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Reports on the Observance of Standards and Codes (ROSC). LATVIA. Fr édéric Gielen Lead Financial Management Specialist Europe and Central Asia Region. THE WORLD BANK. ROSC - LATVIA. Background:. The Need for a Strengthened International Financial Architecture. - PowerPoint PPT Presentation
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Reports on the Observance of Standards and Codes (ROSC)
Frédéric GielenLead Financial Management
SpecialistEurope and Central Asia Region
LATVIA
THE WORLD BANK
Background:
ROSC - LATVIA
The Need for a Strengthened International Financial Architecture1990s – Emerging Market Crises and contagion effects
Mexico
Brazil
Argentina
Philippines
Background:
The Need for a Strengthened International Financial Architecture1990s – Emerging Market Crises and contagion effects
East Asia (Thailand)
Philippines
Malasya
Hong Kong
Indonesia
Taiwan
South Korea
ROSC - LATVIA
Background:
The Need for a Strengthened International Financial Architecture
Shift from ex-post crisis resolution
ROSC - LATVIA
Ex-ante crisis prevention
ROSC - LATVIA
Background:
Origins of the ROSC program
The G-22 Reports: focus on crisis prevention
- Transparency and Accountability (Led to ROSC program)
- Strengthening National Financial Systems
- Government guarantees to the private sector
The ROSC program: Comprises 12 Fundamental Standards
Securities Regulation
Banking Supervision
Accounting & Auditing
Corporate Governance
Insurance Supervision
Insolvency & Creditor Rights
ROSC - LATVIA
Importance of High Quality Accounting and Auditing
Accounting and
Auditing
ROSC - LATVIA
Development of Capital Markets
Job Creation
Financial Stability
Private Sector Growth
Financial Sector Development
Improved Access to Credit
Financial Information
ECONOMIC GROWTH
A&A ROSC: Assessing the Quality of the A&A Framework
ROSC - LATVIA
Economic Context
Legal & Institutional Framework
Accounting in Practice
Auditing in Practice
RecommendationsFINDINGS
Factu
al A
ssessm
en
t
Perc
ep
tion
s
A&A ROSC: Assessing the Quality of the A&A Framework
ROSC - LATVIA
Benchmarks:
International Financial Reporting Standards
International Standardson Auditing
Acquis communautaire Good international practice
A&A ROSC: Global Coverage
ROSC - LATVIA
Latin America and the Caribbean
Europe and Central Asia
Middle East and North Africa
Africa
South Asia
East Asia
A&A ROSC: in Europe and Central Asia (August 5, 2005)
ROSC - LATVIA
The Case of Latvia: Economic Goals
ROSC - LATVIA
- Access to credit, particulary for SMEs
- Development of capital markets
- Development of the private sector
- European Union Integration
Promote: Avoid:
How can A&A help?
ROSC - LATVIA
Accounting and
Auditing
Development of Capital Markets
Job Creation
Financial Stability
Private Sector Growth
Financial Sector Development
Improved Access to Credit
ECONOMIC GROWTH
ROSC is a the first step in the process of reform
Statutory Framework
Monitoring & Enforcement
Education & Training
Accounting Profession &
Ethics
Accounting Standards
Auditing Standards
ROSC - LATVIA
All supporting pillars need to be strengthened
ROSC - LATVIA
Statutory Framework
Monitoring & Enforcement
Education & Training
Accounting Profession &
Ethics
Accounting Standards
Auditing Standards
Latvia A&A ROSC Findings
ROSC - LATVIA
Substantially adopted and implemented
Acquis Communautaire regarding Company Law
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC - LATVIA
Latvia A&A ROSC Findings
Financial information is not always readily available
(45% of companies do not comply with reporting
requirements)
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC - LATVIA
Latvia A&A ROSC Findings
High quality at entry into the audit profession
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC - LATVIA
Latvia A&A ROSC Findings
Possible shortage of auditors (Supply /
Demand imbalance)
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC - LATVIA
Latvia A&A ROSC Findings
Lack of external quality control for auditors;
lack of public oversight over the audit
profession
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC - LATVIA
Latvia A&A ROSC Findings
Existence of a multi-disciplinary regulator
(FCMC)
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC - LATVIA
Latvia A&A ROSC Findings
Enforcement of accounting standards is
not high on FCMC’s agenda
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC - LATVIA
Latvia A&A ROSC Findings
Potentially material departures from IFRS might go undetected
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC - LATVIA
Latvia A&A ROSC Findings
The quality of IFRS financial statements of
listed companies is generally high
IFRS
ISA
Acquis Communautaire
Good International Practice
(+)(-)
ROSC Recommendations: Promoting Confidence in Latvian MarketsFinancial Information
that Meets Users’ Needs
Trust in Audit Quality
Availability of Financial
Information
Monitoring& Enforcement
ROSC - LATVIA
Financial Information that Meets the Needs of Users
Good financial information promotes better business and investment decisions
ROSC - LATVIA
- Full transposition of acquis communautaire
- Remove potentially conflicting or ambiguous financial reporting requirements
Trust in Audit Quality
ROSC - LATVIA
If users cannot trust audit reports, the cost of doing business increases.
- Continuing professional education, quality assurance and discipline
- Public oversight of the audit profession
- Relevant statutory audit requirements
- Ethics
Availability of Financial Information
ROSC - LATVIA
Information that is readily available makes business and investment more efficient.
- Audited financial statements of listed companies and limited liability companies should be readily and publicly available.
Monitoring and Enforcement
ROSC - LATVIA
Essential to guarantee the quality of financial information.
- Enhance the authority of FCMC
- Enhance institutional capacity of FCMC
- Promote a healthy but challenging dialogue between FCMC and auditors
Implementing the ROSC Recommendations
National Steering
Committee
ROSC - LATVIA
IAIS
IFAC
IASB
DevelopmentPartners
Basel Committee
European Commission &Committees
World Bank