| Meeting expenses | 208 | | | 208 | 8,055 |
| Audit expenses for 2013 | | | 3,000 | 3,000 | 4,000 |
| Other expenses | | | | | 74 |
| Operational expenses | 115,712 | 78,424 | 3,000 | 197,136 | 199,775 |
The amounts due to the AFM and the PCAOB were invoiced to IFIAR Verein in March 2014. The audit will be invoiced after its finalization.
7 Deferred Income
Other liabilities include a payment totalling €1,152 (2012: €1,684) of membership fees unintentionally paid over and above to the fee due. This payment will be treated as deferred income and will reduce the membership fee for 2014 for the Member concerned.
8 Related-party transactions
The majority of the activity of IFIAR Verein is conducted with related parties, being the Members of IFIAR (who are also the members of the Verein). All revenues are obtained from Members, whilst the majority of operating expenses are paid to the organisations of the Chair and Vice-Chair of IFIAR. In 2013, the only third parties with which the Verein interacted were the auditors, the providers of indemnity insurance for the Executive Committee and the Verein's bank, Credit Suisse.
Approved on 26 March, 2014, by
Lewis Ferguson IFIAR Chair
Janine van Diggelen IFIAR Vice-Chair
Annex - IFIAR Membership
IFIAR membership shall be open to regulators that are both:
- a) Independent of the audit profession. The audit profession includes, for example: audit firms, professional bodies and bodies or entities associated with the audit profession. Indicators of independence from the profession include:
- A majority of the relevant governing body are non -practitioners (with an appropriate cooling off period for former auditors); and
3. b)
- Funding of the regulator is free of undue influence by the audit profession; and Engaged in audit regulatory functions in the public interest, and, in particular:
- Ultimately responsible for the system of recurring inspection of audit firms undertaking audits of public interest entities; and Exercising that responsibility either directly or through independent oversight.
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As of December 31, 2013, IFIAR membership included independent audit oversight authorities from the following 46 jurisdictions:
ABU DHABI
Abu Dhabi Accountability Authority (ADAA)
Level 9, Falcon Tower Abu Dhabi, United Arab Emirates PO Box 435 Tel: +971 2 6107 508 Fax: +971 2 6344 071 Website: www.adaa.abudhabi.ae
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ALBANIA
Public Oversight Board of Albania Rr. Elbasanit, Pallati Edil Al IT, Zyra nr.321, Tirana Albania Tel: 355 4 346 077
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AUSTRALIA
Australian Securities &amp; Investments Commission (ASIC) Level 5, 100 Market Street, Sydney, New South Wales, 2000, Australia (street address) GPO Box 9827, Sydney, New South Wales, 2001, Australia (postal address) Tel: 02 9911 2000 Direct: 02 9911 2079 Fax: 02 9911 2403 Website: www.asic.gov.au
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AUSTRIA
Austrian Auditors Supervisory Authority (ASA)
c/o Federal Ministry of Economy, Family and Youth
Section I/1a
A-1011 Vienna, Stubenring 1
Tel: 0043 (01) 71100 - 5800
Fax: 0043 (01) 71100 - 15800
Email: qkb@bmwfj.gv.at
Website: www.bmwfj.gv.at/qkb
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BELGIUM
Chambre de renvoi et de mise en état/Kamer van verwijzing en instaatstelling (CRME/KVI) Bd. E. Jacqmain 135
1000 Brussels
Belgium
Tel: + 32 2 511 53 97
Fax: +32 2 203 45 70
Website: The CRME's website is currently under construction.
