IFAC’s goal is to have an established accountancy profession in every country around the globe. There is no doubt that this is a lofty goal, but as we look ahead and see that the growth of the world’s population will largely be in developing economies, I am more and more certain that this goal is one which we cannot compromise or forsake. We are in the process of finalizing a developing nations tool kit that will assist these countries in establishing an accountancy body and, where an accountancy body exists, further develop and enhance it. More than this, we will facilitate ongoing, committed support from developed accountancy bodies to provide practical, long term help.

Just as the WFE works to support newer and smaller exchanges, IFAC also has a focus on small and medium practices (SMPs) and entities (SMEs). We well recognize that in many countries the world over, including here in India, SMEs play a very significant role in terms of contributing to economic growth. In the Asia Pacific Economic Cooperation, which represents some 20 countries and more than 47 percent of world trade, SMEs make up about 99 percent of all enterprises. They are also the backbone of the European economy, representing 99 percent of all enterprises in the EU. IFAC’s focus on SMEs is simple: to help them to deliver high quality work by both serving as a resource and providing relevant guidance. As SMEs struggle to compete in a global world, they, like larger entities, must be aware of a wide range of international rules and regulations. Often faced with resource constraints, this can be difficult to manage. IFAC is commissioning the development of an electronic information exchange for SMPs and SMEs, and a guide to international standards on auditing, which I will touch on very shortly, designed specifically for the audits of SMEs. We view the development of this guide as essential to helping SMEs to meet their responsibilities to the public and to boosting investor confidence.

Let me now turn to some of the global initiatives IFAC has undertaken since January, to help the accountancy profession to meet its public interest responsibilities and to contribute to economic growth and stability, by focusing on four critical areas.

First, before all else, we must actively promote adherence to high ethical standards by all professional accountants, including those in private industry, public practice and government.

Secondly, we must be a vocal advocate for strong corporate governance, both within the profession and to management.

Thirdly, we must develop and encourage adherence to high professional standards so that accountants know what it takes to deliver quality.

Lastly, IFAC must demonstrate to the world that the profession is meeting its responsibilities to deliver quality and to protect the public interest. In other words, we must show that the work we do is, in fact, making a difference.

Let me return to the first point – promoting high ethical standards.

Ethical conduct lies at the core of all business. We do business with those we trust; we get business from those who trust us. It is at the root of generating confidence in both individuals and entities. Ethics, therefore, is a driver of business growth which demands attention from boards and investors alike. We also need to remember that ethics is personal. It involves a commitment to values that affect how each of us makes our personal decisions and, in fact, how we live our lives each and every day.

IFAC’s values of integrity, transparency and expertise are reflected in every facet of our work. To build credibility in financial systems and to contribute to sound economic systems, we must also promote these values to all professional accountants, both in practice and in business, as well as to all those in the financial reporting supply chain. And we must do so in a way that is relevant and meaningful. IFAC’s Ethics Committee, which develops the international Code of Ethics for Professional Accountants, does just this. The committee recently released a revised Code of Ethics which establishes a conceptual framework for all professional accountants to ensure compliance with the five fundamental principles of professional ethics. These principles are integrity, objectivity, professional competence and due care, confidentiality and professional behavior. Under the framework, professional accountants will be required to identify threats to these fundamental principles and, if there are threats, apply safeguards to ensure that the principles are not compromised. The framework applies to all professional accountants, those in public practice as well as those in business and government. The Ethics Committee, recognizing that both governmental and business accountants play significant roles in safeguarding the public trust, plans to provide further guidance for these accountants in the near future.

The Ethics Committee is also focused on an issue that is perhaps most central to public trust and one that has received widespread attention by the media and regulators: auditor independence. A forum on the topic was held in mid-October in Brussels and attended by regulators, standard setters, corporate management, IFAC member bodies, and others. This input is part of an extensive Ethics Committee consultative process that will help to determine how the independence guidance should be modified better to address the public interest.

IFAC has also focused on promoting strong corporate governance. In an independently written report commissioned by IFAC, Rebuilding Public Confidence in Financial Reporting, developed two years ago under the leadership of John Crow, former governor of the Bank of Canada, it was emphasized that actions must be taken to strengthen corporate governance. For example, corporate management must place greater emphasis on the effectiveness of financial management and controls, corporate ethics codes need to be in place and effectively monitored, and threats to auditor independence need to be given greater attention in corporate governance.

