ACCA Responds to IAASB Paper
Part of the efforts of the Association of Chartered Certified Accountants involves the attempt to standardize the accounting rules across the countries of the European Union. Standardized rules would make it easier for investors or auditors reading financial statements from one country to compare them over against the statements from their country and not be concerned about differences in accounting for revenues or liabilities that would inaccurately portray the true financial health of a company.
The International Auditing and Assurance Standards Board, or IAASB published a letter last week entitled, “A Framework for Audit Quality”. The letter was meant to get everyone in the auditing or accounting profession on the same page in relation to audit quality. The letter makes it clear that in the attempt to achieve a quality audit that it isn’t always about the quality of the auditor. At times, pressure from stakeholders, or others can affect the quality of the audit through various means.
Improving audit quality is about making it easy for investors in other nations to draw conclusions about the companies’ financial position. So while it is about investors, it isn’t just investors that are benefited by a quality audit. And it isn’t just investors that are harmed by an audit that is less than ‘quality’. Some investors represent accounts that handle retirement and investment funds of thousands of people.
The audit irregularities of the ENRON scandal affected both the investors and the innocents that had money placed into the trust of investors. Everyday people lost significant percentages of their retirement account because of the less than accurate audit that was performed by the same people who were trying to hide the company’s losses and financial problems.
This letter spelled out what the IAASB calls a ‘framework’ the chief role of which is a communication to companies and users of audit reports. With quality audits, for profit and non-profit organizations, there is more confidence in both the public and private sectors regarding the position of the organization they are investigating. Several of the new regulations are perfectly sensible. Some of them are concerned with sustainable environments and a lot of non-financial information that some object to providing.