The IASB has posted a report entitled, "Global Capital Markets and the Global Economy: A Vision from the CEOs of the International Audit Networks." The report, written by the 6 largest global auditing firms, discusses "how global financial reporting and public company auditing procedures must adapt to better serve capital markets around the world."
The six topics addressed in detail in the report are:
1. defining investor informational needs;
2. aligning the roles of various stakeholders in the governance process;
3. assure a "vibrant, sustainable" auditing profession;
4. provide a business reporting model to deliver relevant and timely information (think XBRL);
5. take steps to assure that large, collusive frauds are rare; and
6. report and audit financial information "pursuant to globally consistent standards."
Both short-term and long-terms steps are outlined to achieve these goals. Near-term efforts include convergence of the IASB and FASB standards, launch a process for convergence of auditing standards, and take steps to assure that regulatory oversight is consistent among various jurisdictions. Long-term steps would be geared toward disclosure of user-customized information, much of which may be non-financial in nature, which is accessible more frequently than is currently the case.
A couple of interesting observations from the report include:
1. The U.S. is one of the only major capital markets in which foreign companies are not allowed to use IFRS, although the process is underway to harmonize U.S. GAAP with the IFRS. If convergence plans continue, the SEC might allow foreign issuers to report using IFRS by 2009. See page 9 of the report.
2. The definition of independence varies from country to country. Although the International Federation of Accountants has adopted a definition of independence, few countries follow it. France has independence standards that may have extraterritorial effects on multinational companies seeking auditing services. See page 11 of the report.
3. Auditors are challenged to address the expectation gap between what an audit is supposed to accomplish and what it actually can accomplish. In other words, stakeholders expect auditors to discover fraud. But even when auditors accomplish their work following all applicable auditing standards, some frauds will still escape detection. After all, frauds are, by their very nature self concealing.
4. Global auditing firms eschew complete integration for a number of reasons including licensing and education requirements, ownership limitations and liability concerns. At times, this means that auditing services are performed by a fairly loose network of related entities.