reparis vienna workshops "ethics in the accountancy profession" march 14-15, 2006 1...
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REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ADOPTION AND IMPLEMENTATION
OF A PROFESSIONAL CODE OF ETHICS IN MOLDOVA
Marina Shelaru, Executive Director, Association of Professional Accountants and Auditors of the Republic of Moldova (ACAP RM)
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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AGENDA
I. Accounting Profession in Moldova: ACAP Overview
II. Legal Framework on Auditing - Current status III. Implementation of Ethics Code in Moldova
IV. Difficulties & solutions
V. Future Actions, Developments & Issues to Consider
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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I. ACCOUNTING PROFESSION in MOLDOVA ACAP - Association of Professional Accountants and Auditors of Moldova, est.1996, IFAC member 1998, CIPA based full membership. Acting as NGO. (Over 800 members: coverage ≈ 14% of accountants and 15% of licensed auditors )
AFAM - Association of Audit Organizations of Moldova, est. 1997, around 30 audit firms, MoF approved auditors; acting as trade association. (Coverage ≈ 30% of audit firms)
AACM – Association of Auditors & Consultants in Management, est.2003, individuals (43) & NGOs (2); acting as NGO.
Conclusion: Coverage is very low. No market demand.
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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MISSION ACAP RM
• To grant the assistance in developing the professional accounting and auditing in the Republic of Moldova, to provide its members with information and guidance, as well as to render services at the highest professional level
• ACAP commonly shared goal: “ The development of a sustainable accounting and auditing profession in the Republic of Moldova”
ASSOCIATION OF PROFESSIONAL ACCOUNTANTS AND AUDITORS OF THE REPUBLIC OF MOLDOVA – UPDATE: August, 1996- March, 2006
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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Four categories: (760 membersas of February, 2006)
* Full member is CIPA based
Note: Coverage ≈ 20%
ACAP MEMBERSHIP
Full member* (114)
Full member* (114)
Student member (144)
Student member (144)
Associate member (500)
Associate member (500)
Honoree member (2)
Honoree member (2)
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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MEMBER SERVICES
Certification program
various training programs,
social and educational events,
the exclusive distribution of specialized literature (members of ACAP are offered substantial discounts),
editions of information and normative bulletins, affinity program,
rich library and the legislative database
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ACAP PERMANENT COMMITTEES
CERTIFICATION, EDUCATION AND TRAINING
PUBLIC RELATIONS & PUBLICATIONS
MEMBERSHIP, NOMINATIONS AND REGIONAL DEVELOPMENT
LEGISLATION & STANDARDS
FINANCE & TREASURY
ETHICS COMMITTEE
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ACAP STRATEGY
ACAP
Universities
Today’s Accounting
Professionals
Tomorrow's Accounting
Professionals
International best practices
Based Standards
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ACAP Relationships
AWG - Accounting Working GroupSRO –Self Regulatory Organizations (IFAC, ECCAA, SEEPAD, CECCAR, UFPA,, etc.)
ASWG - Auditing Standards Working GroupSCSM - State Commission for Securities MarketNB - National Bank
MINISTRY OF FINANCE MINISTRY OF EDUCATION
ENTERPRISES
A W G
SROs
A S W GUNIVERSITIES &
COLLEGES
SCSM NBM
ACAP
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ACAP ACCOMPLISHMENTS • Increased membership of ACAP from 33 on 1996 to over 1900 members in 2002• International Federation of Accountants (IFAC) accepted ACAP as an Associate
(1998) and then as an Full Member (2004). ACAP Chair -member of IFAC Developing Nations Permanent Task Force (DNPTF)
• Full Membership with South Eastern Partnership on Accountancy development (SEEPAD) and Eurasian Council of Certified Accountants and Auditors (ECCAA), IFAC Regional Grouping
• Organized the Three National Conferences of Professional Accountants and Auditors (1998-2000)
• Completed the Enterprise Manual, which facilitated the conversion to NAS of an estimated 20,000 enterprises, the Tax Manual, the Financial Accounting Manual (in partnership with Academy of Economic Studies of Moldova)
• Prepared for approval 36 National Standards on Auditing based on ISA, Code of Ethics
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ACAP ACCOMPLISHMENTS (CONT.)
• Implemented national and international (CIPA) certification programs and exams for accountants based on IFAC education standards (88 CAPs, 1 CIPA)
• Assisted in strengthening partnership with the University of Nebraska at Omaha (UNO) in developing new accounting curriculum and exchanges of professors (2001-2003)
• Held over 400 seminars in various accounting disciplines which were attended by 6,900 participants in past three years
• Held Training Sessions for over 80% of the licensed audit firms in the Audit of Financial Statements According to the National Standards on Auditing (in Fall 2000)
• Held Roundtables on IFAC IES, on discussions of new drafts on Accounting and Auditing Laws, on CIPA Program Promotion, etc..
