In the hotseat - In the public interest

Why should accountants on the ground care what IFAC does? Graham Ward tells Lesley Bolton.

Graham Ward is no stranger to chains of office. In fact he has made quite a career of it. From his early days as chairman of the London Society of Chartered Accountants, he became ICAEW president in 2000 and took up the mantle of president of the International Federation of Accountants in November last year. He is, you could say, the world's premier accountant.

Yet IFAC as a global organisation lives in the shade of the more high profile International Accounting Standard Board, which as a financial reporting standards-setter is never far from the headlines.

The fact is that included within IFAC's wide-ranging remit is setting International Standards on Auditing (ISAs), which are to be endorsed by the European Commission in the same way as IFRSs have been, and the setting of guidance on ethics (adopted in the recent Ethical Standards issued by the Auditing Practice Board in the UK).

'It's true that individual accountants are not as conscious of what IFAC is doing as I would like,' says 52-year-old Ward, who is a PricewaterhouseCoopers partner. 'But I'm a great believer in the standard-setting equivalent of no taxation without representation. People are more likely to want to implement standards that they think of as being their standards as opposed to somebody else's standards.

'It's important that individual accountants who are following our standards recognise where they come from, recognise that they are set by a professional body that includes their own professional body.'

Set up by the profession in 1977, and based in New York, 163 accountancy bodies in 119 countries make up IFAC's membership. All member bodies are required to comply with a series of membership obligations to support adoption and implementation of high quality auditing, accounting, ethical and educational standards.

Navel gazing

The Enron, WorldCom and Parmalat scandals caused a lot of navel gazing, not least in the ranks of IFAC, which is putting a huge emphasis on the profession's public interest duties. Ward, who has been an IFAC board member since May 2000, was instrumental in setting up the independent taskforce on rebuilding confidence in financial reporting, and his inaugural speech as president made many references to the public interest.

Does he feel that the recent accounting scandals showed failings on the part of IFAC? 'No, at the end of the day people commit fraud because of flaws of human nature, not because of a lack of accounting or auditing standards. It's a lack of personal integrity.'

The current emphasis on public interest is a reflection that it hasn't been as explicit in the past as it is now, he says.

'I want to remind accountants that being part of the profession means that you are undertaking activities in the public interest. Audit is a big example. However, it applies to professional accountants in business as well. They are acting in the public interest by helping to generate successful businesses and by the planned leadership they provide. People won't trust you unless they know what you're up to.

'And it's not only our members that need to understand that and to deliver it, but the public themselves should realise that that's the case.'

Part of IFAC's strategy to rebuild public confidence in financial reporting includes increased transparency in its standard-setting processes. It is setting up a Public Interest Oversight Board (PIOB), which will oversee the activities of IFAC's International Auditing and Assurance Standards Board (IAASB) and Education and Ethics Committees. Ward hopes this will be up and running by the end of spring.

'It will give us an independent view that our due processes are properly established in the public interest, and whether we are actually following those processes. It will also have a role in approving the appointments to our standard-setting committees.'

Ward adds: 'If you're a standard-setter, you have to set a standard by setting an example yourself by the things you do. Integrity, transparency and expertise should drive everything we do.'

Guaranteeing the supply chain

The taskforce on rebuilding public confidence highlights the importance of integrity in the whole supply chain involved in financial reporting.

'It applies to an organisation's management, board of directors, the audit committee, the people who advise them - such as lawyers and PR consultants - regulators and users. Everyone in that supply chain has to put the truth and fairness of the financial reports above any other consideration,' says Ward.

'Our taskforce was given examples of firms of lawyers and investment bankers who deemed it a success if they managed to con the board and auditors to accept treatments that were not really proper treatments, including only making partial documentation available to them so they then came to the wrong conclusion and endorsed the reports.'

IFAC published its ethics code a few weeks before the Enron 'problems', says Ward and will be reviewing it in the light of experience. Its guidance extends to accountants in business, whose interests are served by the Professional Accountants in Business Committee. 'It can be quite a lonely role,' says Ward. 'You could easily be the only professional accountant in the business, so if you are faced with an ethical dilemma, what do you do?'

IFAC plans increased emphasis on how to help accountants in business.

A web-based resource centre is being developed bringing together information produced by various member bodies. It is also looking at sustainability issues and narrative accounting (the operating and financial review in the UK).

It is also focusing its attention on the internal audit function, and signed a memorandum of understanding with the Institute of Internal Auditors last November. Internal audit has a huge role in terms of the integrity of an organisation, says Ward - integrity in both internal and external reporting. 'It's important that the internal audit function is closely linked with a business's management, as well as the accountants providing external advice or audit services,' he comments. 'We will be looking in detail at how to carry this forward.'

Ward says IFAC will be doing more on education in the area of ethics.

Not only for accountants in business, but in the public sector as well, where IFAC also has an international public sector standard setting role.

'The World Bank is a valued partner in this work, together with other development banks, and IFAC's standards are increasingly being adopted.

They have been endorsed by the OECD and an implementation project has just begun with the European Commission,' says Ward.

Growth and stability

Ward points to IFAC's twin themes of generating growth and stability in emerging economies, under the auspices of its Developing Nations Permanent Taskforce, and emphasises that effective and transparent management by the public sector are key elements to achieving these goals.

The agenda is huge, and Ward admits that his two-year tenure as president will be barely long enough.

However, as a former captain of the Oxford University Amateur Boxing Club, he believes his career as a pugilist stands him in good stead: 'Boxing is good training in terms of leadership. It's also something that requires you to take a very disciplined approach to what you do. You have to train hard. You have to stay focused. It trains you to stay alert to what may be coming at you, from wherever it's coming.'


IFAC's boards and committees set the following standards:

•    International standards on auditing, assurance engagements and related services

•    International standards on quality control

•    International code of ethics

•    International education standards

•    International public sector accounting standards

Besides standard-setting, IFAC develops benchmark guidance and promotes sharing of resources to support professional accountants in business.

It has also established groups to address issues facing small and medium practices and enterprises, and developing nations, all of which play a critical role in the global economy.

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