SMP Issues Know No Borders 

Standards

SMP Issues Know No Borders

International collaboration is leading to a greater awareness of the unique needs of the small and medium-sized enterprise sector.

FROM: NOV-DEC 2005 ISSUE

CGA-Canada has been an active participant in the International Federation of Accountants (IFAC) since its establishment in the 1970s. The past few years have been challenging for the accounting profession on a number of fronts, and IFAC has implemented a number of new initiatives to address these challenges. One such initiative was the establishment of the Small and Medium Practices (SMP) Permanent Task Force.

CGA-Canada has had a representative on the task force since its inception in early 2004. Comprised of 15 members from 14 countries, the task force currently has one Canadian representative, former CGA-Canada Chair Dale Gislason, FCGA.

A key role of the task force is providing input into international standard-setting processes. In addition, the task force has launched several new initiatives to assist SMPs and professional accountants serving small and medium-sized enterprises (SME). The task force also assists in the development of guidance materials for SMPs and facilitates the sharing of information among member bodies, IFAC boards, committees and task forces, and other external groups.

Recognizing the growing importance of SMEs, the International Accounting Standards Board (IASB) established a Working Group on Accounting Standards for SMEs, and earlier this year, added two IFAC nominees to the group. Those nominees — Dany Girard, FCGA, Chair of CGA-Canada, and Leonardo Rodriguez, President of the Interamerican Accounting Association — are both strong advocates for SMEs.

Resources for SMPs

SMPs, lacking the economies of scale of larger practices, often do not have in-house resources such as technical units and libraries. Recognizing this, the task force is involved in developing an online information resource consisting of documents and links from member bodies and relevant external organizations, such as small business research centres and government agencies that provide support for SMEs. The resource will help SMPs from around the world share information, and will be accessible through the IFAC website. It will cover such topics as:

• accounting, audit, and assurance;
• business advisory services;
• information technology;
• practice management;
• taxation.

Standard-Setting Input

Accounting and auditing standards remain high on the task force's agenda, as the group provides comments to the International Auditing and Assurance Standards Board (IAASB) throughout the development process to ensure that SMP and SME issues are reflected in the International Standards on Auditing (ISA). Providing such input helps to ensure that IAASB standards are suited for audits of entities both small and large.

The last year has seen input to 12 projects, which represent about 85 per cent of the projects in the IAASB's work program. The task force recently added two new IAASB projects to the ones it is already tracking: Using the Work of an Expert and Audit Considerations Relating to Entities Using Service Organizations.

Recognizing the large and increasing demand from SMPs for guidance on the implementation of ISAs, the task force is promoting the development of audit practice aids aimed at enhancing the ability of SMPs to apply ISAs.

Examples include explanatory guides, implementation guidance, small business audit practice manuals, audit software, and training materials. In addition, the task force is compiling an online catalogue of available products.

Other activities include encouraging suppliers to increase their offerings, and conduct market research into the level of demand for such products, the objective being to make this material freely available to any potential supplier.

Outreach and Collaboration

Members of the SMP Permanent Task Force joined delegates from 49 countries at IFAC's first consultative conference in Prague on March 10-11, 2005. IFAC Board member Sylvie Voghel, FCGA, former CGA-Canada Chair, chaired the conference and moderated several sessions. Voghel is one of two Canadians on the 21-member IFAC Board of Directors. Also representing CGA-Canada were Dale Gislason, FCGA, and Rita Bury, CGA, who had attended the SMP Task Force meeting held that week.

Representatives from IFAC member bodies, regional accountancy bodies, other non-member accountancy organizations, development agencies, and other international groups explored topics such as standard setting and the role of SMPs, the challenges of globalization and regulation, and the priorities for IFAC's SMP and Developing Nations Permanent Task Forces.

On the topic of SMPs and SMEs, the delegates suggested that IFAC address the following issues:

• greater SMP representation on IFAC boards, committees, and task forces;
• the urgent need for International Financial Reporting Standards to be developed which are relevant to SMEs and to micro-entities, the discussion focused on the current IASB project and in addressing the needs of entities not covered by this project;
• the need to ensure that ISAs are relevant and easily understandable; and
• consideration of the use of assurance reviews rather than audits, and the importance of ensuring that this service is clearly understood.

IFAC has moved quickly to respond to these recommendations. First, a member of the SMP Permanent Task Force has been appointed to the IAASB Clarity Project Task Force, which aims to improve the clarity and structure of ISAs. Second, the task force is evaluating the utility of having an alternative to an audit. Third, IFAC is considering developing a third tier of accounting standards below the IASB's SME standards.

Given the success of the March 2005 meeting, an IFAC sanctioned SMP forum was held at October's Interamerican Accounting Association conference in Brazil. The forum was a great success with more than 2,000 participants.

During the four-day conference, Sylvie Voghel was part of a panel discussion on accounting rules in the national and international atmosphere. In her concluding remarks, Voghel had the following to say: "The SMP Permanent Task Force made huge progress in the last year or so. We should work to ensure IFAC's boards and committees have more representation from the SMP sector. This would be the most effective way of raising the issues and perspectives of the SMP/SME sector to the decision-making levels of IFAC."

For updates on the SMP Permanent Task Force's activities, visit www.ifac.org/TaskForces/smpptf.

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This article appears courtesy of the International Federation of Accountants.