FEI’s Participation on IAASB CAG

July 11, 2006

FEI Summary

On May 11 and 12, 2006, the Consultative Advisory Group (CAG) of the International Auditing and Assurance Standards Board (IAASB) held it most recent meeting in Paris, France. David Morris, Chairman of Financial Executives International’s (FEI) Global Oversight Committee (GOC) and a member of FEI’s New York City Chapter, represented FEI at the CAG meeting, as he has done for the last two years.

CAG’s purpose is to provide guidance to the IAASB as it goes about establishing international auditing standards. CAG membership is comprised of auditors, regulators, preparers and others.  Specifically, among CAG’s other members are the World Bank, the European Commission, the International Organization of Securities Commissions (IOSCO, which includes the SEC), and Public Company Accounting Oversight Board (PCAOB).

Much like the convergence of accounting standards that is occurring between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), auditing standards around the world are likewise converging. Many of the recent changes that auditing standards have undergone since PACOB has taken over for the American Institute of Certified Public Accountants (AICPA) in the setting of U.S. auditing standards for public companies are likewise being reflected in international standards.

Why should FEI members care about the IAASB and international auditing standards? Just as FEI members have seen with the PCAOB and Auditing Standard No. 2, (An Audit of Internal Control over Financial Reporting Conducted in Conjunction with an Audit of the Financial Statements), these rules do have a direct bearing on the cost of an audit and the efficiency of the audit. If IAASB develops new standards which, in turn, influence standards adopted by PCAOB for public companies and AICPA for private companies and those new standards are onerous, FEI members will bear the direct consequences.

The May, 2006 CAG meeting focused on the exposure draft, “The Audit of Group Financial Statements.”  Comments are due by July 31, 2006. This exposure draft would set standards for auditing companies around the world that make up a consolidated group. Other topics on which the members of CAG provided views and guidance to IAASB include: development of new auditing standards for management representation letters, use of experts by auditors and materiality considerations in auditing. In future meetings, CAG will provide comments on confirmations and reporting on internal controls.

Questions about FEI’s Global Oversight Committee should be referred to Grace Hinchman (ghinchman@FinancialExecutives.org), Senior Vice President, Public Affairs and Technical Activities.

                                        -- Contributed by David M. Morris, Morris Consulting