The International Forum of Independent Audit Regulators (IFIAR) was established in September 2006 by independent audit regulators from 18 jurisdictions. Since its creation, IFIAR’s membership has grown as a result of the establishment of new independent audit regulators in different jurisdictions around the globe, bringing together independent audit regulators from a total of 52 jurisdictions. IFIAR focuses on the following activities:
- Sharing knowledge of the audit market environment and practical experience of independent audit regulatory activity with a focus on inspections of auditors and audit firms;
- Promoting collaboration and consistency in regulatory activity; and
- Providing a platform for dialogue with other international organizations that have an interest in audit quality.
IFIAR became a Member of the Monitoring Group during 2011; the Group oversees audit and accounting related standard setting activities of the International Federation of Accountants (IFAC), monitors the activities of the Public Interest Oversight Board (PIOB), and convenes to discuss issues and share views relating to international audit quality and regulatory and market developments having an impact on auditing.
In 2015, IFIAR’s members approved a multilateral framework for information sharing, and the organization is piloting a coordinated, multijurisdictional audit inspection for gaining a better understanding of group audits. IFIAR also conducts and publishes annual surveys of its members’ inspection findings.
Based on IFIAR’s 2015-2017 Work Plan, the organization’s key objectives for the next year are:
- Improving audit quality globally
- Implementing IFIAR’s new governance structure and operations
- Strengthening IFIAR’s role as the international leader on audit matters
- Facilitating learning and cooperation among IFIAR Members
The purpose of independent audit inspections is ultimately to enhance the level of audit quality. This should in turn increase the public’s confidence in financial statements, thereby contributing to the more efficient operation of capital markets and greater investor protection. Improving audit quality remains IFIAR’s most important objective. The most important activities within IFIAR to improve audit quality globally are:
- Continuing to press the six largest global networks for actions;
- Providing input on audit standard setting and standard setting governance;
- Conducting and reporting on IFIAR’s Inspection Findings Survey;
- Publication of thought papers on matters relating to audit quality; and
- Continuing to address group audit considerations.
Congress acted in July 2002 in the aftermath of the accounting and auditing scandals at Enron and WorldCom. Investors lost approximately $67 billion at Enron alone and $161 billion at WorldCom. There were other failures as well — Tyco, Adelphia, and Global Crossing, to name a few. Accounting gimmickry at those companies included phony earnings, undisclosed related party transactions, and inflated revenues, followed by massive restatements. Inadequate oversight of accountants, lack of auditor independence, weak corporate governance procedures, stock analysts' conflicts of interest, inadequate disclosure provisions, and grossly inadequate funding of the Securities and Exchange Commission (SEC) were all deemed root causes of the scandals.
The Sarbanes-Oxley Act of 2002 ended the auditing profession's framework of self-regulation by creating the Public Company Accounting Oversight Board (PCAOB) to oversee the profession. The Act also barred audit firms from offering a number of non-audit services to their audit clients, in order to prevent conflicts of interest from arising between them and their clients. Additionally, the Act focused on the need for heightened independence, objectivity and professional skepticism on the part of auditors, as well as on enhanced transparency and accountability on the part of auditors and corporate management. The PCAOB also oversees the audits of broker-dealers, including compliance reports filed pursuant to the federal securities laws, to promote investor protection.
In addition to overseeing the audits of public companies and broker-dealers, the duties of the Board include:
- Registering public accounting firms that prepare audit reports for public companies and broker-dealers, including those that are listed on U.S. exchanges. As of March 6, 2014, there were more than 2,300 accounting firms registered with the PCAOB, including more than 900 non-U.S. firms, representing 86 countries.
- Establishing standards that relate to the profession—including auditing, quality control, ethics, independence and other standards. To date, the Board has adopted 17 new auditing standards, as well as certain ethics and independence rules.
- Conducting inspections of audits by registered firms. In 2013, the Board conducted more than 220 inspections, including inspecting audits by firms in some 22 countries outside of the U.S.
- Investigating, conducting disciplinary proceedings, and imposing sanctions on auditors and audit firms, as needed.
Established in 1973, the Financial Accounting Standards Board (FASB) is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP).
The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports.