IFAC – Our Vision for the Future

By: Fermín del Valle

President, International Federation of Accountants

Forum for Strengthening the Accountancy Profession

Tunis, Tunisia – May 23, 2008

Good morning, ladies and gentlemen.

It is a pleasure to be here with you for this Forum for Strengthening the Accountancy Profession.

The city of Tunis is an excellent location for this gathering of international minds to discuss the challenges and opportunities facing the accountancy profession and where we see the profession going in the future. Just across LakeTunis sits the ancient city of Carthage, one of the first international trade and business hubs in the world. Ever since that time, with succeeding Berber, Arab, Ottoman, and French cultures all leaving their mark, Tunisia has grown and thrivedas a center of culture,international commerce and as a gateway between Africa, Europe and the Middle East.

Before I begin, I would like to briefly thank the Ordre des Experts Comptables de Tunisie and your President, Salah Dhibi, for hosting this event. I would also like to acknowledge and thank the two Tunisians who currently serve on IFAC boards and committees: Jelil Bouraoui, who serves as a member of the IFAC Board and as Deputy Chair of our Developing Nations Committee, and Hechmi Abdelwahed, who serves as a member of our Small and Medium Practices Committee.

It is through the service of volunteers like these gentlemen, and with the support and collaboration of IFAC’s 157 member bodies and associates in 123 countries worldwide, and those of you gathered here today, that IFAC is able to fulfill its mission.

The core elements of IFAC’s mission have remained constant throughout our 31-year history: serving the public interest, developing strong global economies, promoting international convergence, and serving as the voice for the global accountancy profession.

I believe that this mission will continue to guide our work in the future as we continue to build a strong and dynamic profession; one that is well-equipped to address the changing demands of the marketplace, to face ethical and technical challenges, to embrace new technologies and new types of reporting, and one that has the strength and the determination to continue to deliver quality.

This morning, I would like to share with you IFAC’s vision for the future of the accountancy profession, and how we are actively working to provide accountants worldwide with the skills, knowledge, resources and power to make it a reality.

When I became President of IFAC in November 2006, I set out my vision for the future of IFAC and the profession as a whole. This included:

  • Achieving full convergence of international accounting and auditing standards worldwide;
  • Addressing the needs of small and medium entities (SMEs) and small and medium accounting practices (SMPs);
  • Promoting quality in all areas of the profession;
  • Responding to the changing demands of the marketplace; and
  • Continuing to fulfill our public interest role.

I am pleased to report that we are already seeing much progress in each of these areas, and it is my firm belief that we will see even more success in the near future.

Let me first speak about international standards and convergence.

Within IFAC, four independent standard-setting boards are committed to developing international standards on auditing, education, ethics and governmental financial reporting. These standards raise the level of practice and promote reliable and high quality financial reporting worldwide. IFAC’s commitment to convergence also includes promoting the use of the International Financial Reporting Standards (IFRSs), which are developed by the International Accounting Standards Board.

The adoption and implementation of a common set of high quality international standards by nations around the world iscrucial to assuringthe quality of the profession’s services. Convergence is also, I believe, directly linked to the future success of our profession and to meeting the evolving needs of the marketplace.

Global convergence of accounting and auditing standards is essential to raising the quality and uniformity of practice by professional accountants. It is also vital to operate effectively in a global world.When investors in one country look to invest in a company in another country, they need to understand and have confidence in that company’s financial information. If the financial information is based on a common set of standards that are also used internationally, they tend to be more confident about investing. This helps to increase international investment and to reduce the cost of raising capital and obtaining credit.Therefore, by reducing or eliminating the differences in financial reporting requirements, we can eliminate barriers to international investment and trade.

