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Accounting Standards Board - World of Accounting

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					   History of
  Accounting
  Standards


  By:Gholamhossein Davani
 IACPA,IIA,CFE,EAA,IMA,AIA
Member of High Council of Iranian
 Association of Certified Public
     Accountants (IACPA)




                                    1
Chairman, Presidents, fellow
accountants, ladies and
gentlemen. Good afternoon. It
is a great pleasure to be here
in Istanbul in the Heart of Asia
and Europe to address the
“12th World Congress of
Accounting Historians “. Thank
you for your kind invitation
Turkey has a special place in
Asia & Europe because it is the
only land way to access to
Europe by Asian countries. I
myself have studied about
Osmani government and
understand about 150 years
Turkey government was the
governor of west European and
Middle East countries.

                               2
•   Accounting has been called the language of
    business and accounting standards are grammar of
    this language. we must have a solid grounding in
    its fundamentals. Accounting information has been
    useful for hundreds of years. The double-entry
    framework was first described in a book written by
    Luca Pacioli, a fifteenth-century Italian monk and
    mathematician, although its origins can be traced
    back another 300 years. The formal structure for
    processing financial transactions is at least 700
    years old.
•   What is the definition of accounting? Accounting is
    the process of providing quantitative information
    about economic entities to aid users in making
    decisions concerning the allocation of economic
    resources.
•   The term accounting theory is commonly used, but
    it has no unified, standardized definition. Very
    closely related to the realm of accounting theory is
    the area of measurement. Measurement is
    concerned with the process of assigning numbers
    to the attributes or characteristics of the elements
    being measured.
•   In addition to accounting, accountancy has
    emerged as a profession, alongside the professions
    of medicine and law.

                                                      3
Who have responsibility
for Accounting Standards

• International Accounting Standards
  Board (IASB)
• Financial Accounting Standards
  Board (FSBB)
• Accounting Standards Board (ASB)
• Governmental Accounting Standards
  Board (GASB)
• International Accounting Standards
  Committee (IASC)
• International Financial Reporting
  Standards (IFRS)
• International Public Sector
  Accounting Standards (IPSAS)



                                   4
Who issues standards?
 International Accounting Standards
 (IASs) were issued by the IASC from
 1973 to 2000. The IASB replaced the
 IASC in 2001. Since then, the IASB has
 amended some IASs and has proposed
 to amend others, has replaced some
 IASs with new International Financial
 Reporting Standards (IFRSs), and has
 adopted or proposed certain new IFRSs
 on topics for which there was no
 previous IAS. Through committees,
 both the IASC and the IASB also have
 issued Interpretations of Standards.
 Financial statements may not be
 described as complying with IFRSs
 unless they comply with all of the
 requirements of each applicable
 standard and each applicable
 interpretation.
                                      5
Accountancy Age
timeline: 1969 - 2004

• 1969: Accountancy Age is launched.
• DTI inquiry into Robert Maxwell's
  Pergamon Press causes its takeover by
  LeaseCo to fall apart.
• Touche, Ross, Bailey & Smart becomes
  Touche Ross
• 1970: ICAEW's proposal to merge with
  ICAS, ICAI and other bodies fails
• 1973: Henry Benson appointed first
  chairman of the International Accounting
  Standards Committee
• 1974: The Consultative Committee of
  Accountancy Bodies (CCAB) is formed
• 1977: IFAC is founded
• 1979: Ernst and Whinney is formed
• 1980: ACCA's Vera di Palma becomes the
  first female president of an international
  accounting body
• 1984: Merger of Deloitte, Haskins & Sells
  and Price Waterhouse falls through
                                               6
•   1987: Peat Marwick International and KMG
    merger forms KPMG
•   1989: Arthur Andersen/Price Waterhouse
    merger collapses in September.
•   Ernst & Young is formed from Ernst & Whinney
    and Arthur Young. Touche Ross and Deloitte
    Haskins Sells merge to form Deloitte & Touche
•   1990: The 'Guinness Four' are found guilty of
    fraud
•   1991: Robert Maxwell drowns. BCCI collapses.
    Polly Peck and Coloroll scandals lead to Ian
    Cadbury's report on good corporate governance
•   1995: Deloitte & Touche creates Deloitte
    Consulting. Barings collapses
•   1996: Ian and Kevin Maxwell cleared of fraud,
    Coopers & Lybrand's audits of Maxwell
    companies face JDS investigation. KPMG
    produces the first annual report by an
    accountancy firm, which reveals senior partner
    Colin Sharman earns a total package of
    £740,000
•   1998: Coopers & Lybrand and Price Waterhouse
    form PricewaterhouseCoopers.
•   JDS turns the spotlight on Arthur Andersen in
    connection with the £50m overstatement of
    profits by Wickes