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ACAP GOALS & PERSPECTIVES:
• One of the main goal: to cover substantial number of accountants in the country; Increase Active Membership Rolls
• Enrich and Expand The Accountant//Auditor Certification Program
• Work on implementation of IFAC Statements of Membership Obligations
• Inform Members, Firms and All Others Involved in Accountancy Education about IFAC IES
• Work towards Implementation of IFAC Ethics and Quality control requirements even without Direct Responsibility
• To achieve the role as the influencer in accounting profession’ development in Moldova and as the good standing representative of Moldova’s accounting and auditing professionals,
• Dedicate substantial efforts to eliminating its dependency on external funding sources.
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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POSITION OF IFAC MEMBER BODY
Code of Ethics for Licensed auditors and professional accountants should be based directly on IFAC Code of Ethics (June 2005)
Cooperation with the Ministry of Finance on new regulations and AA reform implementation
New Law on Auditing should provide a comprehensive regulatory framework for a significant improvement in the audit practice
Understanding of benefits for professional membership at least with one of existing professional organizations. (e.g. UK, Romania, Russia, etc.)
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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II. THE LEGAL FRAMEWORK on AUDITING - CURRENT STATUS
The Law on Auditing dates back to 1996. Regulations on certification of auditors and licensing of auditing
activity approved by the Ministry of Finance – certification is done by Attestation Commission under MoF.
37 National Standards on Auditing and 7 National Auditing Practice Statements approved by the Ministry of Finance and published by 2005.
Code of Professional Conduct for Auditors and Accountants of the Republic of Moldova – issued by MOF.
Conclusion: Major problem in current legal framework – no effective enforcement mechanisms.
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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THE NSA, CODE OF PROFESSIONAL CONDUCT, AND LAW ON AUDIT
DEVELOPMENT PROCESS
• Joint effort by MOF, SROs, audit practitioners, accountancy academia
• The Working Group on the Development of NSA under the auspices of MOF renewed
• NSAs and the Code of Professional Conduct are published in the Monitorul Oficial Government Newspaper
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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CURRENT STATUS
National Standards on Auditing (NSA) are Based on ISA (1999 and 2000 IFAC technical pronouncements)
NSAs are effective for audits of financial statements covering periods beginning on January 1, 2001
The new Draft Law on Audit is being debated by the Government with subsequent submission to the Parliament and approval till end of 2006 – is trying to comply with the current best practices
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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REVISED DRAFT OF NEW AUDIT LAW
Subject to be approved by the Parliament in 2006
Shall Became in force since 2008
General Provisions:PIOB creation Annual Meeting of Auditors Written qualification exam with content largely
compliant with IFAC education guidelines, (by State)CPD requirements – 40 hours per yearAccreditation of CPD providers, (by State)
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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CODE OF PROFESSIONAL CONDUCT OF AUDITORS AND ACCOUNTANTS OF THE
REPUBLIC OF MOLDOVA
The Code is based on IFAC Code for Professional Accountants as revised in January 1998
Approved by the Ministry of Finance and published on March 15, 2001
The Code is effective January 1, 2002
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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CODE’ S STRUCTURE
Part A – framework applies to professional accountants in public practice and employed professional accountants unless otherwise specified (all professional accountants)
Part B – professional accountants in public practice
Part C – employed professional accountants (professional accountants in business)
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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FUNDAMENTAL PRINCIPLES:
1. INTEGRITY
2. OBJECTIVITY
3. PROFESSIONAL COMPETENCE AND DUE CARE
4. CONFIDENTIALITY
5. PROFESSIONAL BEHAVIOR
6. TECHNICAL STANDARDS
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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TO WHOM CODE IS APPLY?
April 1, 2004 February 1, 2006
Certified Auditors 173 130
Including those employed with audit firms
125 75
Sole practitioners 8 5
Audit firms 117 101
Listed companies 25 26
Accountants in business - 5,800 industrial entities
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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III. IMPLEMENTATION OF THE ETHICS CODE in MOLDOVA -CURRENT STATUS
Auditing Act does not provide for abiding by a Code of ethics Neither the MoF nor any professional bodies effectively monitor auditors’
compliance with Auditing Standards and the ethics code Quality control for audit work, which appears to be applied mainly only by the
audit firms within international network Auditing practices tend to depart from the standards in several areas (e.g.
third- party confirmation of debtors & creditors; inquiries of subsequent events and the appropriateness of management’s use of the going concern assumption;)
Professional continuing education & development is not mandatory to retain a certificate of auditor and is only carried out by audit firms whose internal policies set such requirements (Note. Currently certificates are issued for a term of 5 years)
The professional examination required for the issuance of the auditor certificate does not comply with related IFAC Education Standards and EU 8th Directive.
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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EXPERIENCE OF IMPLEMENTATION OF THE ETHICS CODE IN MOLDOVA
4 years of experience shows:
As of February 1,2006: 101 audit firms, including 4 of Big Four;
5 sole individuals
73 licensed auditors
Only 3 cases of suspension of audit organizations’ licenses and 1 case of revocation in 2005
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ETHICS CODE’ S ENFORCEABILITY
The code is not legally enforceable No Ethics problem solving mechanism No enforcement procedures’ existence - no disciplinary committee or sanctions to apply No requests from public “Expectations Gap” Lack of knowledge by companies’ management
related to ethics Conclusion – no effective implementation of the code is possible without effective monitoring/enforcement mechanisms that would cover at least accountants in public practice
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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ENFORCEMENT ACTIVITY by ACAPProvisions of ACAP Strategic Plan for 2003-2008 regarding : --- Code of professional conduct:• Monitoring of observance of the Code of professional conduct,• Appling disciplinary measures to the members
--- Quality control and disciplinary activities:
• committee on quality control of observance of professional standards and ethics, and also to develop its internal procedures for realization of control activity.