I am happy to say that thepast two years have seen significant progress in achieving international convergence. In 2005, the European Union mandated IFRSs for all publicly listed entities, and it is now in the process of considering a similar adoption of the IAASB’s International Standards on Auditing (ISAs). We are also seeing developments in the United States where, last year, theSecurities and Exchange Commission (SEC) adopted rules to acceptfinancial statements prepared in accordance with IFRSs from foreign private issuers without reconciliation to U.S. GAAP. The SEC is now considering allowing U.S. companies to also file their financial statements with IFRSs. In addition, a host of other developed and developing countries, including Australia, Brazil, Canada, China, India, and New Zealand, have announced plans to converge with IFRSs or ISAs.

IFAC commends these countries for their commitment to convergence, and we strongly support the ongoing convergence efforts of other countries to adopt and implement these standards for entities of all sizes.

And there is something perhaps even more significant: in January, seventeen international networks of accounting firms reached a new milestone in their commitment to audit quality by becoming the first full members of the Forum of Firms. These international networks, whose member firms perform transnational audits, have reported that they have implemented a globally coordinated quality assurance program, committed to the use of ISAs, and met other quality and ethics requirements.Constituent entities of the members of the Forum conduct audits of more than 90 percent of publicly listed companies worldwide, and they undertake a significant proportion of all audits with a transnational element. Thus, international standards are now being applied to the vast percentage of the audits of publicly listed companies. Of the Forum’s 21 members, four are now provisional members, meaning that they are working toward becoming full members over the next year or so. I believe that, over the next couple of years, we will continue to build upon the milestone achieved in January and see even more accounting firms – at both the national and international level – implementing international standards.

We recognize, however, that when it comes to convergence, smaller businesses – the so-called SMEs – face special challenges. Given their critical role in the economies of nations around the world, the need to address issues specific to SMEs is readily apparent. For example, here in Tunisia, more than 95 percent of all businesses have fewer than 200 employees, according to the World Bank.

On the African continent as a whole, SMEs represent over 90 percent of private businesses and contribute to more than 50 percent of the employment and GDP of most African countries, according to the African Development Bank.

To address the challenge and opportunities specific to SMEs and the SMPs that serve them, IFAC has established an SMP Committee that focuses on the needs of these groups. The committee takes an active role in ensuring that international standard setters are aware of, and give due consideration to, matters from an SMP/SME perspective in the development of their standards.

The SMP Committee also develops guidance to assist SMPs in delivering quality and serving their clients.Last December, the committee released the first in a series of new implementation guidance, entitled Guide to Using ISAs in the Audit of Small- and Medium-sized Entities. The guide is designed to assist SMPs and other practitioners in conducting high quality SME audits in accordance with ISAs.It includes an analysis of all ISAs issued by the IAASB as of December 31, 2006 and their requirements in the context of an SME audit.

Thus far, the feedback that we have received on the guide from member bodies, practitioners and others has been positive, anda number of accounting firms have advised us that they are using the guide, or adapting it for use, in in-house training. We are continuing to seek input from a wide range of constituents. For example, the IAASB has reached out to various national auditing standard setters to get their feedback on the usefulness of the guide in their jurisdictions.

Demonstrating the high level of interest in this type of implementation guidance, in the first five months since it was issued, 10,000 copies of the guide were downloaded from the IFAC website. If you are interested, you can obtain a copy of the guide free-of-charge from the IFAC website ( guide will be updated to respond to the new set of audit standards revised and redrafted under the Clarity Project. The next step should be to develop a methodology and related audit software based on this guide that will assist practitioners in performing SME audits in accordance with ISAs.

IFAC is also ready to build on the success of the Guide to Using ISAs in SME Audits with the development of further guidance for SMPs. Currently, the SMP Committee is in the process of developing a Guide to Quality Control for Use by Small and Medium-sized Practices, which will provide practical assistance for SMPs to enhance the quality of assurance engagementsand related services in accordance with international standards on quality control at the firm and engagement levels. The quality control guide is planned for release in December 2008. In addition, the committee recently issued a request for proposals to develop a guide to help SMPs improve their operational efficiency and make them more responsive to the needs of their clients. The practice management guide is tentatively scheduled for release in early 2009.