                                                     7
•   2000: European Commission announces in July
    that it intends to make IAS mandatory from
    2005.
•   The IASC completes its three-year restructuring
    programme and creates the International
    Accounting Standards Board, effective from April
    2001.
•   Ernst & Young sells consulting arm to Cap
    Gemini
•   2001: SEC's Enron investigation begins. Big Five
    issue a joint statement in December insisting
    that self-regulation remains the best policy
    following the collapse of Enron
•   2002: Andersen's Houston office admits to
    shredding documents relating to Enron.
    WorldCom is accused of $4bn fraud, which drags
    Andersen into another scandal. Andersen UK
    acquired by Deloitte. SEC implements Sarbanes-
    Oxley
•   2003: Grant Thornton is dragged into €4bn
    accounting 'black hole' at Parmalat.
•   Deloitte & Touche rebrands as simply 'Deloitte'.
•   Higgs and Smith reports take an evolutionary
    step on from Cadbury and Turnbull
•   2004: The Financial Reporting Council is
    revamped. Inland Revenue merges with
    Customs & Excise.
                                                   8
Who Sets Accounting
Standards in UK?


Who Sets Accounting Standards in USA?
•   The role of the Accounting Standards Board (ASB) is to issue
    accounting standards. It is recognized for that purpose under
    the Companies Act 1985. It took over the task of setting
    accounting standards from the Accounting Standards
    Committee (ASC) in 1990.
•   The ASB also collaborates with accounting standard-setters
    from other countries and the International Accounting
    Standards Board (IASB) both in order to influence the
    development of international standards and in order to ensure
    that its standards are developed with due regard to
    international developments.
•   Accounting standards developed by the ASB are contained in
    'Financial Reporting Standards' (FRSs). Soon after it started its
    activities, the ASB adopted the standards issued by the ASC,
    so that they also fall within the legal definition of accounting
    standards. These are designated 'Statements of Standard
    Accounting Practice' (SSAPs). Whilst some of the SSAPs have
    been superseded by FRSs, some remain in force.
•   Accounting standards apply to all companies, and other kinds
    of entities that prepare accounts that are intended to provide
    a true and fair view. The Foreword to Accounting Standards
    explains the authority, scope and application of accounting
    standards.
                                                                    9
       Who Sets
       Accounting
       Standards in USA?
The following institutes work together to
create new and amend older standards in
order to establish and maintain a common
language for communicating financial
information:

   1-The Financial Accounting Standards Board
     (FASB),
   2-American Institute of Certified Public
     Accountants (AICPA),
   3-Securities and Exchange Commission (SEC),
   4-International Accounting Standards Board
     (IASB)
   5-The passage of the Sarbanes-Oxley Act and
     the creation of the Public Company
     Accounting Oversight Board (PCAOB)
     signals many significant forthcoming
     changes in GAAP and the current standards
     setting process.



