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IFRS Enforcement and Governance

Explore the enforcement levels and mechanisms of IFRS compliance within corporate governance structures to ensure integrity, fairness, and transparency. Learn about prevention, identification, investigation, and sanctioning processes to uphold financial reporting accuracy.

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IFRS Enforcement and Governance

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  1. IFRS Enforcementand Governance Leo Goldschmidt Director of ECGI (European Corporate Governance Institute) www.ecgi.org OECD - Russian Corporate Moscow Governance Roundtable 11 November 2004

  2. Enforcement • Broad and narrow definitions • Prevention and then identification /correction of errors /omissions • Investigation of non compliance and its causes • Disciplining and sanctioning malfunction and fraud

  3. Levels of enforcement of IFRS • Internal • Self enforcement (preparers) • Audit (internal) • Oversight / Assessment /Approval (audit committee / board / AGM) • External • Audit • Oversight / Assessment /Sanction (official / market/ press)

  4. Primacy of Company • 1st level of responsibility • Other levels : failsafe Companies must have mechanisms in place to exercise that responsibility = Corporate Governance

  5. Corporate Governance • Set of principles, structures, mechanisms • To ensure • Companies are properly run Based on • Integrity • Fairness • Accountability / transparency

  6. IFRS related CorporateGovernance (1) • Structures and mechanisms • Systems, infrastructure : organised, resourced departments • Accounting • Control • Internal audit

  7. IFRS related Corporate Governance (2) • Structures and mechanisms • Managerial and oversight organs : aware, responsible and active • Management • Audit committee • Board • AGM

  8. IFRS related Corporate Governance (3) • Structures and mechanisms • Procedures / Responsibilty : decision making, assessment, sign off • Authority : powers, reporting lines

  9. IFRS related Corporate Governance (4) • Conflicts of interest • Where possible : avoid and minimise • Where they subsist : manage & foster independence

  10. IFRS related Corporate Governance (5) Tools : Examples • Separation of functions • Incompatibilities – criteria • Definition of reporting lines / Chinese walls • Disclosure (substance, process) • Whistle-blowing procedures

  11. Other levels of enforcement • Same principles

  12. Conclusions • Governance issues : Nothing new – same principles • IFRS related Governance is relevant • both internally and externally to the company • both as framework and in concrete applications • Primary aim of enforcement : to prevent, detect and correct errors in corporate financial reporting • Primary responsibility for IFRS implementation and compliance lies with the company • Corporate governance is not only relevant to IFRS, it is essential

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