The findings of this report provided much impetus to IFAC’s Professional Accountants in Business (PAIB) Committee, as well as to other international groups. The PAIB Committee is in the process of finalizing a document on corporate codes of conduct which, among other things, highlights the professional accountant in business’s role in developing, monitoring and adhering to such a code.

This IFAC committee has also turned its attention to how best to improve the performance of organizations, and thus ensure wider prosperity for all. In 2004, our Professional Accountants in Business Committee, working with The Chartered Institute of Management Accountants (CIMA), issued a report on corporate governance best practices entitled, Enterprise Governance – Getting the Balance Right. The joint group conducted an in-depth analysis of corporate successes and failures in 27 case studies from 10 countries. Among the report’s findings were that there are four key determinants of corporate success and failure: the culture and tone at the top, the chief executive, the board of directors and the internal control system.

The report also revealed that good governance on its own cannot make a company successful. Companies need to balance conformance with performance. To quote: “Unlike the conformance dimension, there are no dedicated oversight mechanisms, such as audit committees, in the arena of strategy. … There is a danger that in the laudable attempt to improve standards of control and ethics, insufficient attention is paid to the need for companies to create wealth and to ensure that they are pursuing the right strategies to achieve this.”

The study examined the concept of ‘enterprise governance.’ Enterprise governance has two equal parts: probity and profitability. I would suggest that one without the other isn’t worth having. Businesses that have the highest ideals but go bankrupt, through poor strategic choices, are as disastrous to shareholders, to other stakeholders and to public confidence as are businesses that fail because of ethical lapses.

At the same time, a profitable business that is managed and overseen with little regard for the public interest, the law, regulations, employees or shareholders should not be in business and, ultimately, will not be in business. Of course, this concept does not apply only to the private sector, to industry and to for-profit organizations. Instinctively, those who work for international organizations, national governments and agencies, and non-governmental organizations understand that they too need to have integrity in all that they do, while at the same time making wise strategic choices that ensure organizational success.

Let me turn now to standards and the need for a common set of recognized and accepted international standards.

The Task Force on Rebuilding Public Confidence in Financial Reporting also recommended that audit standards and regulation be strengthened and that the progress of convergence to international standards be more urgent. IFAC has invested, and continues to invest, a significant amount of effort in these areas. We well recognize that in order for practitioners to deliver quality, they need high quality, internationally accepted standards. Thus, at IFAC, increased effort has been placed on enhancing our standard-setting processes, on improving the transparency of those processes and on devoting more resources to them.

The International Auditing and Assurance Standards Board, our Ethics Committee, our Education Committee, and our International Public Sector Accounting Standards Board have increased the public interest input into their standard-setting processes. The IAASB, Ethics Committee, and Education Committee all include public members and such members will be appointed to the IPSASB next month. In addition, all of these groups now have consultative advisory groups, comprised of relevant stakeholders, including the WFE, represented by Thomas Krantz, who can provide meaningful input to the work programs of each group from a public interest perspective.

The international Public Interest Oversight Board (PIOB), formed in February of this year and chaired by Professor Stavros Thomadakis (a former Chairman of the Hellenic Securities Commission), has eight members and two observers, all very senior people, appointed by international bodies of regulators and institutions. It also is strongly supported by the Financial Stability Forum. The appointing bodies are: IOSCO, the International Association of Insurance Supervisors, the Basel Committee, the World Bank and the European Commission. The PIOB oversees the work of the IAASB and of IFAC’s Ethics and Education Committees and endorses appointments to them. In September 2005, it approved the due process and working procedures that they should follow.

Time does not permit me to enumerate all the projects and standards that are under development by these groups; but I can assure you that they each are addressing areas where the public interest is most significant. For example, the IAASB is addressing the clarity of its standards and released just last week four new proposed standards designed to further enhance the quality of auditor reporting. Recently, the Education Committee released an exposure draft on the training of audit professionals, recognizing the special needs of this segment of the profession. It is also in the process of preparing a tool kit on ethics, featuring different approaches to ethics education. This should be completed by the end of the year.

IFAC is committed to all accountants carrying out high quality work. The developments in governance public interest oversight, auditing, ethics and education, which I have described will improve the quality of audited financial statements and, thereby, the quality of information received by the capital markets and capital allocation decisions. In this context I would like to recognise the high quality work carried out by the Institute of Chartered Accountants of India, led by its President, Shri Kamlesh Vikamsey, in promoting high quality standards of auditing in this country.

