What Are the IFAC SMOs and Why Are They Important?
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Presentation give by IFAC Senior Technical Manager Szymon Radziszewicz at the World Bank's Fiduciary Forum in May 2012 on the importance and role IFAC's Statements of Membership Obligations (SMOs) play in helping professional accountancy organizations around the world encourage and support high-quality financial information and inclusive and sustainable economic growth.
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What Are the IFAC SMOs and Why Are They Important?
- 1. What are SMOs and Why are They Important? Szymon Radziszewicz Senior Technical Manager, Member Body Development Team Leader World Bank Fiduciary Forum Washington, D.C. May 3, 2012 Page 1 | Confidential and Proprietary Information
- 2. Presentation Overview What We Will Cover Today • Background – Ultimate Objective • SMOs as the Framework for PAOs – Key areas of focus – Applicability framework – SMOs as building blocks • SMOs in action – Member Body Compliance Program • Impact of the SMOs and way forward • In the Context of Africa • IFAC Membership Page 2 | Confidential and Proprietary Information
- 3. Setting the Scene Focus on Africa Page 3 | Confidential and Proprietary Information
- 4. Ultimate Objective IFAC’s Vision For the global accountancy profession to be recognized as a valued leader in the development of strong and sustainable organizations, financial markets and economies Page 4 | Confidential and Proprietary Information
- 5. Ultimate Objective Strong Accountancy Profession = Inclusive and Sustainable Growth High-Quality Inclusive and Financial Information Sustainable Growth Accountancy Profession Page 5 | Confidential and Proprietary Information
- 6. The Framework 7 Statements of Membership Obligations SMO1 Quality Assurance SMO2 International Education Standards SMO3 International Standards on Auditing SMO4 International Code of Ethics SMO5 International Public Sector Accounting Standards SMO6 Investigation and Discipline SMO7 International Financial Reporting Standards Page 6 | Confidential and Proprietary Information
- 7. Understanding the SMO Applicability Framework Degree of responsibility for an SMO area No Direct Shared Responsibility For the elements for Use best endeavors to: Implement all the which Member Body requirements of the has direct a. Encourage those SMO responsibility follow responsible for the the approach for requirements to follow In exceptional situations "Direct" this SMO in departures are possible implementing them; if can be justified from AND the public interest AND perspective and need to For the elements for be documented which Member Body has no direct b. Assist in the responsibility follow implementation where the approach for appropriate "No Responsibility " Page 7 | Confidential and Proprietary Information
- 8. The Framework Building Blocks Page 8 | Confidential and Proprietary Information
- 9. SMOs in Action - Member Body Compliance Program Focus on Encouragement and Continuous Improvement Self -Assessment Overview of national Benchmarking against the 7 regulatory and standard- SMOs setting framework Action Plan Strategic document illustrating a PAOs progress toward, or continued compliance with, SMO requirements Page 9 | Confidential and Proprietary Information
- 10. SMOs in Action - Member Body Compliance Program SMO Action Plan as a Road Map To: • Communicating challenges and defining needs for resources to key stakeholders: – Government and its agencies – Independent regulators – Donors – PAO’s members • Building capacity of PAOs • Progressing adoption and implementation • Improving quality of financial reporting and auditing • Better serving the public interest and ultimately sustainable economic development Page 10 | Confidential and Proprietary Information
- 11. Impact / Achievements Transparency – Website Publication Page 11 | Confidential and Proprietary Information
- 12. Impact / Achievements Valuable Information Page 12 | Confidential and Proprietary Information
- 13. Impact / Achievements Action Plan Status CATEGORY STATUS JAN 2011 APR 2012 3rd Iteration Published 0 31 2nd Iteration Published 27 70 1st Iteration Published 90 58 Total Published 117 159 Drafts in Review 24 2 Work in Progress 23 6 TOTAL 164 167 Page 13 | Confidential and Proprietary Information
- 14. Impact / Achievements Enforcement – since 2005 • 59 suspension warnings • 18 suspensions • 9 expulsion warnings • 5 expulsions Page 14 | Confidential and Proprietary Information
- 15. Impact / Achievements Beginning of the Road • Action Plans as first step: • Transparent plans for continuous improvement • Annual updates • Monitoring of progress by CAP • Influencing action and transformation • Time and resources needed to achieve meaningful change Page 15 | Confidential and Proprietary Information
- 16. Impact / Achievements Intersection with Development Agenda • CAP and staff outreach • Working with Regional Organizations • Peer Reviewer and Institutional Support to ROSC Accounting and Auditing Reports – SMOs used as benchmarks in ROSC reviews – PAO Action Plans linked with Country Action Plans • Professional Accountancy Organization Development Committee Page 16 | Confidential and Proprietary Information
- 17. Member Body Compliance Program Going Forward • SMO Revisions – in Progress, expected Nov 2012 • Monitoring Progress and Action Plan Updates • Further transparency on adoption and infrastructure gaps • Continued interaction with the donor community, ROs/AGs and the PAO Development Committee • Leverage the information gathered – improve presentation and user friendliness Page 17 | Confidential and Proprietary Information