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BRAZIL
Comissao de Valores Mobiliarios Securities (CVM)
Rua Sete de Setembro, 111
13°, 26° ao 34° Andares - Centro
CEP - 20050-901
Rio de Janeiro - RJ
Brasil
Tel: 00 55 21 3233 0200
Fax: 00 55 21 2221 6769
Website: www.cvm.gov.br
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BULGARIA
Commission for Public Oversight of Statutory Auditors (CPOSA)
7th Floor, 22 Serdica Street
Sofia 1000
Bulgaria
Tel: +3592 9835539
Fax: +3592 9831385
Email: office@cposa.bg
Website: www.cposa.bg/en/
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CANADA
Canadian Public Accountability Board (CPAB)
150 York Street
Suite 200
Toronto, Ontario M5H 3S5
Canada
Tel: 00 1 416 913 8261
Fax: 00 1 416 850 9235
Website: www.cpab-ccrc.ca
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CROATIA
Croatian Audit Public Oversight Committee (APOC)
Katanciceva 5
10 000 Zagreb
Croatia
Tel: +385 1 45 91 171
Fax: +385 1 45 91 101
Email: info@javni-nadzor-revizije.hr
Website: www.javni-nadzor-revizije.hr/
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DENMARK
Danish Business Authority (DBA)
Dahlerups Pakhus
Langelinie Alle 17
2100 Copenhagen
Denmark
TEL: +45 3529 1000
FAX: +45 3546 6001
E-mail: erst@erst.dk
Website: www.erst.dk
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DUBAI INTERNATIONAL FINANCIAL CENTRE
Dubai Financial Services Authority (DFSA)
Level 13, The Gate
P. O. Box 75850
Dubai, UAE
Tel: +971 (0) 4 362 1508
Fax: +971 (0)4 362 0801
Website: www.dfsa.ae
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EGYPT
Auditors Oversight Board (AOB)
Egyptian Financial Supervisory Authority
2nd Floor, 20 Emaad El Din Street
Down Town
Cairo
Egypt 11111
Tel: +202-257-97368 extension 106
Fax: +202-257-73693
Website: www.efsa.gov.eg
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FINLAND
The Auditing Board of the Central Chamber of Commerce of Finland (AB3C)
P.O. Box 1000
Aleksanterinkatu 17
00101 Helsinki
Finland
Tel: +358 9 4242 6200
Fax: +358 9 4242 6251
Website: www.ab3c.fi
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FRANCE
Haut Conseil du commissariat aux comptes (H3C)
10 rue Auber
75009 Paris
France
Tel: 00 33 1 4451 0936
Fax: 00 33 1 4451 0935
Website: www.h3c.org
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GERMANY
Abschlussprueferaufsichtskommission (APAK)
Rauchstrasse 26
D-10787 Berlin
Germany
Tel: +49 30 5900 363 700
Fax: +49 30 5900 363 710
Website: www.apak-aoc.de
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GIBRALTAR
Financial Services Commission
PO Box 940
Suite 3, Ground Floor
Atlantic Suites
Europort Avenue
Gibraltar
Tel: +350 200 40283
Fax: +350 200 40282
Email: auditors@fsc.gi
Website: www.fsc.gi
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GREECE
Accounting and Auditing Standards Oversight Board
7, Voulis Street, 5th Floor
105 62, Athens
Greece
Tel: +30 210 324 2648
Fax: +30 210 323 4141
Email: info@elte.org.gr
Website: www.elte.org.gr
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HUNGARY
Auditors' Public Oversight Authority (Ministry for National Economy)
József nádor tér 2-4
1051 Budapest
Hungary
Tel: +36 1 795 3543
Fax: +36 1 795 0294
Email: kozfelugyelet@ngm.gov.hu
Website:
http://www.kormany.hu/hu/nemzetgazdasagi-miniszterium/ado-es-penzugyekert-
felelos-allamtitkarsag/hirek/konyvvizsgaloi-kozfelugyeleti-hatosag
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INDONESIA
The Accountant and Appraiser Supervisory Center (PPAJP)
Ministry of Finance in Indonesia
Jl. Dr.Wahidin No.1
Gedung Djuanda II
Lt 19-20
Jakarta Pusat
DKI Jakarta 10710
Indonesia
Tel: 021 384 3237
Fax: 021 345 3710
Website: www.ppajp.depkeu.go.id
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IRELAND
Irish Auditing &amp; Accounting Supervisory Authority
Willow House
Millennium Park
Naas
Co. Kildare
Ireland
Tel: +353 (0)45 983600
Fax: +353 (0)45 983601
Email: info@iaasa.ie
Website: www.iaasa.ie / www.iaasa.eu
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ITALY
Commissione Nazionale per le Società e la Borsa (CONSOB)
3, Via G.B. Martini
00198 Rome
Italy
Tel: 00 39 068 4771
Fax: 00 39 068 477763
Website: www.consob.it
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JAPAN
Certified Public Accountants &amp; Auditing Oversight Board (CPAAOB)
3-2-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8905
Japan
Tel: 00 81 3 5251 7279
Fax: 00 81 3 5251 7288
Website: www.fsa.go.jp/cpaaob
Financial Services Agency (FSA) 3-2-1 Kasumigaseki Chiyoda-ku Tokyo, 100-8967 Japan Tel: 00 81 3 3506 6420 Website: www.fsa.go.jp
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KOREA