Through its International Public Sector Accounting Standards Board (IPSASB), IFAC develops International Public Sector Accounting Standards, designed to improve public sector financial management and accountability. We view this as an increasingly important area of IFAC activity. Governments, both how they operate and perceptions about how they operate, have a strong influence on investor decisions. Governments, perhaps more than any other entity, must have a strong public interest focus. After all, they are the ones to whom most of us entrust our money in the form of taxes. They are the ones that control state and national budgets, or in other words, our money. And they are the ones that make fiscal decisions that affect the well-being of the world’s citizens.

IFAC’s International Public Sector Accounting Standards, which are based on International Financial Reporting Standards (IFRSs), enhance governmental accountability at all levels. Support for the standards from the OECD, NATO, and the World Bank has further enhanced the value of these standards and the importance of achieving convergence in this important area. This is, in fact, an area in which IFAC is moving steadfastly ahead. In October, the IPSASB issued a new ED proposing changes to 11 accrual basis IPSASs to reflect developments in the equivalent IFRSs.

Convergence with national standards is one of IFAC’s most important objectives and one which, I believe, is at the core of building an investment climate of trust.

Here’s why. Globalization demands high-quality standards that can be applied from Madrid to Mumbai, from New York to Nairobi. This puts everyone on a level playing field.

Second, global standards will result in increased transparency and accountability. Investors will be better able to compare company financial statements across borders. I also believe that developing countries that adopt international standards will see increased investment in their economies, by institutional and retail investors who are familiar with, and confident in, the standards, regardless of geography.

There’s another consideration as well. Having a multiplicity of accounting, auditing and other standards around the world is against the public interest. It creates confusion, encourages error and facilitates fraud. The cure for those ills is to have a single set of international standards, of the highest quality, set in the public interest by an international expert body which transparently consults with, and recognizes the legitimate interests of, the international community. Such standards will also reduce the cost of capital, increase access to capital and, thereby, improve economic growth and corporate profitability.

In consultation with IFAC boards and committees, and other relevant interested parties, IFAC staff are further developing the concept of “international convergence.” The objective is to develop guidance to accompany IFAC’s Statements of Membership Obligations (SMOs), which form the basis of the IFAC Member Body Compliance Program.

This program supports the development of high quality auditing, accounting, ethical, educational and related quality assurance and disciplinary standards in IFAC member bodies throughout the world. The program is intended to guide accounting institutes in the full spectrum of their professional responsibilities, to demonstrate a shared commitment to our profession’s values of integrity, transparency and expertise.

Phase 1 of the Compliance Program, a fact-based questionnaire to assess the regulatory and standard-setting frameworks of IFAC member bodies, is now complete. More than 60 responses have been posted on the IFAC website and the goal is to have all responses posted as soon as reviews are completed. Part 2, an SMO Self-Assessment questionnaire, will be distributed to member bodies at the end of November and responses will be posted to the IFAC website next year. The responses from these questionnaires are important for several reasons: they provide a global, publicly available snapshot of the accountancy profession from both a regulatory and standards perspective and they can be used to help IFAC gauge where it needs to focus its efforts to support the development of the profession and to work to achieve convergence. Perhaps most importantly, however, the responses to the questionnaires demonstrate the international accountancy profession’s willingness to be accountable for its actions to meet high standards, to deliver quality and to protect the public interest. In other words, this program demonstrates that the profession is fulfilling its promise to the public. And all the documents to which I have referred are publicly available on IFAC’s website www.ifac.org.

As we look to the future, the international accountancy profession, regulators, standard setters, stock exchanges and all those involved in capital markets will continue to face new challenges to build an investment climate of trust. In anticipation of these challenges, and in recognition that we must never waiver in our commitment to build public trust, IFAC’s Board has recently agreed to lead a new study on enhancing the quality of the financial reporting supply chain. The project will identify investor expectations and needs and include practical suggestions for enhancements that the global accountancy profession can provide by direct action and those where it will need to engage with others to create change. Among the issues to be considered in the new study are corporate management and governance, regulatory developments, auditor independence and rotation, and the expectations around the board’s and the auditor’s responsibility for the detection of fraud.

Finally, as we all look ahead, we must consider the needs – social, economic, and health – of a growing population. As the 20th century ended, world population reached 6 billion, increasing by 82 million people every year in less developed countries compared to 1.5 million in more developed countries. The challenge for all of us here is how to develop our professions and our roles so that we facilitate the development of prosperous societies that can both support the increasing global population and fight poverty.