SAFA CONFERENCE. ACCOUNTING PROFESSION IN SOUTH ASIAN REGION - VALUES & PERSPECTIVES. ICAI-CHENNAI 30 SEPTEMBER 2006 . MANAGING PROFESSIONAL RISK. - A RECIPE FOR SMPs . ANWARUDDIN CHOWDHURY . Member Council and Past President. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF BANGLADESH. PREAMBLE.
ACCOUNTING PROFESSION IN SOUTH ASIAN REGION - VALUES & PERSPECTIVES
ICAI-CHENNAI 30 SEPTEMBER 2006
MANAGING PROFESSIONAL RISK
- A RECIPE FOR SMPs
Member Council and Past President
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF BANGLADESH
A SAFA Conference on the Theme “Accounting Profession in the South Asian Region – Values & Perspectives” is both timely and topical. It would serve as a forum of interaction amongst the leaders of the SAFA accounting profession. The policy issues and recommendations emerging from the Conference deliberations may be used for future policy formulations of our Institutes and other concerned authorities.
The professional firms in the SAFA region being predominantly Small and Medium sized Practices (SMPs), their Values and Perspectives on the South Asian Accounting and Auditing Profession impacts a significant dimension. SMPs, being relatively more vulnerable to practice risks, need to ensure proper management of professional risk through quality assurance of their services. Hence a Technical Paper on Managing Professional Risk – A Recipe for SMPs has been aptly chosen to elucidate on the conference theme.
There are several debatable, futuristic and pluralistic connotations in the subject and the field of discussion is so extensive that one can hardly do justice to its magnanimity in a limited page Paper (Slide PPP) endeavouring to synthesize the Importance of Managing Professional Risks by SMPs for enhancing appropriate Values and Perspectives of the SAFA accounting profession.
It is hoped that the deliberations of the Paper, and particularly the esteemed contributions of the learned discussants will reflect meaningful “recommendations” for strengthening the SMPs in their Professional Risk Management and contributing relevant value addition to the Accounting Profession in the South Asian Region.
WHY PROFESSIONAL RISK MANAGEMENT IS A RECIPE FOR SMPs ?
IN SAFA MEMBER COUNTRIES AT
- Possibility/probability of an occurrence/event materialization which impacts on the activities of a firm or entity.
- Reflection of an opportunity, threat or uncertainty
- Strategic and Operational Risks
- Dependent upon Probability, Time and Occurrence
- - Analyses
- - Identification
- Linkage between Performance and Conformance
- Identification, Analysis and economic control of all such risks, which threaten assets, resources or earning capacity of a professional firm and/or may give rise to legal actions - Professional Risk Management is a vital ingredient of successful accounting practice.
- Business (Practice Risk)
- Pure Insurable Risks
- Special Relationship
- Quality Control Standards to avoid Negligence actions.
- SMALL AND MEDIUM ACCOUNTING PRACTICES (SMPS)
- Including current initiatives for addressing Needs of SMPs and Recommendations for international action.
- Development of quality assurance standards
- Improvements of practice management quality
- Development of educational courses and training, marketing support, technical aids, web-related services and networking
- SMPs presence on standard-setting committees and on governing bodies / Councils of the Institutes
-Development of an international database for providing continuous updates and research on relevant professional issues worldwide.
- Establishment of networking facilities among firms (SMPs) for ensuring regular communication linkages.
Assistance in helping SMPs develop innovative new service areas, such as providing assurance services in e-business, advice on risk management and strategic planning.
- Quality Enhancement
- Services to Members
- SMPs Participation on Standards Setting
- Innovative Service Areas
- Advocacy and Alliances
- Development of Standards for Quality Assurance & Quality Control Systems
- Practice Management Quality
- Education & Training Quality
- CPE/CPD (Continuous Learning Process)
- Ethical Codes of Practice.
- Courses & Training
- Publications for Clients
- Publications for Members
- Technical Aid
- Database Access
- Web related Services
- Networking Support
- Library Support
- Resolving Professional Queries
- Members Discussions
- International Activities
- Presence of SMPs on Standards Setting Committees
- Presence of SMPs on Governing Bodies/Councilors of Institutes
- Web Trust
- System Trust
- Insolvency Practice
- Environment & Social Reporting
-Contact with regulators, public authorities & Govt. Agencies
- Advertising & Promotional Publicity
- Placement Services
- The Global Presence of SMPs
- SMPs Information Accessibility
- SMPs Networking Linkages
- SMPs Response of Professional Services
- SMPs liaison/interaction with regulators & Govt. Agencies
These Recommendations are vital for SMP services facilitation leading to improved quality assurance and thereby more effective Professional Risk Management.
The Policy Issues in various jurisdictions – particularly the Councils of the Institute of Chartered Accountants of the SAFA Region are in the process of implementing these and other facilitation measures for supporting the SMPs for improving quality assurance and professional risk management.
The membership profile of ICAB is predominantly comprised of SMPs. In cognizance of this issue, the Institute’s, Council has formulated several initiatives, policies and programmes designed to strengthen the SMPs in enhancing their technical expertise, competence and quality assurance of their services.
Such Measures encompass:
- Revision and regular updating of curriculum reflecting dynamics of the accounting profession
- Structured CPE/CPD Seminars and Workshops particularly catering to the needs of SMPs
The IAASB of the IFAC has issued several ISA covering the various dimensions and management of “professional risks” generally confronted in the conduct and reporting on the audit of corporates and other forms of entities (audit clients) These Auditing Standards are applicable in varying degrees both for SMPs and non SMP firms.
The different aspects of “professional audit risk” emphasizing an applicability to SMPs are highlighted hereafter.
ISA 200 – Objective and General Principles Governing the Audit of Financial Statements
ISA 315 – Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatements
ISA 320 – Audit Materiality
ISA 330 – The Auditors Procedures and Response to Assessed Risks
ISA 400 – Risk Assessments and Internal Control
ISA 401 – Auditing in a Computer Information Systems Environment (Assessment of Risk)
ISA 200 – OBJECTIVE AND GENERAL PRINCIPLES GOVERNING THE AUDIT OF FINANCIAL STATEMENTS
- Communication to appropriate level of management
- If fraud involves senior management or material misstatement communicate to audit committee
ISA 315 – UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENTS
- Entity, Nature, Environment and Internal Control
- Industry, Regulatory & Other Externalities
- Measurement & Review of Auditee’s Financial Performance
- Objectives/ Strategies & Related Business Risks
- Internal Control Considerations - Review & Testing
- “manual” and “automated” elements of characteristics relevant to “audit risk assessment”
- Assessing Risks of Material Misstatements
- Significant Risks Requiring Special Audit Considerations
- Revision of Risk Assessment – Evaluations & Reevaluations.
- Communication with Governance & Management Executives
- Audit Evidencing and Documentation
The SAFA must resolve to work together coherently, by pooling their resources, sharing each other’s experiences, in responding to the emerging challenges and opportunities of global financial markets, competitive business and profession – as a means of ensuring the well-being and emancipation of our people and thereby contribute towards the socio-economic upliftment, leading to overall development, peace, progress and prosperity of the region.
FOR PROFESSIONAL VALUE ADDITION
THANK YOU FOR YOUR KIND ATTENTION