Financial Services Commission (FSC)
27 Yoido-Dong
Youngdeungpo-Gu
Seoul 150-743
Korea
Tel: 00 82 2 3771 5000
Website: www.fsc.go.kr
Financial Supervisory Service (FSS)
27 Yoido-Dong
Youngdeungpo-Gu
Seoul 150-743
Korea
Tel: 00 82 2 3771 5114
Website: www.fss.or.kr
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LIECHTENSTEIN
Financial Market Authority Liechtenstein (FMA)
Finanzmarktaufsicht Liechtenstein (FMA)
Landstrasse 109,
P.O. Box 279, 9490
Vaduz, Liechtenstein
Tel: +423 236 73 73
Email: info@fma-li.li
Website: www.fma-li.li
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LITHUANIA
The Authority of Audit and Accounting
Ukmerges 222
LT-07157, Vilnius
Lithuania
Tel: +370 5 262 0198
Fax: +370 5 262 0782
Email: admin@aat.lt
Website: www.aat.lt
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LUXEMBOURG
Commission de Surveillance du Secteur Financier (CSSF)
110, route d'Arlon
L-2991 Luxembourg
Tel: 352 26 25 1 351
Fax: 352 26 25 1 603
Email: direction@cssf.lu
Website: www.cssf.lu
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MALAYSIA
Audit Oversight Board Securities Commission Malaysia Suite 8-6, Level 8 Wisma UOA Damansara II No 6, Changkat Semantan Damansara Heights 50490, Kuala Lumpur Tel: +60320910666 Website: www.sc.com.my/
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MALTA
The Accountancy Board of Malta
Small Enterprise Centre
Marsa Industrial Estate
Marsa MRS 3000 - Malta
Tel: (356) 21220084
Fax: (356) 21228671
Website: www.secure3.gov.mt/accountancyboard/Home.aspx
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MAURITIUS
Financial Reporting Council 3rd Floor Anglo Mauritius Building Intendance Street Port-Louis Mauritius Email: snaiken@mail.gov.mu Website: www.frc.mu
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NETHERLANDS
Autoriteit Financiele Markten (AFM)
P.0. Box 11723 1000 GS Amsterdam Holland Tel: 00 31 20 707 2000 Fax: 00 31 20 797 3800 Website: www.afm.nl
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NORWAY
Finanstilsynet / The Financial Supervisory Authority of Norway
P.0. Box 1187 Sentrum N-0107 Oslo Norway Tel: 00 47 2293 9901 Fax: 00 47 2293 9996 Website: www.finanstilsynet.no
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POLAND
Audit Oversight Commission
12 Swietokrzyska Str, 00-916 Warsaw, Poland
Tel: +48 22 694 39 61
Fax: +48 22 694 32 60
Email: biuro.kna@mf.gov.pl
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PORTUGAL
Conselho Nacional de Supervisão de Auditoria/ National Council of Auditing Supervision
Rua do Crucifixo, n.º 7 - 3.º
LISBON - PORTUGAL
Tel: +351213233411
Fax: + 351213432858
Email: cnsa@cnsa.pt
Website: www.cnsa.pt/
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SINGAPORE
Accounting and Corporate Regulatory Authority (ACRA)
10 Anson Road
05-01/15
International Plaza
Singapore 079903
Tel: 00 65 6325 0206
Fax: 00 65 6225 1676
Website: www.acra.gov.sg
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SLOVAK REPUBLIC
Auditing Oversight Authority
Slovanská 1
PO Box 63
810 05 Bratislava 15
The Slovak Republic
Tel: +421 2 57267511
Fax: +421 2 57267500
Email: udva@udva.sk
Website: www.udva.sk
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SLOVENIA
Agency for Public Oversight of Auditing
Glinška 3
1000 Ljubljana
Slovenia
Tel: +386 (1) 620 85 50
Fax: +386 (1) 620 85 52
Email: info@anr.si
Website: www.anr.si
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SOUTH AFRICA
Independent Regulatory Board for Auditors (IRBA)
Building 2, Greenstone Hill Office Park
Emerald Boulevard
Modderfontein
South Africa
Tel: +27(0)87 940 8800
Email: communications@irba.co.za
Website: www.irba.co.za
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SPAIN
Accounting and Auditing Institute (ICAC)
Calle de las Huertas 26
28014 Madrid
Spain
Tel: 00 34 91 389 5607
Fax: 00 34 91 429 9486
Website: www.icac.meh.es
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SRI LANKA
Accounting and Auditing Standards Monitoring Board
3rd Floor
293 Galle Road
Colombo 3
Sri Lanka
Tel: 00 941 301 210
Fax: 00 941 301 211
Website: www.slaasmb.org/
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SWEDEN
Supervisory Board of Public Accountants
Karlavägen 104
Box 24014
104 50 Stockholm
Sweden
Tel: +46 8 783 18 70
Fax: +46 8 783 18 71
Website: www.rn.se
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SWITZERLAND
Federal Audit Oversight Authority FAOA
P.O. Box 6023
Bundesgasse 18
CH-3001 Berne
Switzerland
Tel: +41 31 560 22 10
Website: www.revisionsaufsichtsbehoerde.ch/
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CHINESE TAIPEI
Financial Supervisory Commission
18F, No. 7, Sec. 2, Sianmin Blvd.
