IFEA (or the “Foundation”) announces a proposition to improve independence within the standard-setting system

The International Foundation for Ethics and Audit's (IFEA’s) Board of Trustees have promoted the launch of the Foundation/IFEA, stating that it adds a key recommendation that has been contemplated in the Morning Group’s July 2020 recommendations, a document titled “Strengthening the International Audit and Ethics Standard-Setting System”, which presents how the group’s recommendations are able to strengthen the international audit-related standard setting. The document can be viewed by clicking the link HERE.

Background of IFEA

The IFEA or the Foundation is a nonprofit organization that tackles high-quality, international ethics, audit, and assurance in service to the public interest. It does these acts through two (2) groups; the International Ethics Standards Board for Accountants (IESBA) and the International Auditing and Assurance Standards Board (IAASB).

Through cooperation, both groups can develop and issue their standards independently and in accordance with an approved due process and the Public Interest Framework, overseen by the Public Interest Oversight Board.

The objective of the Foundation

The Foundation’s main goal is to merge both the International Ethics Standards Board for Accountants (IESBA) and the International Auditing and Assurance Standards Board (IAASB) into a new entity that is independent of the International Federation of Accountants (IFAC).

This new entity will be led by Ms. Gabriela Figueiredo Dias and Mr. Tom Seidenstein Chair members of IESBA and IAASB respectively, both still serving as Co-CEOs of the Foundation. Meanwhile, the Public Interest Oversight Board (PIOB) will remain an independent oversight board that will continue supporting the public interest responsiveness of the international standards and the effective delivery of the board’s strategies.

Background of Public Interest Oversight Board (PIOB)

The PIOB is a global independent oversight body with the goal of enhancing the quality and public interest focus of the international audit, assurance, and ethics standards implemented by the international standard-setting boards: the IAASB and the IESBA.

Their main goal is to enforce relevant audit, assurance, and ethical standards. All of these must be responsive to the Public Interest to further boost confidence in capital markets.

Comments from Chair Members

Various Chair members gave their comments regarding the importance of the Foundation’s actions. Robert Buchanan, Chair Trustee of the Foundation stated that:

“Establishing the Foundation as an independent legal entity to house the IESBA and IAASB, which were previously within the IFAC structure, is an important step in strengthening the independence of the international standard-setting system for ethics, audit and assurance,”.

Linda de Beer, a Chair member from the PIOB gave two comments, first states that:

“We are confident that the revised structure—with IFEA as the home of the standard-setting boards governed by a board of trustees that includes both PIOB and IFAC-appointed trustees - is an important mechanism created by the Monitoring Group to reform with the profession and simultaneously enhance the independence of the standard-setting boards,”.

Then she mentions her confidence in how the process make the standard-setting better off by stating:

“This, in conjunction with an independent nominations process housed within the PIOB through the PIOB Standard Setting Boards Nominations Committee, will continue to enhance the trust and confidence in the standard-setting process.”.

The Co-CEO’s also shared their thoughts on the upcoming system by stating:

“We are delighted with the modernization of the standard-setting system and the progress already achieved under the new Foundation, including transferring board personnel from IFAC to IFEA, the approval of our 2023 budget, and the process to strengthen our technical staff, which is well underway. We welcome the myriad opportunities created by the Foundation’s establishment.”

“As always, we are committed to the delivery of high-quality standards in service of the public interest, and to the faithful implementation of the reforms. We would like to thank IFAC for all its support to date, and for its continued involvement as the Foundation’s service provider.”

Among the last Chair members who gave their comments was Paul Munter, Co-Chair of the Monitoring Group (MG), a group of international financial institutions and regulatory bodies that aim to improve public interest in areas related to international audit-related standard-setting and audit quality.

He stated that “The objectives of the Monitoring Group’s recommendations included achieving an independent and inclusive, multi-stakeholder standard-setting system, and fostering the development of timely, high-quality standards that are responsive to the rapidly changing environment while still being responsive to the public interest. We are confident that the new structure advances both objectives.”

He then closed his statements by clarifying that he and his group “are pleased the recommended reforms are on track for full implementation through diligent, collective efforts, and the focus is now on the implementation of the resource and costing plans.”