Academic journal article Journal of Accountancy

IFAC, Firms to Apply International Standards Consistently

Academic journal article Journal of Accountancy

IFAC, Firms to Apply International Standards Consistently

Article excerpt

The International Federation of Accountants and seven major transnational accounting firms together are planning a global initiative to strengthen international accounting and auditing practices. IFAC hopes firms in the alliance, by uniformly applying standards developed by the International Accounting Standards Committee (IASC), and its own international auditing practices committee (IAPC), will help the world's nations increase the transparency, reliability and consistency of their financial statements. And that, IFAC thinks, will encourage investors to move more public and private capital across international borders.

The IFAC alliance, known as the Forum of Firms, so far consists of the Big Five firms plus Grant Thornton LLP and BDO Seidman, LLP, but IFAC said firms of any size can apply for membership. In order to qualify, applicants must have, or anticipate working with, clients that conduct business in two or more international jurisdictions. "The classic example of such a client is Coca-Cola, which operates all around the world, but, of course, there are smaller ones," said Peter Johnston, IFAC's director.

Member firms also are required to establish, and train their staffs to observe, internal policies and practices that comply with international accounting standards (IASs), international standards on auditing (ISAs) and the IFAC code of ethics.

"It's possible, at first, that few transnational firms will qualify for membership," Johnston acknowledged to the JofA. Firms that gain admission to the group must submit to quality control and monitoring and ensure that all their offices--domestic and international--consistently use adequate standards. Other requirements include supporting the establishment of professional bodies and international standards in developing countries.

The initiative also calls for independent oversight of IFAC's public interest activities, although it is not yet clear who would perform that function. "It would have to be a group of people who are independent of the profession, but interested in and knowledgeable about it," Johnston said, adding that the oversight board clearly must draw some of its members from jurisdictions other than the United States and western Europe. …

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