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Over the last two decades, the global financial landscape has undergone a
significant transformation. These developments have been attributable, in part, to
dramatic changes in the business and political climates, increasing global competition,
the development of more market-based economies, and rapid technological
improvements. At the same time, the world's financial centers have grown increasingly
Efforts to develop a global financial reporting framework have been guided by the
cornerstone principle underlying the system of regulation -- pursuing the mandate of
investor protection by promoting informed investment decisions through full and fair
disclosure. Financial markets and investors, regardless of geographic location, depend on
high quality information in order to function effectively. Markets allocate capital best and
maintain the confidence of the providers of capital when the participants can make
judgments about the merits of investments and comparable investments and have
confidence in the reliability of the information provided.
With the activities and interests of investors, lenders and companies becoming
increasingly global, increased involvement in a number of forums to develop a globally
accepted, high quality financial reporting framework is essential. Efforts, at both a
domestic and international level, consistently have been based on the view that the only
way to achieve fair, liquid and efficient capital markets worldwide is by providing
investors with information that is comparable, transparent and reliable.
However, ensuring that high quality financial information is provided to capital
markets does not depend solely on the body of accounting standards used. An effective
financial reporting structure begins with a reporting company's management, which is
responsible for implementing and properly applying generally accepted accounting
standards. Auditors then have the responsibility to test and opine on whether the financial

statements are fairly presented in accordance with those accounting standards. If these
responsibilities are not met, accounting standards, regardless of their quality, may not be
properly applied, resulting in a lack of transparent, comparable, consistent financial
Accordingly, while the accounting standards used must be high quality, they also
must be supported by an infrastructure that ensures that the standards are rigorously
interpreted and applied, and that issues and problematic practices are identified and
resolved in a timely fashion. Elements of this infrastructure include:

effective, independent and high quality accounting and auditing standard setters;

high quality auditing standards;

audit firms with effective quality controls worldwide;

profession-wide quality assurance; and

active regulatory oversight.

Accountants are all charged with creating and implementing an accounting and audit
foundation that will allow investors to make sense of the rapidly changing financial
markets, and ensure that the results are not only timely and accurate, but also
comprehensible and useful to investors. The new standards that are developed should be
informed by thoughtful and robust analytical thinking and with the needs of investors
uppermost in our minds. These new standards need to be clear, appropriately and
consistently applied, and then effectively enforced. Timely communication between all
players leading up to the effective date will be critical to help pave the road to success.