Paper calls for wider spread of funding to support international audit and ethics standard-setters.
The Monitoring Group has published a new paper highlighting the importance of high-quality audits conducted in accordance with standards developed via an independent and inclusive international audit and ethics standard-setting structure.
The Monitoring Group is a group of international financial institutions and regulatory bodies responsible for the overall governance of the international audit and ethics standard-setting system, including periodic effectiveness reviews. In July 2020, it issued recommendations on strengthening the international audit and ethics standard-setting system.
The paper says academic research has demonstrated cost-reduction benefits for debt and equity issuers whose financial reporting is subject to high-quality independent audits, and that the benefits “far outweigh” the costs of operating the independent standard-setting structure.
While steps have already been taken to implement the Monitoring Group’s recommendations, thereby improving the independence of the international audit and ethics standard-setting structure, the report highlights the need to maintain these improvements through a “sustainable long-term multistakeholder funding mechanism” that supports the independence of the standard-setting structure.
“It is in the public interest that all stakeholders in the financial reporting ecosystem who benefit from a single set of high-quality international auditing and ethics standards contribute to support long-term financial stability of the standard-setting system,” the report says.
The paper calls for the introduction of a stable funding model that includes financial commitments from a more diverse set of stakeholders to support the work of international audit and ethics standard-setters – including investors, regulators, stock exchanges, national standard-setters and auditors.
To date, the work of international standard-setters IAASB (International Auditing and Assurance Standards Board), IESBA (International Ethics Standards Board for Accountants) and PIOB (Public Interest Oversight Board) has primarily relied on funding from the accountancy profession.