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November 28, 2014

News roundup: PCAOB, FRC, ICGN, ICAEW, ESMA, IIRC, ACCA, IASB and the Smith Commission

By Isabella Grotto

The board the Public Accounting Oversight Body (PCAOB) approved a fiscal-year budget of approximately $250.9m, accompanying it to a strategic plan for the period 2014-2018. At $7.5m (3%) less than the board’s 2014 budget, the financial plan "reflects the board’s views about how to make optimal use of the PCAOB’s strengths and opportunities," according to the body.

The PCAOB may soon require US public company to identify engagement partners as part of their audit process. PCAOB chairman James Doty said he was hopeful the organisation’s board would finalise a standard requiring publication of the name of the engagement partner, alongside other participating firms, in audits next year.

Disciplinary hearings at the UK Financial Reporting Council (FRC) for KPMG and two of the networks’ partners, James Marsh and Greg Watts, who stand accused of breaching the Ethical Standards for Auditors are set to be heard on 4 and 5 December, respectively. Marsh is charged with having breached standards during the audit of Cable and Wireless Wordlwide, while Watts is under investigation for his role in the audit of automotive retailer Pendragon, who was forced to correct its 2011 figures by £31.1m following an overstatement.

The FRC announced plans to get rid of half-year financial reports and preliminary announcements, in favour of a new set of requirements consistent with international interim reporting rules. The watchdog issued an Exposure Draft on 12 November to revise its existing guidance on interim financial reports for consistency with UK and Irish GAAP. Following the request for comments, the finalised interim reporting requirements are expected for the first quarter of 2015.

The International Corporate Governance Network (ICGN) appointed George Dallas as policy director and Tom Rotherham- Winqvist as education advisor. The senior appointments come as part of the organisation’s focus on increasing regulatory engagement and expanding education around governance. ICGN managing director Kerrie Waring said the expansion of its team would allow the ICGN to develop guidance, respond to public consultations and engage with regulators, "to inspire good governance practice for companies and investors alike."

The Institute of Chartered Accountants of England and Wales (ICAEW) published a report on critical success factors for business leaders, focusing on the Gulf region. Published by the ICAEW as part of Chartered Accountants Worldwide, the report is the first of a planned series of publications on issues facing business leaders. Among the issues addressed in the opening issue are talent acquisition and retention, new technology, corporate governance and reputation, as well as political and economic instability.

In his key note speech at the 2014 Henri Sijthoff award in Amsterdam this week, European Securities and Markets Authority (ESMA) chair Steven Maijoor praised IFRS for improving the quality of financial reporting in the Single Market since their 2005 adoption in consolidated financial statements for EU listed companies. He also lamented the limited prospects for IFRS adoption in the US and Japan and warned of challenges facing the industry moving forward. These included the requirement for businesses to provide investors with clear and consistent information and the need to enforce IFRS compliance within the EU Single Market.

The International Integrated Reporting Council (IIRC) launched an initiative in conjunction with a group of six tech companies, aimed at developing IT services designed to facilitate the adoption of integrated reporting. The initiative will investigate how technology can underpin new trends in corporate reporting and be applied to assist adopters, according to the Council. A number of other partners are expected to join the initiative’s initial ‘charter member’ tech companies, which include: CRedit360 (UK), Deloitte, Indra (Spain), PwC (US), SAP (Germany) and Tagetik (Italy).

The Association of Chartered Certified Accountants (ACCA) launched a certificate in international public sector accounting standards (IPSAS). The Certificate, Cert IPSAS, is designed to allow public sector organisations to ‘up-skill’ staff and equip them with the capabilities necessary to implement IPSAS.

The International Accounting Standards Board (IASB) vice-chairman Ian Mackintosh told the audience at a discussion on the future of financial reporting that he believes the era of continuous change in financial reporting may be coming to an end. According to Mackintosh, the widespread adoption of IFRS, as well as the decade-long maturing of the standards themselves, means that a welcome "period of relative calm" is to be expected over the coming years. "Perhaps we are moving from the build-out phase of global standards, to a period where the focus is on the maintenance of those standards and working with others to encourage their consistent implementation," he said.

In response to the UK’s Smith Commission‘s recommendation on the granting of further fiscal responsibilities to the Scottish Parliament, Baker Tilly head of tax in Scotland Stephen Hay said that if income tax on Scottish earnings were to become more onerous "then those paying the highest rate of tax may very well look to convert earnings into alternative revenue that is either liable to savings income tax, corporation tax or capital gains tax." He warned: "As the Scottish Government will rely on income tax for 25% of the annual budget, then this is likely to have a significant knock on effect on the annual Scottish fiscal policy.

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