Certain Accountants to Face Regulatory Control Post-Enron: IFAC

The International Federation of Accountants (IFAC) warned Thursday that certain IFAC members will need to accept the end of pure self-regulation and increasing external regulation in the post-Enron era.

President of the IFAC Rene Ricol made the remarks in his closing speech at the World Congress of Accountants Thursday.

“For most of our national organizations, it means the acceptance of external controls for our professions, established under the authority of boards or committees independent of the profession on which we would be represented but would not have a majority.

“It means also that even if IFAC is best placed to prepare and establish standards of audit, standards of education, ethical standards and public sector accounting standards, it has to acceptthat there should be transparency, discussion, criticism, the input of outside stakeholders in all the stages of the process,” Ricol said.

Ricol's remarks were an insinuating sharp criticism targeting the accountants in the United States, where a spate of unruly accounting behavior and corporate governance malpractice were uncovered under the shroud of what some congress participants described as a “formality-driven” accounting and auditing practice.

Ricol also hinted that companies, such as Enron, should stop cooking the books for stock and stock option value for the privatefinancial gains of the company's employees and get down to reporting quality account information.

“That is to say that we think that an effective external audit is not possible if there is not good corporate governance, and thus good management of the company as a whole,” he said, adding that this would not be possible unless “there is transparency in the financial information provided, including disclosures about the sensitive subject of stock options, which should not be the only motivating element in the remuneration of directors.”

Now against the backdrop that the Generally Accepted Accounting Standard of the United States is suffering problems and that thereis a lack of enthusiasm on the part of the United States to harmonize its standard with the International Accounting Standard (IAS), Ricol made such remarks, “We must accept all that and also recognize that these standards must be endorsed by others, notablythe audit standards by the regulators.”

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