An SEC official who represents the Commission on IOSCO’s Accounting Subcommittee said that the organization is committed to the development of high quality international auditing standards and uniform international financial reporting standards. In recent remarks, Associate Chief Accountant Janet Luallen noted that IOSCO has been actively monitoring the work of the IAASB and provides comments on the quality of proposed audit standards and the process for setting them, and also provides comments on the Board's agenda.
IOSCO is currently evaluating under what conditions it could endorse cross-border auditing standards. According to the official, the IAASB's responses to public interest concerns in its standard setting will be relevant to any IOSCO endorsement.
IOSCO is also exploring other issues related to audit quality, including the possible impact of audit firm concentration, auditor liability and other factors. IOSCO held roundtable discussions with its financial market stakeholders on topics related to the quality of audits in 2007. IOSCO and its members are also coordinating with auditor oversight bodies to examine and address issues affecting audit quality.
Similarly, IOSCO is currently exploring other issues related to audit quality, including the possible impact of audit firm concentration and auditor liability. IOSCO is also studying ways to make auditors' reports more relevant and informative to investors, noted the SEC official, and how to close the expectations gap by improving fraud detection by auditors.
On the accounting front, IOSCO is closely monitoring developments in IFRS. As part of this process, IOSCO comments on proposed changes and routinely discusses standard-setting work with the IASB. As part of this effort, IOSCO encourages a reduction in the complexity of accounting standards and in the number of exceptions to principles.
As jurisdictions adopt modified versions of IFRS for use by public companies, IOSCO fears that confusion may be sown among the community of financial statement users. Readers of financial statements may believe they are looking at IFRS financial statements when an issuer asserts that the standards have been used, reasoned the official, although the statements in question contain material differences from results that would be obtained using full IFRS as issued by the IASB. IOSCO believes that there is a need to inform investors as to the accounting framework used, she continued, and is currently considering what it might do encourage this.
Finally, the recently-formed IOSCO task force on market turmoil will examine issues raised by the accounting treatment of structured products. The task force will also look at special purpose entities in order to better analyze the mechanisms whereby these entities are reflected on or off the balance sheet and the possible implications in terms of risk measurement and information to investors where listed companies are involved