International Auditing and Assurance Standards BoardInternational Auditing and Assurance Standards Board

Convergence with International Standards Convergence with International Standards on Auditingon Auditing

John Kellas, IAASB ChairmanJohn Kellas, IAASB Chairman

CReCER Regional ConferenceCReCER Regional ConferenceJune 14, 2007June 14, 2007

AgendaAgenda• Why convergence mattersWhy convergence matters• The challenges of convergenceThe challenges of convergence• Meeting the challenges of convergenceMeeting the challenges of convergence• ConclusionConclusion

AcceptanceAcceptance• Wide acceptance of international standardsWide acceptance of international standards

– ““Wong” ReportWong” Report– 12 Key Standards for Sound Financial Systems12 Key Standards for Sound Financial Systems

BenefitsBenefits• International investorsInternational investors

– Applicable to listed and unlisted entitiesApplicable to listed and unlisted entities

• International regulatorsInternational regulators• Auditing firmsAuditing firms• Educators and learnersEducators and learners

Convergence vs. AdoptionConvergence vs. Adoption• Meaning of “convergence”Meaning of “convergence”• Adoption is preferred approachAdoption is preferred approach

– All the advantages of convergenceAll the advantages of convergence– All countries may contribute to standard-setting All countries may contribute to standard-setting

processprocess– Fastest way to eliminate / minimize differencesFastest way to eliminate / minimize differences

ChallengesChallenges• Starting pointStarting point

– Established national standard setting process Established national standard setting process vs. new economiesvs. new economies

• Authority of standard settersAuthority of standard setters– Standard setting no longer a function of most Standard setting no longer a function of most

IFAC member bodiesIFAC member bodies

• Cultural differencesCultural differences

Challenges (Cont.)Challenges (Cont.)• Philosophical differencesPhilosophical differences

– Rules vs. principles / objectivesRules vs. principles / objectives

• The scope of the standardsThe scope of the standards– Application of standards to all types and sizes Application of standards to all types and sizes

of entity by all sizes of audit firmof entity by all sizes of audit firm

• TranslationTranslation• Frequency and complexity of changesFrequency and complexity of changes

Meeting the ChallengesMeeting the Challenges• Working in partnership with national standard Working in partnership with national standard

setterssetters• National standard setters to address matters of National standard setters to address matters of

domestic concerndomestic concern– Guidance on modifications to ISAs issued in July 2006Guidance on modifications to ISAs issued in July 2006

• Composition of the IAASBComposition of the IAASB• Dialogue with ‘stakeholders’Dialogue with ‘stakeholders’

– IAASB Consultative Advisory Group and othersIAASB Consultative Advisory Group and others

• Development of high-quality standardsDevelopment of high-quality standards

High-Quality StandardsHigh-Quality Standards• High-quality standards are:High-quality standards are:

– ClearClear– Not capable of different interpretationsNot capable of different interpretations– Capable of translationCapable of translation– EnforceableEnforceable– Designed to achieve a high-quality auditDesigned to achieve a high-quality audit– ‘‘Jurisdictionally neutral’Jurisdictionally neutral’– Strike a balance between principles and rulesStrike a balance between principles and rules– Subject to due processSubject to due process– Subject to public oversightSubject to public oversight

Conclusion Conclusion • Adoption of international standards should Adoption of international standards should

be supported bybe supported by– International Quality Control StandardsInternational Quality Control Standards– IFAC Code of Ethics for Professional IFAC Code of Ethics for Professional

AccountantsAccountants– Implementation guidance and adviceImplementation guidance and advice– Training and educationTraining and education– Monitoring and enforcementMonitoring and enforcement

Conclusion (Cont’d)Conclusion (Cont’d)• 100+ countries use, base their standards on, 100+ countries use, base their standards on,

ISAsISAs• Significant announcements bySignificant announcements by

– Canada, China, India and the USACanada, China, India and the USA

• Project to adopt ISAs in the European UnionProject to adopt ISAs in the European Union• Contribution of IFAC Member Bodies in Contribution of IFAC Member Bodies in

Latin America is recognizedLatin America is recognized

International Federation of AccountantsInternational Federation of Accountantswww.ifac.orgwww.ifac.org