Banciao City, Taipei County
Taiwan 22041
Tel: (886 2) 8968 0899
Fax:(886 2) 8969 1162
Email: international@fsc.gov.tw
Website: www.fsc.gov.tw
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THAILAND
Securities and Exchange Commission
15th Fl.
GPF Witthayu Towers B
93/1 Wireless Road
Lumpini
Patumwan,
Bangkok 10330
Tel: (66) 2695-9584
Fax: (66) 2695-9792
Website: www.sec.or.th
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TURKEY
Capital Markets Board of Turkey Sermaye Piyasasi Kurulu Eskishehir Yolu 8. Km. No. 156 06530 Ankara Turkey Website: www.cmb.gov.tr/index.aspx
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UK
Financial Reporting Council (FRC)
5th Floor, Aldwych House
71 - 91 Aldwych
London WC2B 4HN
Tel: +44 20 7492 2300
Fax: +44 20 7492 2301
Website: www.frc.org.uk
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USA
Public Company Accounting Oversight Board (PCAOB)
1666 K Street, NW Washington DC 20006-2803 USA Tel: (202) 207 9100 Fax: (202) 862 8430 Website: www.pcaobus.org
OBSERVERS
The following organizations are observers of IFIAR meetings:
- Basel Committee of Banking Supervisors
- European Commission (EC)
- Financial Stability Board (FSB)
- International Association of Insurance Supervisors (IAIS)
- International Organization of Securities Commission (IOSCO)
- Public Interest Oversight Board (PIOB)
- World Bank
IFIAR WORKING GROUPS' MEMBERSHIP
Enforcement Working Group
Chair: Takashi Nagaoka, FSA, Japan Vice Chair: Claudius Modesti, PCAOB, USA Members:
- ASIC
Australia
- AB3C
Finland
- AOC
Germany
- AFM
Netherlands
- CNSA
Portugal
- FAOA
Switzerland
- FSC
Chinese Taipei
- FRC
UK
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Global Public Policy Committee (GPPC)
Chair: Brian Hunt, CPAB, Canada Members:
- ASIC
Australia
- H3C
France
- AOC
Germany
- FSA/CPAAOB Japan
- AFM
Netherlands
- ACRA
Singapore
- FRC
United Kingdom
- PCAOB
United States
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Inspection Workshops Working Group
Chair Tim Volkmann, AOC, Germany Members:
- ASIC
Australia
- CPAB
Canada
- H3C
France
- AOC
Germany
- CPAAOB/FSA Japan
- FSA
Norway
- FRC
United Kingdom
- PCAOB
United States
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International Co-operation Working Group
Chair: Doug Niven, ASIC, Australia
Members:
- ASIC
Australia
- CPAB
Canada
- H3C
France
- CONSOB
Italy
- CPAAOB/FSA Japan
- FSS
Korea
- ACRA
Singapore
- SBPA
Sweden
- FAOA
Switzerland
- FRC
United Kingdom
- PCAOB
United States
Observer:
- European Commission
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Investor Working Group
Chair: Steve Harris, PCAOB, US Members:
- CPAB
Canada
- H3C
France
- CPAAOB/FSA Japan
- FSS/FSC
Korea
- AFM
Netherlands
- ACRA
Singapore
- FRC
United Kingdom
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Standards Coordination Working Group
Chair: Bernard Agulhas, IRBA, South Africa Members:
- ASIC
Australia
- CPAB
Canada
- H3C
France
- AOC
Germany
- CONSOB
Italy
- CPAAOB/FSA Japan
- AFM
Netherlands
- ACRA
Singapore
- ICAC
Spain
- FAOA
Switzerland
- FRC
United Kingdom
- PCAOB
United States
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IFIAR CORE PRINCIPLES
Introduction
IFIAR is an organization of independent audit regulators (hereinafter, 'audit regulators'). The organization's primary aim is to enable its Members to share information regarding the audit market environment and practical experiences of independent audit regulatory activity, with a focus on inspections of auditors and audit firms.
