Guarding the guardians

With the backing of the World Bank, the International Organisation of Securities Commissions (IOSCO) and the Basel Committee on Banking Supervision, a Public Interest Oversight Board (PIOB) has been established to oversee the public interest activities of the International Federation of Accountants (IFAC). PIOB will oversee IFAC's work on audit performance standards, independence, and other ethical standards of auditors, audit quality control and assurance standards, education standards, and the Member Body Compliance Programme. In a statement, PIOB said higher quality standards along with strengthened auditor oversight were part of the reforms recognised as necessary by regulators.

IFAC is a worldwide organisation for the accountancy profession, dedicated to serving the public interest by strengthening the accountancy profession worldwide, and contributing to the development of strong international economies. The organisation sets international standards of ethics, auditing and assurance, education, and public sector accounting. It issues benchmark guidance and studies to encourage high-quality performance by professional accountants in business.

'The creation of the PIOB is the fruit of a convergence of views between the official community and IFAC, and expresses a sense of responsibility among audit practitioners and the international institutions and regulatory organisations involved in promoting financial stability in a globalised economy,' said Michel Prada, chairman of the French Financial Markets Authority and deputy chairman of the IOSCO Technical Committee, who led co-ordination of regulators in setting up PIOB. 'This undertaking will, in enhancing the quality of financial reports and restoring public confidence, contribute to the implementation of the recommendations of the G7 finance ministers.'

'Public oversight is critical to building credibility and confidence in international standards. This, in turn, contributes to confidence in the financial information produced by companies, in the examinations carried out by their auditors, and, ultimately, in the capital markets that rely on such information,' states IFAC President Graham Ward. 'The formation of the PIOB, together with the other reforms unanimously approved by international regulators and the IFAC Council, is critical to IFAC achieving its goal of serving the public interest.'

The PIOB will be chaired by Stavros Thomadakis, professor of finance at the University of Athens and former chairman of the Hellenic Capital Market Commission. He said: 'The creation of the PIOB is a landmark in the cooperation of world regulatory organisations for the oversight of international standard-setting for auditors. The project of the PIOB is ambitious and represents a novelty for world-level public oversight. Success for the PIOB will mean quality, stability, and integrity in companies and world markets. It is a heavy responsibility which must be carried out in close co-operation with national oversight authorities for accountancy, as well as the regulatory organisations and IFAC.'

Roger Adams, ACCA executive director - technical, welcomed the creation of PIOB. He said: 'Creating a PIOB is a necessary step in rebuilding confidence in the global accounting profession. For IFAC to retain a standard setting role - for auditing, public sector accounting, ethics and education - it had to become more inclusive and has to demonstrate to its stakeholders that there is excellent due process. The PIOB should be able to confirm to the outside world that this is indeed the case.

'Although Enron and Parmalat may now seem an age away, things move much more slowly in regulatory circles, hence the mechanisms which the previous president of IFAC put in place are only becoming operational now under his successor Graham Ward.'

PIOB will oversee the activities of four public interest activity committees (PIACs), the International Auditing and Assurance Standards Board (IAASB), the Ethics Committee, the Education Committee, and the Compliance Advisory Panel. As well as establishing the PIOB, IFAC has also agreed to strengthen the standard-setting processes, particularly through these PIACs, to create a more transparent nominating process and committee structure, and to implement a Member Body Compliance Programme. These moves are backed by a commitment to close ongoing dialogue between IFAC and international regulators.