• Protection of the legal rights and assertion’ professional interests of members of the association in the solution of disputable and\or conflict issues.
• carry out regular discussions of demands and blames from organizations concerning the members of the association.
• observation the honour and objective approach in the solving of disputes and to follow precisely the legislation while making disciplinary decisions. Note. It is one of the most complex and non-realized issues related to public and state recognition of profession
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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IFAC CODE OF ETHICS (as of JUNE 2005)
Became in force June 30, 2006 for ACAP RM members
Decision subject to be made by ACAP Annual Membership meeting in April 2006 (around 800 members, from which 88 CAPs, 1 CIPA, 2 CPA, 23 licensed auditors)
plans to be submitted to the MoF Working Group for further discussions and approval for all accountants and auditors
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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IV. DIFFICULTIES & SOLUTIONS
Issues: - no government regulation of the AA Profession exists
- no professional regulation of accounting profession exists
Gap of expectations:- understandings of Independence rule
- publicity / disclosures
- advertisements
- companies management and corporate governance culture: luck of understanding regard ethics and audits
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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FACTORS EXPLAINS THE DIFFICULTIES
Lack of understanding of the audit process by economic entities
Governance structures among the companies are limited
Lack of practical experience and technical expertise for applying Standard on Audit and enforcing Code of Ethics
Absence of monitoring and effective sanctions and remedies
Market does not recognize and does not understand (and does not encourage) benefits for accountants to be part of professional organization
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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WHAT PROFESSION COULD BENEFIT FROM ACAP RM
Certification Program in line with IFAC and EU requirements - CIPA
CPD Programs, including SEEPAD Regional seminars
IFAC Publications & updates; other relevant library resources
Training Programs (MoEd Licensed)
Exchange of information (e.g. from international partnerships)
Relatively Low cost membership – for high quality services
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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V. ACTIONS TO BE TAKEN
Approval of New Audit Law
An independent PIOB of auditors should be established
Develop guidelines
Implementing the quality control based on international standards principles
JEEP – Joint Ethics Enforcement Procedures
Strengthen of the professional education & training, Continue Professional Development
Encourage that accountant in public practice to be part of one professional organization
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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FUTURE DEVELOPMENTS
Development of guidelines to support the new Audit law - certification and CPD guidelines
Development of the full blown Manual on Auditing & Ethics Establishment of a system where all newly approved ISAs
and revisions thereof become effective in Moldova without a lengthy leucocratic adoption process
Delegation of some costly activities to professional organizations - e.g. certification, training, drafting and translating standards with subsequent approval by Government body, etc.
Establishing an effective enforcement mechanism – Public Oversight Body and active participation of professional organizations in enforcement
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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Strengths Weaknesses
IFAC Standards Are Adopted Mismatch Between the Law, Rules, Regulations & Capacity to Comply
Capacity Issues are To Be Expected Considering the Short Times Involved
Puts Added Burden on Accelerating Capacities on:
EducatorsRegulatorsUsersPreparers & Auditors
ISSUES TO BE CONSIDERED IN FUTURE*
Compliance & Enforcement
* Source: Dr. Gert Karreman, Carana Corp.: GAEB - GLOBAL ACCOUNTANCY EDUCATION BENCHMARKING FOR SEEPAD
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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Strengths Weaknesses
Disciplinary Committees Established Framework for Disclosure of Substandard Work or Unethical Behavior Is Not In Place or Functioning
Due Process Procedures for Discipline Are Not Developed
Sanctions Are Generally Inadequate
Peer Reviews Have Started No Public Forum to Announce Sanctions
Compliance & Enforcement (continued)
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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Strengths Weaknesses
More CPD Courses are Offered To A Wider Audience
Short on Capacity of Facilities, Trainers and Course Content
Ethics Courses Offered Teaching of Ethics & Values Must Start Early in Schools
Mismatch Between Demands of the Market and Capacity to Deliver
Organized, Functioning and Assisting Members
“Branding” of the Professional Bodies Outputs Has Not Been Accomplished
Certain Segments of the Market Prefers “Certificate” of Imported Brands
International Recognition is Lacking
CPD
REPARIS Vienna Workshops "Ethics in the Accountancy Profession" March 14-15, 2006
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Strengths vs. Weaknesses
• Quote from Michael Hammer: “. . .The formulas for yesterday’s success are almost guaranteed to be formulasfor failure tomorrow.”
• Chinese Proverb “Tell me … I’ll forget. Show me … I may remember. Involve me… then I’ll understand.”
• Educate Me and I Will Perform!
THANK YOU FOR YOUR ATTENTION!
Contacts: ACAP RME-mail: [email protected], [email protected] Tel.: (+ 373 22) 541-412, 543-408, 541-495