Securities Law & Instruments

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In response to widespread interest in the conduct and quality of audits and in the oversight of auditors, in 2004 the Technical Committee of the International Organization of Securities Commissions (IOSCO),{1} in cooperation with a group of other international organizations, developed a Survey on the Regulation and Oversight of Auditors. The goal of the Survey was to obtain a point-in-time, baseline description of the structures and processes in place in 2004 for regulation and oversight of auditing around the world to assist regulators, oversight bodies and other organizations that are working to enhance auditor oversight and international audit quality.

IOSCO's Survey also sought to identify the extent to which the auditor oversight arrangements in place as of the end of 2004 encompass the recommendations in IOSCO's Principles for Auditor Oversight and Principles of Auditor Independence and the Role of Corporate Governance in Monitoring an Auditor's Independence. These Statements of Principles were developed by IOSCO's Technical Committee in 2002 and endorsed by IOSCO's Presidents' Committee in October 2003.{2}

58 responses to the Survey were submitted. The Ontario Securities Commission and Autorité des Marchés Financiers (Quebec) submitted a joint response to the Survey.

In April 2005, IOSCO's Technical Committee published a Survey Report on Regulation and Oversight of Auditors (Survey Report), which provides a high-level summary of the major findings. The Survey Report can be downloaded from IOSCO's website at (Library -- Public Document #199).

The Survey Report addresses matters such as:

    • legal frameworks for auditor oversight in different jurisdictions;

    • the oversight of auditors' work by audit committees, supervisory boards and similar groups;

    • other aspects of auditor oversight, including areas such as licensing, qualifications and training, peer reviews, independent inspections, investigations and discipline; and

    • structures, powers and funding of auditor oversight bodies.

The overall picture provided by the Survey Report shows a mixed and changing landscape for auditor oversight arrangements. For example, the Survey revealed that the IOSCO Principles for auditor oversight and auditor independence have been broadly implemented in most of the Technical Committee jurisdictions. However, the Survey Report concludes that "on a global basis, it is evident that a great deal remains to be accomplished to create auditor oversight structures and quality assurance processes that fully encompass the IOSCO principles".

The Survey Report also notes, however, that legal frameworks, established professional customs and practices, regulatory structures and practices for auditors, and governance practices that touch on financial reporting are being re-examined and in many cases enhanced in many countries and regions in the world. In particular, the areas of auditor oversight and audit quality assurance are undergoing significant change. Several countries (including Canada) have established new auditor oversight bodies and other survey respondents indicated that they plan to create such bodies in the near future. In addition to these national efforts, initiatives are underway at a regional level (e.g. in the European Union) and a global level to strengthen auditor oversight and audit quality assurance. For example, at the global level, IOSCO and other members of an informal monitoring group of international organizations are continuing to encourage and monitor the work being done by the International Federation of Accountants (IFAC) and by professional organizations and networks of accounting firms. In connection with these efforts, an international Public Interest Oversight Board was formally established on February 28, 2005 to oversee IFAC's standard-setting activities for auditing, professional ethics and education.{3}

Looking to the future, IOSCO intends to conduct a further analysis of key results of its Survey as it monitors continuing international developments that affect auditor oversight and audit quality assurance. Consideration will also be given to the need to: (1) update the IOSCO Principles for auditor oversight and auditor independence in light of changing expectations with respect to audits; (2) enhance existing oversight arrangements; and (3) initiate additional actions as needed for investor protection and market confidence. IOSCO also expects to update selected portions of the Survey in future years, after further developments have occurred in oversight structures and processes.

IOSCO encourages regulators and international organizations with responsibilities for audit oversight matters to use the information contained in the baseline survey.{4}

Questions about the Survey and Survey Report may be referred to:

John A. Carchrae, CA
Chief Accountant
Ontario Securities Commission
Tel: (416) 593 8221
Fax: (416) 593 3693

May 6, 2005

{1} The Commission is a member of IOSCO, including its Presidents' Committee, Executive Committee, Technical Committee and a number of other sub-committees. More information about IOSCO and the Commission's participation in IOSCO can be found on the Commission's website at (International Affairs -- Who's Who).

{2} IOSCO's Technical Committee brings together regulators from fifteen countries where the many of the world's largest and most internationalized markets are located. The Presidents' Committee brings together all of IOSCO's Ordinary Members and Associate Members and includes representatives from more than 100 countries.

{3} Commission Chair David Brown is one of the founding members of the PIOB. To learn more about the PIOB, download the Winter 2005 edition of the Commission's International Update from the Commission's website at (International Affairs -- International Updates).

{4} Copies of the detailed statistical compilation for individual questions will be sent, upon request, to IOSCO member regulators. Members of auditor oversight bodies and international regulatory and financial institutions with an interest in auditor oversight may also obtain access to the detailed compilation by contacting the IOSCO Secretary-General. Contact details are specified in the Survey Report.