The World Bank -
                    Centre for Financial Reporting Reform

Audit & Oversight Community of Practice Newsletter Summer 2011

To view the PDF/print version click here.
 

Audit and
                                                        Oversight Community of Practice

The Audit and Oversight Community of Practice has been very active since the last newsletter in January 2011 and this newsletter recaps these activities. We hope you enjoy reading it.

In this newsletter, we discuss:

  1. The Global Development Learning Network (GDLN) event of 1 March in which the Chamber of Financial Auditors of Romania (CFAR) made a presentation live from Bucharest describing how the Chamber conducts quality reviews of auditors.  
  2. The 24-25 March workshop in Vienna in which the Croatian Audit Chamber and Institute of Certified Auditors of Macedonia shared their experiences of Quality Assurance Systems.
  3. The series of four GDLN distance-learning events from March to May on Public Oversight.  
  4. The next AOCoP workshop planned for autumn 2011 including following-up on the activities agreed upon during the previous October 2010 workshop. 


1.  Audit and Oversight Distance Learning event on Reviewing Auditors in Romania 

On Tuesday 1 March, the World Bank Centre for Financial Reporting Reform (CFRR) held a Global Development Learning Network (GDLN) event on Romania's approach to reviewing the work of auditors.

Around 60 participants visited 9 GDLN centres in the REPARIS countries to see Mrs. Carmen Mataragiu and Mr. Silviu Agachi of the Chamber of Financial Auditors of Romania (CFAR) make a presentation live from Bucharest over the GDLN network describing how the Chamber conducts quality reviews of auditors and then applies appropriate sanctions and disciplinary measures.

Mrs Mataragiu and Mr Agachi explained that the CFAR reviews each registered auditor and audit firm at least once every three years. These reviews cover both auditors' general policies as well as individual audit files. Each auditor is then awarded a rating of A to D.

These ratings have a significant impact on audit firms: firms awarded an A are subject to less frequent reviews than those receiving Bs, Cs or Ds; while some regulators require an A or B grade when authorizing auditors to perform audits of supervised entities. In terms of applied sanctions and disciplinary measures, firms assessed as C receive a notification sanction while those assessed at D receive a warning sanction. These sanctions are only removed after CFAR has identified that the firm is taking concrete measures to deal with the problems that CFAR has identified. Such measures typically including attending additional professional education courses. In addition, firms can be suspended for severe violations of professional standards.

Carmen Mataragiu and Silviu
                                                        Agachi from the CFAR 

For a full description of the event, including presentations and video recordings of the event, please click here.


2.  Audit and Oversight CoP workshop on Quality Assurance Systems in Croatia and Macedonia

 The CFRR organized a workshop for the AOCoP on Quality Assurance Systems (QAS) in Vienna on 24 and 25 March 2011. 17 participants from the REPARIS countries attended the workshop, together with experts from the UK and France. The workshop had two main objectives:

  1. To learn from the experience of carrying out initial assessment reviews of audits in Croatia and of implementing QAS in Macedonia; and
  2. To record material for a DVD that could then be used as an educational resource to train QAS specialists across the REPARIS countries.
Participants at the QAS
                                                        workshop

Branka Petricevic, Dušanka Jelcic and Tihana Mavric from the Quality Assurance Department of the Croatian Audit Chamber (CAC, which was admitted as an associate member of IFAC in 2010) described how quality assurance is carried out in Croatia. They first outlined the regulatory background, including the national law on auditing (which met the requirements of the EU’s Statutory Audit Directive), national professional rules and audit standards, and then went on to describe the various stages of evaluation under the QAS in Croatia.

They stressed that the QAS in Croatia was still in its early stages (the QAS only became operational in January 2010) and that evaluations were currently intended to be educational, helping the auditor or audit firm to improve their performance rather than seeking to punish firms if poor performance was identified. The first phase of the Croatian QAS involved sending a questionnaire to all audit firms to collect basic information on their activities. This was followed by an assessment visit to each firm by the reviewers from the CAC.

