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SEC Accountant Discusses Global Initiatives

Accounting, auditing and disclosure are the common concerns of international regulators with cross border capital formation, according to Susan Koski-Grafer, a senior associate chief accountant at the SEC. She noted that corporate financial reporting scandals triggered strong reactions in the public and private sectors here and abroad, leading to greater cooperation than ever before in encouraging high quality financial reporting.

Koski-Grafer said that high quality accounting standards alone will not result in high quality financial reporting. Those who apply the accounting standards must have enough knowledge about the standards and a commitment to apply them properly. With the adoption of new international financial reporting standards, Koski-Grafer emphasized the importance of communication with respect to the interpretation and application of the standards among issuers, audit firms, regulators and users. She acknowledged that some implementation and transitional problems may occur, including different interpretations of the provisions based on preparers', auditors' and regulators' previous accounting frameworks.

The International Organization of Securities Commissions has launched a project to encourage communication among securities regulators about their decisions as they review the application of IFRS to companies' financial statements. IOSCO envisions that any unresolved differences will be referred to the International Accounting Standards Board for its interpretation. Koski-Grafer reported that a consultation paper on this project will be circulated early this year.

Koski-Grafer also advised that the Committee of European Securities Regulators has an operating subgroup that will collect information about the regulatory decisions on IFRS to be shared among the European securities regulators and other public and private enforcement bodies. The SEC staff has been preparing for the past two years for the wider use of IFRS among foreign registrants, she added.

In the area of international auditing, Koski-Grafer noted that a significant amount of IOSCO's efforts have been directed at auditor independence and oversight. IOSCO expects to complete a survey among its members that addresses such issues as legal frameworks, oversight bodies, auditing standards and quality assurance, investigations and disciplinary processes, and audit committee oversight. IOSCO plans to issue a report on the survey results.

IOSCO also has been working with the International Federation of Accountants, the International Auditing and Assurance Standards Board and the Ethics Committee to increase the transparency in the standards setting process and to foster the development of high quality international auditing, ethics and independence standards, according to Koski-Grafer. The Public Interest Oversight Board has been created to improve international audits and should become operational this year. Koski-Grafer noted that a member of the PCAOB is an observer at IAASB meetings. U.S. and international auditing standards setters are communicating, she said.

National regulators and oversight bodies are also involved in audit reform initiatives. Koski-Grafer referred to Canada, France, the U.K. and Japan, which are creating oversight bodies and working to improve standards for audit quality assurance and to improve auditor independence. The European Union is revising its Eighth Directive on Auditing, she added, and CESR's subgroup will focus on auditing standards, audit quality and oversight.

Koski-Grafer said she joined the SEC four and a half years ago, after a long career in the industry, because she wanted the opportunity to address financial reporting matters from a global perspective. She looks forward to the day when investors around the world can look at the financial statements and disclosures of listed public companies everywhere and see reports that have been prepared and audited using improved and more comparable standards than today, regardless of where the company is based or the markets in which its securities are listed.