Consistent with the IFIAR Charter, the Core Principles (hereinafter, 'Principles') seek to promote effective independent audit oversight globally, thereby contributing to Members' overriding objective of serving the public interest and enhancing investor protection by improving audit quality.
An audit regulator's membership in IFIAR is not dependent on its status in implementing the Principles. However, Members are encouraged to work towards implementing them where appropriate in their own jurisdictions, taking account of the risk profile, size and complexity of audit firms in their market. It is recognized that legislative change or other measures by national authorities not in control of the audit regulator may be required to achieve adherence to the Principles.
The Principles are intended to:
- Assist Members in developing their own national arrangements through being able to draw on and hence benefit from the experience of other members;
- Advance widespread adoption of high quality audit oversight practice aimed at fostering high quality audits and promoting public trust in the financial reporting process; and
- Support cooperation between regulators and promote greater consistency of audit oversight. The Principles may also assist audit regulators who are not already Members of IFIAR to develop effective independent audit oversight arrangements.
The Principles are presented in bold lettering followed by an explanatory text that provides further explanation.
A system of audit oversight and audit regulation can only be effective subject to certain preconditions; that is if it exists
within an appropriate external environment. Such preconditions, although often outside the control of the national audit oversight system, in practice have a direct impact on the effectiveness of that system. The main precondition is the existence of a well -developed legal and corporate governance framework as to provide necessary support for high quality auditing. Elements of this framework will cover the following:
- Comprehensive and well defined accounting and auditing principles and standards that are generally accepted;
- Legal requirements for the preparation and publication of financial statements according to those principles and standards;
- An enforcement system for preparers of financial statements to ensure compliance with accounting standards (e.g. fines, shareholder redress or penalties on responsible managers for non -compliance);
- Corporate governance arrangements and practices that support high -quality corporate reporting and auditing practice; and
- Effective educational and training arrangements for accountants and auditors.
Where shortcomings exist, audit regulators should make the government or other relevant decision makers aware of such matters and their potential impact on audit quality or the operation of an effective audit oversight system. Audit regulators should also act, as part of their normal activities, with the aim of mitigating the effects of such shortcomings on the effectiveness of their oversight, regulation and inspection.
Part A. Structure
Principle 1: The responsibilities and powers of audit regulators should serve the public interest and be clearly and objectively stated in legislation.
Audit regulators should have a mandate to work in the public interest and protect investors by seeking to improve audit quality. The responsibilities and powers of audit regulators should, at a minimum, require independent oversight of the audits of public interest entities.
The legal framework for audit oversight should set forth the audit regulator's mandate and responsibilities, and provide the regulator with adequate powers and authority that enable the regulator to perform its audit oversight duties, including powers to address, through inspection and enforcement, compliance with the requirements for the authorization/registration of auditors/audit firms and compliance with applicable auditing, professional and independence standards.
Principle 2: Audit regulators should be operationally independent.
Independence means the ability to undertake regulatory activity and to take and enforce decisions without external interference by those regulated. The audit regulator should be operationally independent from external political interference and from commercial, or other sectoral interests, in the exercise of its functions and powers, including not being controlled in its governance by audit practitioners. The audit regulator should have a stable source of funding, which is secure and free from influence by auditors
and audit firms and sufficient to execute its powers and responsibilities.
Principle 3: Audit regulators should be transparent and accountable.
The audit regulator should have public accountability in the use of its powers and resources to ensure that the audit regulator maintains its integrity and credibility. Further, the decisions and actions of the audit regulator should be subject to appropriate scrutiny and review, including appeal to a higher authority. Transparency should include the publication of annual work plans and activity reports, including the outcome of inspections either in the aggregate or on a firm by firm basis.