The CAC reviewer would use this visit to check the basic information and to check how far the firm was complying with the overall rules governing audits. This was supplemented by analysis of audit reports that the firm had prepared. The CAC reviewer then brought together all this information to grade each audit firm on its performance and to prepare a report to the firm. The Croatian team explained many of the practical issues that arose in planning and carrying out these reviews and circulated examples of the various questionnaires, reports and other documents that CAC reviewers used.

Branka Stojanovska from the Quality Assurance Committee of the Institute of Certified Auditors of Macedonia (ICAM, which had been operating since 2006) then described how the QAS functioned in Macedonia, giving a detailed description of how inspections were organized and interviews were conducted. Ms Stojanovska also provided examples of the main documents used in the audit review process. She said that the Macedonian system, which had been set up with assistance from the French Institute of Certified Auditors, shared many elements with the QAS used in Croatia. In particular, ICAM was also currently using QA reviews primarily as educational tools to improve the performance of audit firms.

However, there were some significant differences. In particular, the Macedonian QAS involved two visits to audit firms, with the first covering internal procedures at the audit firm, and the second reviewing individual engagements that the audit firm had carried out. Ms Stojanovska also placed particular stress on the confidentiality of the information obtained from the review of an audit firm – ICAM was obliged to destroy all documentation from the previous quality control review once a new review was being carried out, and was also not allowed to keep working papers that the auditor had prepared in the documentation of the review.

Paul Simkins from the UK's ICAEW, which had assisted Croatia in designing its QAS, and Marc Konczaty, from France's Conseil Supérieur de l'Ordre des Experts-Comptables (CSOEC) commented on both presentations.

In addition to the formal presentations, workshop participants took on the roles of reviewer and auditor to stage enactments of review visits and interviews under both the Croatian and Macedonian QAS. The workshop concluded with a round table discussion giving participants the opportunity to express their views on the conduct of the workshop.

For a full description of the event including video recordings of the event and presentations, please click here. Please note that video material from this workshop is currently being edited by the CFRR.

 

3.  AOCoP GDLN Distance Learning Series on Public Oversight

The CFRR held a series of four GDLN distance learning events on "Public Oversight" on 15 March, 5 April, 19 April and 5 May 2011.

The objective of this series of events was to provide members of public oversight bodies, government officials with responsibility for the public oversight system and staff supporting the public oversight system with a good understanding of their roles and responsibilities.

 Up to 78 participants attended the distance-learning events from 9 GDLN centres in the REPARIS countries.

For a full description of the events, including presentations, please click here.   Please note that video material from this workshop is currently being edited by the CFRR.

 

GDLN on Statutory Audit Directive and European public oversight systems

 

The first GDLN on 15 March included presentations on the EU's Statutory Audit Directive (SAD) and a comparison of existing systems of public oversight of auditing in Europe.

John Grewe from the Professional Oversight Board of the UK's Financial Reporting Council (FRC) outlined the main features of the SAD, and John Carchrae from the CFRR compared the operation of public oversight systems in Switzerland and a range of EU member states.

 

For a full description of the 15 March event, including video recordings and presentations, please click here.


GDLN on Audit Standards and Procedures

The second GDLN on 5 April included presentations on how international auditing standards are developed and how an auditor performs an audit.

Prof. Arnold Schilder, the chairman of the International Auditing and Asssurance Standards Board (IAASB), explained how International Standards on Auditing (ISAs) are developed, and Claire Lindridge of the UK's Audit Inspection Unit explained how auditors typically carry out audits in practice.

Claire Lindridge and
                                                        Professor Arnold Schilder 

For a full description of the event on 5 April please click here.  


GDLN Panel Discussions

The third and fourth GDLNs on 19 April and 5 May were organized as panel discussions. The first panel event focused on institutional and legal arrangements for public oversight, while the second concentrated more on the practical details of how a public oversight board (POB) carried out its activities. In both events, the expert panels gave brief scene-setting presentations of how the public oversight system operated in their home countries. These were then followed by a panel discussion of questions that participants had submitted in advance of the events.

