pwc. pwc transparency and disclosure 3rd meeting of the latin america corporate governance...
TRANSCRIPT
Transparency and disclosure
3rd Meeting of the Latin America Corporate Governance Roundtable
Mexico City - April 10, 2002
Ana María Elorrieta
© 2001 PricewaterhouseCoopers. PricewaterhouseCoopers refers to the individual member firms of the world-wide PricewaterhouseCoopers organisation. All rights reserved.
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What do markets, investors and stakeholders want?
• Comparable and prepared under common financialcomprehensive reporting principles, full disclosure
• fair represents economic reality,
balance discussion of risks
• considered results from good governance
• reliable audit to high standard
Access to high quality information that is:
Financial reporting
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Financial Reporting - Why IAS?
• The only international framework
• New Board structure in place
• Due process
• Interpretations
• Translations, practice aids
• Principles not rules
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Financial Reporting - Why IAS?
• ComparabilityCommon recognition and measurement principles
• Full disclosure“Financial statements should not be described as complying with IAS unless they comply with all the requirements of each applicable standard”
• Fair presentation“transactions accounted for in accordance with their substance and economic reality and not merely their legal form”
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IAS in some Latin American countries
Argentina
•Rules similar to IAS approved by the professional body, applicable as from July 1, 2002
•Certain minor differences will remain.
Brazil
•Regulators and professional bodies support harmonisation through local rules
•There is a project at the Congress to create the Brazilian Accounting Commission
•New accounting standards in accordance with IASs.
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Colombia
•Government required by law (2000) to promote harmonisation
•Feasibility study conducted by university
Chile
•Regulators and professional body support gradual harmonisation
•IAS concepts apply in the absence of local rules
•New standards are generally IAS compliant
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Ecuador
•IAS’s are translated and adopted as local GAAP
•Time lag due to translation and approval by regulator
Paraguay
•IASs have been adopted by the Professional Council
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Peru
•IAS have been adopted as the Peruvian GAAP by the Government professional body. The IAS’s need to be approved by CNC
•IAS 1 to 38 and SIC 1 to 16 have been approved for 2001 Financials. SIC 17 and IAS 40 are mandatory as from 2002. IAS 32 (revised in 1998), 39 and 41 are mandatory from 2003
Uruguay
•The IAS’s approved by a technical commission are mandatory. Some IASs and IAS interpretations are still not mandatory
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•Panamá and Costa Rica have officially adopted IAS in 2001. However the adoption is still partial in certain industries.
•El Salvador has scheduled full adoption in 2004
•Guatemala in 2002.
•Nicaragua and Honduras has postponed full adoption to 2003/4.
Corporate governance
Auditing
Auditor Independence
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Most inherent value of the auditing profession
Appearance Vs. essence
IndependenceIndependence
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Threats to independence
Safeguards
Circumstances and relationships that may create threats to independence and the safeguards that may be appropriate to eliminate and reduce, including financial interests, relationships with clients, provisions of non-audit services to audit clients.
Conceptual approach adopted by Conceptual approach adopted by IFAC Code of EthicsIFAC Code of Ethics
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Apparent benefit• Independence of auditors
Disadvantages• Reduction in quality due to lack of
cumulative client knowledge, reduction of investments in audit training and industry specialization
• Increase audit costs without a corresponding increase in benefits
In South America: Brazil, Bolivia, Ecuador and Paraguay
Rotation of audit firmRotation of audit firm
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Scope of services - Framework Scope of services - Framework proposedproposed
Services that directly supports high quality audit: audit services, tax services, risk management and control services.
Other services based on study of threats and safeguards.
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SafeguardsSafeguards
Client acceptance procedures
Independence policies
Rotation of audit partner
Concurring partner review
Consultations
Segregation of personnel involved in audit and non-audit services
Internal disciplinary an review processes
Standards on Auditing
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Audit and assuranceAudit and assurance
Financial statements audited in accordance with internationally-recognised framework.
Audit quality enhanced by deeper knowledge of the business.
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International Standards on AuditingInternational Standards on Auditing
Change the name to International Auditing and Assurance Standards Board (IAASB)
Increase the Board size to 18
5 members from FoF, 10 from Member Bodies and 3 public members
Meetings to be held in public
Increase staff resources
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ISAs in Latin American countries
Argentina: in the agenda for 2002, including independence rules. Difference in auditor’s report
Brazil: no significant differences but Brazilian standards are too generic in some areas and could result in differences in application. Independence rules in the accounting body’s agenda for 2002.
Ecuador, Peru and Uruguay: already adopted for audits of financial statements
Conclusions
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Conclusion
In terms of financial reporting
Improve quality of reporting standards, adopting International Accounting Standards
Corporate Governance
Good corporate governance to support quality information
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Conclusion
In terms of auditing
Common goal: audit quality
Independence is a state of mind: adopt a principle approach, the Independence Standard in the IFAC Code of Ethics
Raise local auditing standards to International Standards on Auditing
Independent oversight
Discourage rotation of audit firm
Thank you!