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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 Enforcementand Governance Leo Goldschmidt Director of ECGI (European Corporate Governance Institute) www.ecgi.org OECD - Russian Corporate Moscow Governance Roundtable 11 November 2004
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
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)
Primacy of Company • 1st level of responsibility • Other levels : failsafe Companies must have mechanisms in place to exercise that responsibility = Corporate Governance
Corporate Governance • Set of principles, structures, mechanisms • To ensure • Companies are properly run Based on • Integrity • Fairness • Accountability / transparency
IFRS related CorporateGovernance (1) • Structures and mechanisms • Systems, infrastructure : organised, resourced departments • Accounting • Control • Internal audit
IFRS related Corporate Governance (2) • Structures and mechanisms • Managerial and oversight organs : aware, responsible and active • Management • Audit committee • Board • AGM
IFRS related Corporate Governance (3) • Structures and mechanisms • Procedures / Responsibilty : decision making, assessment, sign off • Authority : powers, reporting lines
IFRS related Corporate Governance (4) • Conflicts of interest • Where possible : avoid and minimise • Where they subsist : manage & foster independence
IFRS related Corporate Governance (5) Tools : Examples • Separation of functions • Incompatibilities – criteria • Definition of reporting lines / Chinese walls • Disclosure (substance, process) • Whistle-blowing procedures
Other levels of enforcement • Same principles
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