IFAC board approves initiatives to strengthen financial reporting

At its meeting last week, the board of the International Federation of Accountants agreed to initiate a global study on how to enhance the quality of the financial reporting supply chain. It also approved a guidance document on environmental management accounting, developed jointly with the United Nations, and expressed its full support for moving ahead on initiatives to support developing nations and convergence to international standards.

Enhancing financial reporting
In the coming months, an independent chair will be appointed to lead a new IFAC global initiative on enhancing the quality of the financial reporting supply chain. The chair will be charged with considering issues such as corporate management and governance, regulatory developments, auditor independence and rotation, and the expectations around the auditor’s responsibility for the detection of fraud.

“To enhance the credibility of financial reporting, action is necessary at all points along the information supply chain that delivers financial reporting to the market,” says IFAC President Graham Ward. “This project will identify investor expectations and needs and include practical suggestions for enhancements that the global accountancy profession can provide by direct action and those where it will need to engage with others to create change.”

Environmental management accounting
Recognizing that environmental issues are of increasing concern to countries and that there is no conventional accounting practice to assist in the management of environmental issues, IFAC, together with the Division of Sustainable Development of the United Nations Department of Economic and Social Affairs, the US Environmental Protection Agency and the UK Environment Agency, participated in the development of the new International Guidance Document on Environmental Accounting. The document defines EMA, defines its uses and benefits, and includes examples of EMA applications for internal management and external reporting initiatives. It will be posted on http://www.ifac.org/ within a month.

New guidance for SMEs
Recognizing the unique reporting needs of small and medium enterprises (SMEs), the board directed the Small and Medium Permanent Task Force to move ahead on the development of guidance materials on International Standards of Auditing (ISAs) for use in SME audit engagements.