International Ethics Standards Board for Accountants

Monitoring Group Report

Ken Dakdduk

Paris June 2010

• Monitoring Group issued Consultation Paper June 10, 2010

• Response date August 15, 2010

• Final conclusions and associated report November 2010

Monitoring Group (MG) ReportProject Status

KEY

ACCOUNTABILITY

OVERSIGHT

CONSULTATION/ADVICE

OVERSIGHT & CONSULTATION

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• Ensure that IFAC activities are responsive to the public interest– Increased transparency– Greater public and regulatory input – Increased dialogue with regulators

• Created the PIOB, IESBA CAG, and MG Called for effectiveness review by MG five years after formation of PIOB

2003 IFAC Reforms

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• Basel Committee on Banking Supervision• European Commission• Financial Stability Board• International Association of Insurance Supervisors• International Organization of Securities

Commissions• World Bank• International Forum of Independent Audit

Regulators (observer)

Monitoring Group Composition

• Whether the reforms were implemented

• Whether the manner of implementation achieves reform objectives

• Whether original features of reforms are conducive to credible standard setting today

• Whether new factors warrant a future review

MG Approach

• Reviewed self-assessments from IFAC and PIOB– Discussed with both

• Informal discussions/information gathering– Members of IESBA CAG – Some members of IFIAR

• Considered MG members’ experiences with and observations of IESBA and CAG

MG Approach

• Mix of Board member backgrounds [R1]– Should meet the need for technical competence and

objectivity– Parity, or perhaps a majority, of members with

professional career experience that goes substantively beyond that of auditor

• Assignment of Board seats [R2]– Current practice of Forum of Firms holding five seats on

the board should be discontinued– FoF nominees should be considered with other nominees

Preliminary Conclusions

• Ability to attract public Board members [R3]– IFAC should explore financial measures, such as

stipends, to accompany travel cost arrangements for public members

• Setting a Code of Ethics for Accountants [R4]– Considered whether it is necessary or desirable to have

same degree of practitioner involvement in setting independence standards as in setting auditing standards

– MG will evaluate how expertise and perspectives of those who are or have been auditors is best included in setting ethics and independence standards and whether it would be advisable to have an alternative structure, or composition of IESBA

Preliminary Conclusions

• Role of Technical Advisors [R5]– IFAC should change manner in which expert technical

information and support is made available to Boards– Board members and not technical advisors are the

principals in the Board’s discussions, deliberations and decision making

• Participation of members in meetings [R6]– IFAC should institute a practice for Boards to invite TF

members and external guest speakers to regularly conduct technical sessions for all Board members on key issues on the Board’s agenda

Preliminary Conclusions

• Role of the CAG [R7]– IFAC should revise manner in which CAG determines

agenda items, discussion matters are presented, input is summarized and presented to Boards so that approaches used do not appear to go beyond CAG’s technical advisory role

• Meetings of the CAG [R8]– IFAC should revise approach to CAG meeting content to

provide for more realistic and effective participation approach on part of CAG members and to provide for submission of final CAG minutes to Board members before Board meetings in which discussed

Preliminary Conclusions

• Analysis of comment letters [R9]– Change how comment letter input is summarized and

provided to Board members so appropriate time is given to discuss a summary highlighting arguments made, roles of respondents, frequency with which point was raised and whether TF has taken up the input recommended and why

• Feedback on MG members input [R10]– IFAC should put in place arrangements for Boards to

provide direct feedback to individual MG group members regarding their input to Board if it does not appear that the Board will take the input in the manner the MG member recommended

Preliminary Conclusions

• Finalization of standards [R11]– IFAC should implement refinements to the manner in

which a standard comes together – e.g. by using feedback statements – so there is a better opportunity for constituents to anticipate what the content will, and then does, encompass

• Voting by members [R12]– IFAC should remove the provision for proxy voting by

Board members

Preliminary Conclusions

• Finalization of standards [R11]– IFAC should implement refinements to the manner in

which a standard comes together – e.g. by using feedback statements – so there is a better opportunity for constituents to anticipate what the content will, and then does, encompass

• Voting by members [R12]– IFAC should remove the provision for proxy voting by

Boards

Preliminary Conclusions

• Role of PIOB members [R13]– MG will consult with the PIOB and speak to IFAC to

discern how to most effectively draw upon and focus the talents of PIOB members in carrying out PIOB’s oversight work

• Role of PIOB staff members [R14]– MG will consult with the PIOB regarding how best to

orient efforts of PIOB staff to technical issue resolution in performing oversight fieldwork, with an emphasis on starting their work early in a project’s life cycle, consider comment letters, take decisions, and provide feedback

Preliminary Conclusions

• Diversity among PIOB members [R15]– MG will take a broader approach to identifying and

appointing the next set of PIOB members• Consider factors related to geographical background, staggering of membership

terms and other aspects of diversity

• Funding of PIOB [R16]– MG will, in consultation with PIOB and IFAC,

determine what longer term neutral funding arrangements can be put in place for the PIOB

Preliminary Conclusions

• Longer term operation of MG [R17 &18]– MG will look to enhance efficiency and effectiveness of

its interactions with the PIOB• Governance of PIOB Foundation,• PIOB’s oversight work• MG review of PIOB oversight cost

– MG will meet with PIOB at least once a year to discuss market and regulatory developments, challenges, opportunities for improvement

– Immediately following completion of effectiveness review, MG will further assess its role and approach to monitoring in light of its members’ experiences and specific capital market developments since Reforms adopted

Preliminary Conclusions

Discussion