Part B. Operations
Principle 4: Audit regulators should have comprehensive enforcement powers which include the capability to ensure that their inspection findings or recommendations are appropriately addressed; these enforcement powers should include the ability to impose a range of sanctions including, for example, fines and the removal of an audit license and/or registration.
Audit regulators should at a minimum be responsible for the system and conduct of recurring inspection of audit firms undertaking audits of public interest entities. Audit regulators should have the authority and ability to enforce inspection findings and recommendations. The audit regulator should have comprehensive enforcement arrangements such as fines, suspensions and the removal of an auditor's or audit firm's license or registration.
Audit regulators should have adequate and appropriate mechanisms for enabling information to be brought to their attention by third parties and for then dealing with such information, such as through complaints procedures or through whistle blowing arrangements. These mechanisms should act in a timely and effective manner and their results followed up through an appropriate system of investigations and penalties in relation to cases of inadequate or noncompliant execution of an audit.
Principle 5: Audit regulators should ensure that their staff is independent from the profession and should have sufficient staff of appropriate competence.
Audit regulators should have arrangements in place to ensure that inspection staff members are independent of the profession. These arrangements will, as a minimum, include ensuring that staff members should not be practicing auditors or employed by or affiliated with an audit firm, and that the arrangements are not controlled in any form by a professional body.
In order for audit regulators to be effective, it is a prerequisite that there is sufficient staff of appropriate competence. The persons carrying out the reviews of quality assurance systems of audit firms should have appropriate professional training and relevant experience in auditing and financial reporting, and training in regulatory quality assurance reviews.
This also means that adequate arrangements for consultation and discussion amongst inspectors are in place. New inspectors should be subject to proper supervision and appropriate training.
Principle 6: Audit regulators should be objective, free from conflicts of
interest, and maintain appropriate confidentiality arrangements.
Audit regulators should maintain the highest standards of ethical conduct to provide the public with confidence in the objectivity of their decisions. Audit regulators should have in place prohibitions against conflicts of interest by its governing body and staff and ensure that appropriate arrangements are in place to protect confidential information from public dissemination.
Principle 7: Audit regulators should make appropriate arrangements for cooperation with other audit regulators and, where relevant, other third parties.
Taking into account the global nature of the financial markets, where necessary and relevant, cooperation and information sharing with other audit regulators and other third parties, including financial market regulators, is helpful to improve audit quality.
Audit regulators should provide timely assistance to each other within reasonable limits. Arrangements should be in place for sharing information between audit regulators and other regulators (or between parts of the audit oversight system if it involves more than one body), and for protecting the confidentiality of such information.
Part C. Principles for inspections
Principle 8: Audit regulators should as a minimum, conduct recurring inspections of audit firms undertaking audits of public interest entities in order to assess compliance with applicable professional standards, independence requirements and other laws, rules and regulations.
The recurring inspections should be conducted pursuant to a process comprising the selection of the audit firms to inspect, appointment of an inspection teams with appropriate expertise and competence, notification to the audit firm, advance documentation request, notification of selection of audit engagements for review, meetings with management, and on -site inspection arrangements. The inspection process should be subject to appropriate internal quality control within the audit regulator to ensure high quality and consistency.
Principle 9: Audit regulators should ensure that a risk -based inspections program is in place.
Audit regulators should have a process for assessing risks in the audit environment and audit risks in individual regulated firms and their audit engagements. Audit regulators should have a process for taking into account their risk assessment in allocating their inspection resources and in the inspection approaches they adopt. These processes should be commensurate with the size and complexity of the audit firms and their clients. Audit regulators should have an established minimum cycle regarding the frequency of inspections.
Principle 10: Audit regulators should ensure that inspections include effective procedures for both firm wide and file reviews.
The risk -based inspection approach should also be reflected in both firm wide and audit file inspection procedures. The firm wide procedures should address the audit firm's quality control system as reflected in the firm's organization, policies and procedures. ISQC 1 or similar standards should be used as a benchmark in
performing firm wide procedures. The inspection process should also include adequate testing of selected audit files in order both to determine the effectiveness of the firm's quality control system and to assess compliance with applicable laws, rules and professional standards.
Principle 11: Audit regulators should have a mechanism for reporting inspections findings to