State Board Report

January 2008

The “train has left the station on IFRS” [International Financial Reporting Standards as published by the International Auditing and Assurance Standards Board], Walton Conn, KPMG national office partner, told the conference jointly sponsored by Baruch College and the NASBA Center for the Public Trust on December 6 in New York City. He reported that the largest accounting firms have already invested in training their staffs in IFRS. Waiting for the SEC to make a determination on whether US companies can use IFRS in place of GAAP (see story about SEC’s concept release sbr 8/07) may be too late for beginning consideration incorporating IFRS into the Uniform CPA Examination, Mr. Conn observed.

Fellow panelist Larry Shapiro, associate director of assurance for BDO Seidman, commented that clients as well as their auditors will need to come up to speed on IFRS. PricewaterhouseCoopers believes the conversion to IFRS is an eventuality, remarked Jorge Milo, national auditing services leaders for PWC; however, he added that for those businesses without operations outside the United States there will not be the same incentives.

“We’re going to globalization,” said John Fogarty, past chairman of the AICPA’s Auditing Standards Board and present member of the IAASB. A huge number of auditing standards are under revision, he explained, and the strides to convergence of international and US standards over the last five years have been tremendous. There is “intense interest” globally on the application of these standards to small and medium-size companies, he told the conference. Mr. Fogarty commented, “Some say because I am small this should not apply to me: That degrades the system.” He reported the standard-setters are trying to address this problem by having guidance on how standards should be applied to small entities.

Thomas Ray, PCAOB’s chief auditor and director of professional standards, outlined the guidance for smaller companies that the PCAOB had out for comment until December 17, 2007. This addresses scaling the audit for smaller, less complex environments, as well as sufficient evidence when there is less formal documentation and auditing smaller companies with pervasive deficiencies. Two of the PCAOB’s current projects outlined by Mr. Ray, one on risk assessment and the other on reviewing interim standards, will be related to international standards. SEC Deputy Chief Accountant-Professional Practice Zoe-Vonna Palmrose reported 110 private issuers currently registered with the SEC use IFRS. In response to the SEC’s concept release about giving US domestic issuers the same option that foreign private issuers now have, to use either IFRS or US GAAP in their SEC Filings, 78 comments were received, she reported. More public feedback was to be collected during the December 13 and 15 roundtables the SEC held on the subject. The Commission is particularly interested in feedback on training in IFRS, Ms. Palmrose said.

There is a large volume of technical material that auditors need to know to do their jobs effectively, but not necessarily for entry into the profession, KPMG Partner Craig Crawford told the conference. The firms want people who can apply the technical aspects of the profession, but it is part of the firms’ responsibility to teach them how to approach problems, he observed.

Trust in the US financial system relies on auditors, Larry Bridgesmith, Center for the Public Trust Board member said in summarizing the conference. “Culture is what we tolerate as professionals,” he observed. “We can make a difference by being a difference.”

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