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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. 1. What are SMOsand Why are They Important?Szymon RadziszewiczSenior Technical Manager, MemberBody Development Team LeaderWorld Bank Fiduciary ForumWashington, D.C.May 3, 2012 Page 1 | Confidential and Proprietary Information
  2. 2. Presentation OverviewWhat 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. 3. Setting the SceneFocus on Africa Page 3 | Confidential and Proprietary Information
  4. 4. Ultimate ObjectiveIFAC’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. 5. Ultimate ObjectiveStrong Accountancy Profession = Inclusive andSustainable Growth High-Quality Inclusive and Financial Information Sustainable Growth Accountancy Profession Page 5 | Confidential and Proprietary Information
  6. 6. The Framework7 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. 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. 8. The FrameworkBuilding Blocks Page 8 | Confidential and Proprietary Information
  9. 9. SMOs in Action - Member Body Compliance ProgramFocus on Encouragement and ContinuousImprovement 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. 10. SMOs in Action - Member Body Compliance ProgramSMO 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. 11. Impact / AchievementsTransparency – Website Publication Page 11 | Confidential and Proprietary Information
  12. 12. Impact / AchievementsValuable Information Page 12 | Confidential and Proprietary Information
  13. 13. Impact / AchievementsAction 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. 14. Impact / AchievementsEnforcement – since 2005 • 59 suspension warnings • 18 suspensions • 9 expulsion warnings • 5 expulsions Page 14 | Confidential and Proprietary Information
  15. 15. Impact / AchievementsBeginning 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. 16. Impact / AchievementsIntersection 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. 17. Member Body Compliance ProgramGoing 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. 18. In ShortWhy 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. 19. In the ContextAfrican Landscape • Size of the continent • Large number of jurisdictions • Cultural and linguistic variety • Diversity of regulatory frameworks Page 19 | Confidential and Proprietary Information
  20. 20. In the ContextKey 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. 21. In the ContextKey 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. 22. In the ContextSuccess 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. 23. ConclusionEnd Game Page 23 | Confidential and Proprietary Information
  24. 24. ConclusionEnd Game Page 24 | Confidential and Proprietary Information
  25. 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. 26. IFAC MembershipThe 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. 27. IFAC MembershipRoad 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. 28. IFAC MembershipKey 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. 29. Tools and Resources•• organization-development-committee•••• Page 29 | Confidential and Proprietary Information
  30. 30. Page 30 | Confidential and Proprietary Information