- 18. In Short Why Are SMOs Important • The SMOs are the framework for PAOs and basis for IFAC Member Body Compliance Program • The Program drives the adoption and implementation support of international standards – PAOs are instrumental in supporting the adoption and implementation of auditing and financial reporting standards and ethical requirements • IFAC Member Body Development staff have deep technical knowledge of professional, regulatory and legal environments in over 120 countries – IFAC staff = 7 full time technical staff devoted to Program and development of the profession Page 18 | Confidential and Proprietary Information
- 19. In the Context African Landscape • Size of the continent • Large number of jurisdictions • Cultural and linguistic variety • Diversity of regulatory frameworks Page 19 | Confidential and Proprietary Information
- 20. In the Context Key Challenges • Lack of financial and technical capacity in many professional accountancy bodies calls for: – Investment in the accountancy profession by national governments and donor agencies – Support of regional organizations – More advanced bodies acting as mentors – Development of guidance and tools • Abilities of bodies to clearly communicate challenges, and need for resources is crucial to obtain assistance Page 20 | Confidential and Proprietary Information
- 21. In the Context Key Challenges • Outdated statutory frameworks call for revision and the development of requirements related to: – The empowerment of the various institutions and the clarification of their responsibilities – The ongoing adoption and implementation of international standards – The establishment of QA review systems • Professional bodies and other relevant institutions should promote legal amendments and provide input as needed Page 21 | Confidential and Proprietary Information
- 22. In the Context Success Factors • Support PAFA, ABWA and FIDEF to support the establishment and strengthening of PAOs in the region • Support development and modernization of financial sector framework • Support existing processes of adoption and implementation of international standards • Encourage synergies and economies of scale with regional standard-setters when they exist • Encourage the development of implementation guidance and tools Page 22 | Confidential and Proprietary Information
- 23. Conclusion End Game Page 23 | Confidential and Proprietary Information
- 24. Conclusion End Game Page 24 | Confidential and Proprietary Information
- 25. IFAC Membership: The Benefits • Part of an international community of the leading professional accountancy bodies around the world • Recognized for commitment to development of the profession • Access to information, resources and support to help strengthen the profession nationally • Enhanced opportunities to provide input • Ongoing dialogue with technical staff Page 25 | Confidential and Proprietary Information
- 26. IFAC Membership The Requirements Acknowledged by legal decree or by general consensus Meets SMO obligations Participates in the Member Body Compliance Program Committed to IFAC Financially and operationally viable, with an appropriate governance structure Provides for the support and regulation of members Page 26 | Confidential and Proprietary Information
- 27. IFAC Membership Road Map • Mentoring arrangements • Early engagement with IFAC • SMO Action Plan as a Road Map • Understanding of the membership requirements • Considerable progress must be shown to move from Associate to Member. Page 27 | Confidential and Proprietary Information
- 28. IFAC Membership Key Considerations • Legislation: Legal recognition/structure • Regulation of the Profession: Relationship with government • Governance: Organizational structure • Committees: Key areas of function/activity • Management: Professional staff • Financing: Funding operations and activities • Marketing/Promotion: Raising awareness and defining value statement Page 28 | Confidential and Proprietary Information
- 29. Tools and Resources • www.ifac.org/ComplianceProgram • www.ifac.org/about-ifac/professional-accountancy- organization-development-committee • www.ifac.org/SMP • web.ifac.org/clarity-center/index • www.ifac.org/Ethics/Resources.php • www.ifac.org/Translations Page 29 | Confidential and Proprietary Information
- 30. www.ifac.org/ComplianceProgram www.ifac.org Page 30 | Confidential and Proprietary Information
Editor's Notes
- Global organization for the accountancy professionComprised of 167 Members and Associates in 127 countriesMembers and Associates are Professional Accountancy OrganizationsRepresents 2,5 millions accountants in public practice, business, government, and academiaThe color may be uniform but there are different ways to effectively organize the profession, different legislative frameworks, different stakeholder expectations and capacity Green – membersYellow – associates onlyGrey – no IFAC representation
- The SMOs are alignedwith the underlying International Standards and providekey focus areas for the profession
- To understand how the SMOs can work for each organization, you must first understand the applicability framework
- Once you understand what are the specific responsibilities for each SMO area you can use SMOs as the building blocks defining the PAOs. While the priorities and emphasis on each SMO area can be different for each PAO, the basic ideas are the same. The accountancy profession needs to: Have solid base of education (experience, examination) and focus on lifelong continuous professional development [click] Focus on adoption and implementation of international standards [click] With strong ethical standards as the cornerstone AND [click] Quality assurance and investigation & discipline as mechanisms to maintain and continuously improve high quality practice by professional accountants.
