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Questions have been raised about the independence of the International Federation of Accountants (IFAC) standard-setting process and its responsiveness to the public interest, observes the Monitoring Group in a consultation paper released late last year entitled “Strengthening the Governance and Oversight of the International Audit-Related Standard-Setting Boards in the Public Interest.” The Monitoring Group, which includes the International Organization of Securities Commissions (IOSCO), the Basil Committee on Banking Supervision (BCBS), the European Commission (EC), the Financial Stability Board (FSB), the International Association of Insurance Supervisors (IAIS), and the World Bank Group (WBG) has worked with IFAC with the objective of restoring confidence in the standard-setting of IFAC’s independent Boards.

The current governance framework has three separate standard-setting boards that are nominated, funded and staffed by IFAC to develop international standards for (1)audit and assurance, (2) ethics and (3) education. There is also a Public Interest Oversight Board (PIOB) that is charged with protecting the public interest and then there is the Monitoring Group that is responsible for the overall governance of the standard-setting process and its implementation. The consultation paper which is now out for comment, and is being studied by NASBA’s Standard Setting Advisory Committee, offers options for consideration in keeping with the Monitoring Group’s periodic look at the effectiveness of the standard-setting process. One proposal would have a single independent board to develop and adopt auditing and assurance standards and ethical standards for auditors, rather than the current three separate boards. However, it is proposed that the responsibility for the development and adoption of educational standards remain with IFAC.

“The Monitoring Group notes that there is a legitimate concern among many stakeholders that the influence of the profession is at least perceived to be too strong and that addressing this issue could further strengthen public confidence, as well as encourage still-wider global adoption of the International Standards on Auditing (ISAs),” the paper states.

The Monitoring Group is looking for feedback on whether the changes being proposed are necessary and if they could more effectively deliver the standards’ objectives. Views on whether the options would enhance transparency and public understanding of the governance structure are being requested. The options being suggested would change IFAC’s role, but it would be expected to continue to contribute thought leadership on the future development of the accountancy profession. The comment deadline is February 9.