INTERNATIONAL FEDERATION OF ACCOUNTANTS

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International Federation of Accountants
The Role of the Auditor in Enhancing Public
Confidence Presented by Nick Fraser
November 14, 2006
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Reporting Financial Supply Chain
BACKGROUND

• Public confidence in financial reporting
  requires everyone in the supply chain to perform
• Sound financial reporting and auditing
• Starts with management
• Needs the support of the Board of Directors and
  the Audit Committee

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The Auditor
THE ROLE OF THE AUDITOR

• The Auditor is one element in the financial
  reporting supply chain
• Scandals have led to questions about the quality
  of audit
• Profession has responded

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Forum of Firms
FORUM OF FIRMS/TAC

• Founded in 2001 as the formal mechanism through
  which international auditing networks of audit
  firms can participate directly in IFAC activities
• Constituent entities of Forum members audit more
  than 90 of publicly listed companies worldwide
  and undertake a significant proportion of all
  audits with a transnational element

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Provisional Members of the Forum
FORUM OF FIRMS

• Jefferys Henry
• KPMG
• Mazars
• Moore Stephens
• PKF
• Polaris
• PricewaterhouseCoopers
• RSM
• Russell Bedford
• TAGI
• Urbach Hacker

• Baker Tilly
• BDO
• Constantin
• Deloitte
• DFK
• Ernst Young
• Grant Thornton
• HLB
• Horwath
• International Eurogroup
• INPACT
• IGAF

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Forum of Firms
FORUM OF FIRMS/TAC

• New Constitution approved in February 2006
• Members must commit to
• Use ISAs
• Maintain appropriate quality control standards in
  accordance with ISQC 1
• Comply with the IFAC Code of Ethics
• Conduct globally directed internal inspection
  programs

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Forum of Firms
FORUM OF FIRMS/TAC

• Members have until December 2007 to show they
  meet the requirements to be deemed full members
• After 2007, networks may only join upon
  confirmation of meeting membership obligations

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Transnational Auditors Committee
FORUM OF FIRMS/TAC

• IFAC committee and executive arm of the Forum of
  Firms
• Responsibilities include
• Identifying audit practice issues
• Providing a forum to discuss best practices in
  areas including quality control, auditing
  practices, ethics and training and development

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Transnational Auditors Committee
FORUM OF FIRMS/TAC

• TAC nominees serve on the IAASB, Ethics, and
  Education Standards Boards
• Provides input to the standard-setting process
• Participates in IFAC regulatory programs
• PIOB
• Monitoring Group
• EGAOB

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Transnational Auditors Committee
FORUM OF FIRMS/TAC

• Current Projects
• Review of external inspection reports to identify
  trends that can help firms improve audit quality
• Best practice papers in development
• Consistent application of IFRS across network
• Tone at the Top

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Ethics and Standards
STANDARDS

• Ethics
• Auditor needs to act with objectivity and
  independence
• Audit Standards
• Good audit quality starts with high quality
  auditing standards

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Audit Quality Standards
STANDARDS

• IFACs ISQC 1
• Audit firm responsible for setting up and
  maintaining a system of quality control for all
  audits
• ISA 220
• Establishes standards for specific
  responsibilities of audit firm personnel

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Quality Control
STANDARDS

• Audit Firm Quality Control
• Essential to manage firm risk and firm reputation
• Audit firms need to be committed to continual
  improvement
• Need to demonstrate commitment to audit quality
  to all in the supply chain

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Managing Expectations
THE ROLE OF THE AUDITOR

• Auditors need to ensure their role is well
  understood
• Key challenge is to manage the expectations gap
• Need to inform the supply chain
• The role of the auditor
• The limitations of audit

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Responding to Challenges
TYPE TEXT HERE ALL CAPS

• Auditors need to work with others in the supply
  chain
• Regulators and audit oversight bodies
• Standards setters
• Investors
• To ensure the credibility and value of the audit

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Summary
THE ROLE OF THHE AUDITOR

• Quality audits are an essential component of the
  financial reporting supply chain.
• Profession needs to demonstrate its willingness
  to continually improve quality to enhance
  confidence in financial reporting

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International Federation of Accountants