Global accounting standards gain greater acceptance

A new study by the International Federation of Accountants has found high rates of adoption of international accounting standards in areas such as auditing and ethics.

IFAC surveyed 104 of its member organizations in 80 jurisdictions around the world for its International Standards: 2017 Global Status Report. It found 79 percent of the jurisdictions (that is, 63) have adopted International Standards on Auditing for all mandatory audits, while 61 percent (49 jurisdictions) have fully adopted the 2009 or more recent Code of Ethics for Professional Accountants, and 91 percent (72 jurisdictions) have adopted International Financial Reporting Standards for all or most public entities.

In addition, 100 percent of the 80 jurisdictions have incorporated some requirements of the 2010 International Education Standards, with 20 percent of them (that is, 16) fully adopting all IES for all professional accountants. Meanwhile, 55 percent (44 jurisdictions) have made strides in the adoption of International Public Sector Accounting Standards, with 9 percent (7 jurisdictions) fully adopting all IPSAS for all public sector entities.

Courtesy of IFAC

More accounting organizations around the world are also imposing continuing professional education requirements. “I’ve been doing this for over 10 years now,” said Joseph Bryson, director of quality and development at IFAC. “When I first got into this work, I was actually in Latin America and very few companies had adopted international standards at that time. In terms of education in particular, there was very little CPE. It was a foreign concept, and now if you look at Latin America there is wide-scale adoption of international standards. All the countries are using the international standards pretty much. CPE is at least offered in every single one of the Latin American countries. That’s a significant leap over the last decade.”

The U.S. has many of its own standards for accounting, auditing and assurance from the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, and the American Institute of CPAs, but IFAC works closely with the AICPA, which is one of its member organizations, on some of the standards for private companies, Bryson noted.

There are many challenges facing professional accounting organizations, the study pointed out. They include challenges related to legislative delays, lack of stakeholder buy-in or collaboration among regulators, and lack of technical and other human and financial resources. The challenges are often associated with underlying issues in other membership criteria—governance, operational capacity, and financial viability—and can have a significant impact on a member organization’s ability to adopt and support implementation of international standards, according to the report.

“The biggest learning point for us and also for the international standard-setting boards has been really understanding that while the professional organizations, the IFAC member organizations, play a crucial role in adopting, it doesn’t fully depend on them even in the areas of ethics and education, and investigation and discipline, areas where we previously thought that the profession had more influence or more direct control or authority,” said Bryson. “The real learning point for us is that it is very much a multi-stakeholder process, and the professional organizations are real champions of influencing, advocating and supporting progress to achieve international benchmarks for competency, quality and credibility in financial information. Accountants are doing a great deal to coordinate and collaborate with government and their counterparts, regulators and stakeholder institutions to progress adoption and implementation, and the majority of their challenges lie therein.”

IFAC has also been facing some challenges of its own with a recent effort by the Monitoring Group, a group of financial and auditing regulators from various countries, to assert more control over auditing and ethics standards internationally (see IFAC concerned about losing separate standard-setting boards for auditing and ethics). The Monitoring Group sent out a consultation paper last year asking for views about the current makeup of the standard-setting boards and whether they were sufficiently representative. In response, IFAC recently commissioned the law firm Gibson Dunn to conduct an analysis of the public responses to the consultation paper from investors, standard setters, government auditors, regulators, researchers, individuals, accounting firms and professional accounting organizations from a wide range of geographies. It found the respondents generally criticized the premise of the consultation paper, disputing the notion that there are major concerns with the current standard-setting process. They expressed concern that a Public Interest Framework to evaluate change hasn’t yet been issued and agreed to. The respondents also generally expressed skepticism about the broader governance changes proposed by the Monitoring Group’s consultation paper. However, they also voiced significant support for some of the operational changes proposed in the consultation paper.

They agree with the Monitoring Group's concept of having multi-stakeholder composition of both the standards boards and their oversight bodies, with a framework that provides an umbrella within which all significant proposals can be evaluated and agreed as an integrated package by key stakeholders. But they believe any steps taken shouldn’t jeopardize the existing widespread adoption of standards from the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants, their acknowledged high quality, or the standard boards’ current work plans.