In the first panel event, John Grewe (UK), Vibeke Sylvest Barfoed (Denmark) and Agnieszka Stachnika and Aleksandra Markowska-Tendaj (Poland) briefly described the institutional and legal arrangements governing the POBs in the UK, Denmark and Poland. The subsequent Question and Answer session covered a wide range of topics, though there was particular interest in the issues of how the independence of the POB was to be maintained in small economies where only a limited number of people had expertise in audit issues.

Participants in a discussion at the GDLN panel event

For a full description of the 19 April and 5 May events, including video recordings and presentations, please click here.

In the second panel event, John Grewe (UK), Professor Kai-Uwe Marten (Germany) and Audrius Linartas (Lithuania) discussed practical details of how the POBs cooperated in the UK, Germany and Lithuania, respectively. The panel discussion that followed was again wide ranging, with the issue of the division of responsibilities between the POB and the professional body for auditors attracting particular attention.


4. Next AOCoP workshop planned for autumn 2011

The next AOCoP workshop is planned to take place in autumn 2011. The main agenda for the workshop will be to follow up on the activities agreed upon during the October 2010 workshop. This includes:

  1. sharing the analytical paper that is currently being prepared by the AOCoP’s Public Oversight Systems (POS) workgroup describing effective POS legislation, regulation and other policy instruments, as well as a comparative analysis of the effectiveness of more mature POS structures;
  2. seeing the DVD that will have been produced of the AOCoP’s Quality Assurance Systems (QAS) workshop that was held on 24-25 March in Vienna. This will help prospective QAS implementers learn from the experiences of Croatia in carrying out initial assessment reviews of audits and of Macedonia in implementing full QAS reviews; and
  3. sharing the analytical paper that is currently being prepared by the AOCoP’s Sanctions & Discipline workgroup comparing the sanctions and discipline schemes of various mature countries.

Further details of the next AOCoP workshop including invitations and a detailed agenda will follow in the next few months.


About REPARIS and the Audit & Oversight Community of Practice

The Road to Europe: Program of Accounting Reform and Institutional Strengthening (REPARIS) is a regional program aimed at creating a transparent policy environment and effective institutional framework for corporate reporting within South Central and South East Europe. Participating countries include Albania, Bosnia and Herzegovina, Croatia, Kosovo, Former Yugoslav Republic of Macedonia, Moldova, Montenegro and Serbia.

Further information may be found at worldbank.org/reparis

The objective of the AOCoP is to support REPARIS economies to address issues relating to audit and audit oversight, including alignment with the EU acquis communautaire. The AOCoP envisions enabling REPARIS economies to understand the issues, share experiences to address them, and ultimately develop and implement action plans at the regional as well as national level.

The AOCoP wiki may be found at auditingoversightcop.wikispaces.com.


About the CFRR

The Centre for Financial Reporting Reform (CFRR) is the World Bank's centre of expertise in the reform of financial reporting for Europe and Central Asia. It is based in Vienna and works with partners from the region, including ministries of finance, regulatory bodies, professional bodies for accountants and auditors and universities, to help them set up and operate effective frameworks for financial reporting.

The CFRR is also active in the wider policy discussion surrounding financial reporting – for example, it is part of the monitoring group which is evaluating the reforms to the International Federation of Accountants (IFAC) and has also been involved in recent discussions at the WTO on international trade in accountancy services.

You can view a short video feature on the CFRR here.

About CFRR

Web: worldbank.org/cfrr

Address:
Praterstrasse 31 - 19th Floor
1020 Vienna Austria
Phone: +43 (0)1 2170 700
Fax: +43 (0)1 2170 701

Contacts:
Ranjan Ganguli  rganguli@worldbank.org
Andrei Busuioc  abusuioc1@worldbank.org

You are receiving this email because you are a valued contact or partner of the
World Bank Centre for Financial Reporting Reform (CFRR)

Unsubscribe - Subscribe