- SMOs form the basis for the IFAC Member Body Compliance Program. The Program’s key focus is to encourage continuous improvement and development Evaluate the extent to which members are meeting the SMO requirements Assist members in adopting and implementing international standards and best practices Demonstrate progress being made and how the SMO requirements are being addressed through the Action Plans Promote transparency through publication of responses on the IFAC website. Action Plans are prepared by member bodies for their own use and reflect their specific national frameworks, priorities, processes and challenges. As a result, Action Plans vary in objective, content and level of detail. The key is that the member bodies takes full ownership of the plan which is the only way for the Action Plan to be successfully implemented.
- Why transparency is important:The self-assessment responses are available to anyone who wants to review such information Regulatory Input – the Program can assist regulators and other key stakeholders in achieving their objectives by providing a transparent assessment of the current status of adoption of international standards and best practices in their jurisdictions.
- Progress File Notes – Internal Use of Dashboards with Traffic LightsThrough the Compliance Program IFAC gathers and publishes a great deal of information relating to the work of its member bodies around the world and the developments within national professions. This information can be leveraged by donors, regional bodies, regulators and indeed mentors interested in development of the profession.Improve presentation and user friendlinessG-20 Adoption Status Updates – verification with relevant member bodiesProgress File Notes – Internal Use of Dashboards with Traffic Lights
- The vast majority of members have published their action plans. The CAP and staff constantly monitor the timeliness of submissions - enforcement action can happen at any time when the member body is non-responsive for more than 2 months
- Regardless of the focus on encouragement and improvement enforcement options include suspension warning, suspension, and expulsion from membership for lack of commitment to the Compliance Program.They have been very effective in mobilizing the response of member bodies.
- The Action Plan phase is still just the beginning of the process. The goal is actual change reflected by the completion of the action steps identified in the plan. Through the member body requirements contained in the SMOs, the Program has made a substantial contribution to transforming IFAC into a global professional organization that is demonstrating its commitment to strengthen the accountancy profession around the world.As indicated before, the Program serves as an engine to drive behavior in a positive way to achieve the successful adoption and implementation of international standards and best practices.
- Refer to the first slide
- Part of an international community of the leading professional accountancy bodies around the worldRecognized for commitment to development of the profession and values of integrity, transparency and expertise Access to information, resources and support to help strengthen the profession nationallyEnhanced opportunities to provide input on critical issues, including developing nation initiatives, SMP issuesAccess to guidance and advice from the MBD team and other technical staff within IFAC
- IFAC’s Establishing and Developing a Professional Accountancy Body Toolkit offers a wealth of resources and guidance to getting started. I know we have already spoken about some of the content areas around which mentoring relationships are formed. No doubt many of those in the room are already very familiar with the basics, however, to conclude I wanted to highlight some of the key considerations for any newly established PAO, and indeed their mentor.
- Somespecifictools for PAO development:Good Practice Guidance, Establishing and Developing a Professional Accountancy BodyMentoring Guidelines for Professional Accountancy OrganizationsThe Education, Training, and Development of Accounting Technicians