Promoting high quality work in accounting firms both small and large is essential to promoting consistent audit quality internationally and to providing businesses, investors, regulators and others with reliable financial information. However, accounting firms, regardless of their size, are just one element of the financial reporting supply chain.

In March of this year, IFAC released a report on the findings of an independent global survey of members of all sectors of the financial reporting supply chain, including investors, preparers, company management and directors, auditors, standard setters, and regulators. Participants were asked to identify the extent to which improvements have been made to four main elements related to the financial reporting supply chain: corporate governance, the financial reporting process, the audit of financial reports, and the usefulness of the financial reports.

The report found that the quality and strength of financial reports and financial reporting have improved in recent years, as have corporate governance, the preparation of financial reports, and the audit of financial reports. But the report also emphasized that investors and other stakeholders are still finding it difficult to make sense of the figures in financial reports due to insufficient narrative reporting or qualitative information on company strategy and performanceon non-financial areas. As a result, the recommendations for change included making the financial reporting information more understandable, increasing communication among all financial reporting supply chain participants, and including more business-driven information.

IFAC is already working to address these challenges. At its meeting in late-February, the IFAC Board approved a follow-up project that will take the findings of the Financial Reporting Supply Chain report to the next stage and will develop specific recommendations. This project will analyze current actions to address the suitability of business reporting and identify areas for future development.

As the findings of the Financial Reporting Supply Chain report clearly demonstrate, it is imperative that the accountancy profession continue to explore how best to serve our clients and determine what new services we can provide to the marketplace. This is essential to the future of the profession and to ensuring our continuing relevance.

I encourage all of you here today to look to the markets that you serve – whether you work within an organization, in public practice or in government –to identify where and how you can best serve your clients. At the global level, IFAC is leading the profession as it identifies and designs more efficient ways to deliver its services and generates new services that respond better to the changing demands of the market.

One area in particular in which professional accountants can take a lead role is in the area of corporate social responsibility, which includes environmental sustainability, as well as social and economic performance. I firmly believe that sustainability will be increasingly important to long-term business performance in the future, and that professional accountants will play an even greater role in sustainability and corporate social responsibility, in particular, in preparing and in auditing the reports.

This is a key way that accountants are fulfilling, and will continue to fulfil, their public interest role.

At IFAC, we are increasing our focus on corporate social responsibility and sustainability. In 2006, our Professional Accountants in Business Committee – which serves the needs of the more than one million accountants worldwide who work within organizations – released two documents on sustainability. These documents examine how professional accountants in businessand their organizations are addressing the challenges and opportunities posed by sustainability.

In addition, IFAC is currently developing a Sustainability Framework that will clearly define the different aspects of sustainability that professional accountants may be involved in and how they can deliver change in their organizations. We hope to publish the framework later this year.

I firmly believe that the profession has an important role in the fulfilment of this corporate social responsibility mission and I am convinced that, together, we can succeed in ensuring sustainable growth for our businesses, for our profession and for society as a whole.

Throughout my term as IFAC President, I have emphasized the importance of collaboration in all that we do. This is because I so strongly believe that it will take all our individual and collective efforts to achieve a better future for the profession.

Whether we are working toward achieving global convergence, enhancing the quality of the services delivered by professional accountants, meeting the needs of SMPs and SMEs, or addressing the new and changing marketplace demands, we can only succeed if we have collaboration as an operating principle.

As we look toward the future, I believe that the accountancy profession here in Tunisia, throughout the Middle East and North Africa, and globally will remain strong if it applies a collaborative approach among member bodies in the region and also with other more developed professional organizations that can be willing to cooperate with member bodies of the region. This will allow you to continue delivering the highest quality service in the benefit of the societies that you serve. This is the reason our profession was founded; it isour mandate today and it will continue to be our mission in the future.

During the rest of this forum, as you discuss the topics of education, compliance, public sector accounting and other issues, and after you leave to return to your homes, I urge you to remain focused on our profession’s core mission of protecting the public interest and think about what you can do, as individuals, to fulfill this mission and to create an even better future for our profession.

Thank you very much for your attention.

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