280 likes | 443 Vues
Presentation to the Chinese Institute of Certified Public Accountants Beijing September 2012. Supporting International Development by China’s Corporate Sector
E N D
Presentation to the Chinese Institute of Certified Public Accountants Beijing September 2012 Supporting International Development by China’s Corporate Sector The Role and Responsibilities of the Accounting Profession in Enhancing the Credibility of China’s and the Asian Region’s Capital Markets Presented by Lee White FCA Chief Executive Officer Institute of Chartered Accountants Australia
I am honoured to be invited to speak to you today • The Chinese Institute of Certified Public Accountants is to be congratulated on the leadership it has demonstrated in the evolution of public accounting in China, since its founding in 1988
China’s growth • Chinese companies will be major investors in Asia in the next 20 + years because of their domestic growth and financial strength • In addition investment in Chinese companies by domestic and foreign investors will increase as more of China’s major companies seek to access local and international capital markets to fund their growth
A consequence of growth • Consequently the welfare of China’s citizens and those of its regional neighbours will be increasingly dependent on the economic prosperity of China’s corporate sector • Good corporate governance will play a major role in enhancing this prosperity
Growth and corporate governance • A major component of good corporate governance is reliable and timely reporting both in terms of financial and non financial data enhanced by high quality external auditing and effective audit committees • This is the mandate and responsibility of the accounting profession and the area on which I would like to talk to you more today as both CICPA and my organisation ICAA have a mutual interest and obligation to good corporate reporting
What constitutes a quality audit • Our approach has been to assist the 3 key stakeholders to improve quality • The supplier’s role – assisting auditors to develop a quality audit (Continuous cycle of audit quality brochure) • The consumer’s role – assisting consumers to evaluate quality as a means of promoting quality as a competitive edge between audit firms (The benefit of audit brochure) • The governance role – making audit committees more effective in delivering a quality external reporting (Walk the line brochure)
Framework for managing audit quality sustainability • Key phases: • Client acceptance and retention • Strategy and policies • People and tools • Inspection • Remediation • Return to client acceptance and retention phase
Framework for managing audit quality sustainability • Client acceptance and retention • Risk appetite • Values • “Tone from the top” • Data
Framework for managing audit quality sustainability • Strategy and policies • Independence • Delivery of quality • Remediation systems • Acceptance of standards • Relevance
Framework for managing audit quality sustainability • People and tools • Recruitment • Development • Engagement • Culture • Methodology / technology
Framework for managing audit quality sustainability • Inspection • Commitment • Collaboration • Robustness • Ongoing • Effective / efficient
Framework for managing audit quality sustainability • Remediation • Commitment • Results / consequences • Action • Systems • Accountability
The benefit of audit – a guide to audit quality • Five drivers of audit quality • The culture within the audit firm • The skills and personal qualities of audit partners, principles and staff • The effectiveness of the audit process • Factors outside the control of auditors • The reality and usefulness of audit reporting
Walk the line • Discussions and insights with leading audit committee members • Outcome of joint project by: • UK Financial Reporting Council • The Institute of Chartered Accountants in Australia • The Institute of Chartered Accountants of Scotland • The aim of the project was to explore the workings of audit committees • The project was conducted through interviewing the audit committee chairmen and others involved in working with audit committees
Questions used as basis of meetings and telephone interviews: • How would you define your role? • How should your role discharge its obligations to the board (however they are defined)? • In whose interests is the audit committee acting? • What is the proper relationship between the audit committee and the rest of the board? • What are the skill requirements of an audit committee?
Questions used as basis of meetings and telephone interviews: • How should audit committees identify risk? For example, what regular reports should be available to audit committees (external and internal auditors, compliance reports and reports from chief financial officer/chief executive officer)? • To what extent should the audit committee have responsibility for reviewing all material activities and transactions and management’s assessment of the financial risk in those transactions – and reporting thereon to the board? • What part should audit committees play in the appointment of the chief financial officer, internal auditors and external auditors?
Questions used as basis of meetings and telephone interviews: • Should audit committee chairmen have a governance responsibility to meet with investors? • Should the audit committee be limited to a consideration of financial reporting matters or should it also consider other audit/financially related risks? • What are the main challenges facing audit committees?
Participants interviewed included • Leading audit committee members of listed companies from: • Singapore • Indonesia • Australia • United Kingdom • United States • Germany • Netherlands
Summary of findings • Functions of audit committee • Building on relationships • Building an effective audit committee • Challenges facing the audit committee • Reflections and questions
Functions of audit committee • Oversight of integrity of: • financial reporting processes and reporting • internal control and risk management • Building on relationships • audit committee and the board • audit committee and management • audit committee and the auditor • internal audit • audit committee and shareholders
Building an effective audit committee • composition of the audit committee • managing the audit committee meeting • Challenges facing the audit committee • unrealistic expectations • communications to bridge the expectations gap • legal responsibilities and liabilities • keeping the flow with new members • quality of information • knowledge of auditing standards
Reflections and questions • Universal questions answered by audit committee chairmen: • How do you keep the board fully informed? • What sort of reports should be given to the board before they are asked to approve financial statements? • Should those reports come from the audit committee chairman or management? • How do you ensure you get the best out of the external auditor? • How often should the audit committee meet with the external auditor?
Universal questions answered by audit committee chairmen (continued): • How do you best deal with commentary from the external auditor that may be critical of management? • How do you ensure you get the best from the internal auditor? • How do you ensure you get the best out of the audit committee members? • How do you ensure diversity of membership across the audit committee? • How do you ensure frank and open discussions in audit committee meetings?
Regional engagement • At a regional level we are working to engage more closely with independent audit regulators in Australia, Singapore, Malaysia, Indonesia, Thailand and Vietnam so that the profession and the regulators work together to enhance quality
Regional engagement • Given my earlier comments about the role of Chinese companies in the capital markets and economies of these countries China has a vital interest in the work of these regulators
Regional engagement • We would be pleased to explore further with CICPA the opportunity for CICPA to join with us in this engagement