roger w ferguson, jr : international financial reporting and auditing remarks by mr roger w ferguson, jr, vice chairman of the board of governors of the us federal reserve system, to the financial stability forum, international accounting standards board, and international federation of accountants roundtable on financial reporting and auditing, paris, 16 february 2006 ( via videoconference ). * * * it is a pleasure to join you for this joint roundtable on financial reporting and auditing. as chairman of the financial stability forum, i would like to express my appreciation to all of you that are participating in this roundtable as distinguished speakers or in other roles. in addition, i appreciate the very good partnership that we have had with the international accounting standards board ( iasb ) and international federation of accountants ( ifac ), and with our host, the world bank, in preparing for this gathering. since our last joint roundtable in october 2004, much has transpired in the international accounting and auditing arenas. indeed, 2005 was a very big implementation year for international standards around the world. the topics of this roundtable - - dealing with the experience of implementing iasb and ifac standards and related regulatory challenges, international convergence and harmonization, issues associated with using fair values in the financial reporting model, and risks and vulnerabilities arising from the financial reporting chain - - all reflect the interconnectedness of accounting, auditing, and regulation and the need to consider these issues from the unique perspectives that all of you bring to the table. it is very important that this type of constructive dialogue continues to take place among the many key stakeholders in the financial reporting chain. the focus of the roundtable - - international financial reporting and auditing - - continues to gain increased attention from members of the international regulatory community such as the financial stability forum, the international organization of securities commissions ( iosco ), the international association of insurance supervisors ( iais ), and the basel committee as well as from national supervisors, standards setters, banks, investors, analysts, auditors, and many others. as we all know, in recent years, accounting and auditing scandals and other developments have found their way onto the front pages of your daily newspapers in ways rarely seen before. these challenging developments have led to a new resolve on the part of governmental, regulatory, and business leaders that there must be a reinforcement and improvement of standards - setting processes and a return to sound accounting, auditing, and disclosure practices by companies

and their auditors. the unprecedented problems of a few years ago fueled efforts to help restore investor confidence in u. s. and european capital markets through legislative reforms affecting both the accounting profession and corporate management and directors. for example, these efforts led to, for example, the enactment of the sarbanes - oxley act in the united states which set the stage for a new audit oversight authority - - the public company accounting oversight board - - to regulate, inspect, report on, and in some cases enforce penalties against auditors and led to new requirements for corporate management to maintain strong internal controls and to make periodic public reports on the adequacy of their companies'internal controls. in the european union, the eighth directive and other initiatives were undertaken in recognition of the important role of audit oversight authorities. these initiatives seek to strengthen accounting standards, internal controls, and transparency. but long before these legislative initiatives were being considered, steps were taken to establish independent international standards - setting frameworks for both accounting and auditing standards, as reflected by the creation of the iasb in 2001 and the ifac international auditing and assurance standards board ( or iaasb ). both of these standards - setting processes have been reviewed and enhanced over time and continue to be subject to improvements. in his keynote speech earlier today, michel prada shared with you iosco's initiatives to address international accounting and auditing issues. it is clear that iosco has played a very important role in these arenas for many years. likewise, central banks and banking supervisors have taken steps to enhance their focus on accounting and auditing matters that affect institutions they supervise. during the mid - 1990s, the basel committee started to devote more resources to developing principles that would help shape and improve bank disclosure, supervisory reporting, and accounting practices. moreover, the committee recognized that it was also important to support high - quality standardssetting processes. with the formation of the accounting task force by the basel committee in 1997, the basel committee began to participate more actively in processes for setting accounting and auditing standards. this participation led to the development of enhanced accounting guidance on financial instruments and more comprehensive bank audit guidance. the iais has also shown a strong interest in the development of sound international accounting and auditing standards, as evidenced by its participation in the iasb's insurance working group and the recent group of thirty ( g - 30 ) effort to enhance the transparency of reinsurance activities. all of these positive efforts by regulators and supervisors