                                             10
Who Sets Accounting
Standards in EU?
 At a joint meeting in September 2002, the International Accounting
 Standards Board (IASB) and the Financial Accounting Standards Board
 (FASB) agreed to work together to develop high quality, fully compatible
 financial reporting standards that could be used for domestic and cross-
 border reporting; this co-operative effort is sometimes described as
 international convergence of US GAAP and IFRS financial reporting
 standards. The IASB-FASB convergence effort involves two kinds of
 projects. The first type includes short-term projects that are intended to
 remove many of the numerous individual differences between
 International Financial Reporting Standards (IFRS, which include
 International Accounting Standards (IAS) issued by the predecessor body
 to the IASB) and US GAAP. Examples of current and proposed short-term
 convergence efforts involve the accounting treatments of no monetary
 exchanges, discontinued operations, income taxes and interim reporting.
 The second type of convergence project involves longer term joint IASB-
 FASB projects and coordinated projects that are intended to provide
 major pieces of improved accounting guidance. Examples of the latter
 include the joint projects on revenue recognition and purchase method
 procedures and the coordinated project on share-based payments. The
 goal of the IASB-FASB convergence efforts is to make US GAAP and IFRS
 financial reporting standards as nearly as possible the same across
 jurisdictions while also improving the overall quality of those standards.

 The convergence activities of the IASB and the FASB will of necessity be
 directly and indirectly affected by regulatory changes and shifts in
 economic conditions throughout the world. The purpose of this paper is
 to identify some possible implications for international convergence of a
 particularly significant regulatory change, namely, the mandated
 adoption of IFRS by listed enterprises in the European Union beginning in
 2005. This change will increase the number of enterprises that apply
 IFRS to prepare their consolidated reports from several hundred to
 several thousand, and will require the use of IFRS by enterprises that
 vary considerably in size, ownership structure, capital structure, political
 jurisdiction and financial reporting sophistication. The purpose of this
 discussion paper is to explore several implications of this major shift in
 financial reporting requirements for the overall international
 convergence of financial reporting standards and practices.

                                                                         11
IASB Framework

 While not a standard, the IASB Framework
 for the Preparation and Presentation of
 Financial Statements serves as a guide to
 resolving accounting issues that are not
 addressed directly in a standard. Moreover,
 in the absence of a standard or an
 interpretation that specifically applies to a
 transaction, IAS 8 requires that an entity
 must use its judgment in developing and
 applying an accounting policy that results in
 information that is relevant and reliable. In
 making that judgment, IAS 8.11 requires
 management to consider the definitions,
 recognition criteria and measurement
 concepts for assets, liabilities, income, and
 expenses in the Framework. The IASB
 adopted the Framework in April 2001. It
 had originally been adopted by the IASC in
 1989. Currently, the IASB is working on a
 Project to Revise the Framework.



                                            12
What is IFRSs’

 The term International Financial Reporting
 Standards (IFRSs) has both a narrow and a
 broad meaning. Narrowly, IFRSs refers to
 the new numbered series of
 pronouncements that the IASB is issuing, as
 distinct from the International Accounting
 Standards (IASs) series issued by its
 predecessor. More broadly, IFRSs refers to
 the entire body of IASB pronouncements,
 including standards and interpretations
 approved by the IASB and IASs and SIC
 interpretations approved by the
 predecessor International Accounting
 Standards Committee. [On this website,
 consistent with IASB policy, we abbreviate
 International Financial Reporting Standards
 (plural) as IFRSs and International
 Accounting Standards (plural) as IASs.]




                                          13
                  IFRS


•   International Financial Reporting Standards
    Preface to International Financial Reporting
    Standards
•   IFRS 1 First-time Adoption of International
    Financial Reporting Standards
•   IFRS 2 Share-based Payment
•   IFRS 3 Business Combinations
•   IFRS 4 Insurance Contracts
•   IFRS 5 Non-current Assets Held for Sale and
    Discontinued Operations
•   IFRS 6 Exploration for and Evaluation of Mineral
    Assets
•   IFRS 7 Financial Instruments: Disclosures
•   IFRS 8 Operating Segments Framework for the
    Preparation and Presentation of Financial
    Statements
•   Framework for the Preparation and Presentation
    of Financial Statements




                                                  14
       Which are
       international accounting
       standards(IAS)?
•   IAS 1 Presentation of Financial Statements
•   IAS 2 Inventories IAS 3 Consolidated Financial
    Statements
    Originally issued 1976, effective 1 Jan 1977.
    Superseded in 1989 by IAS 27 and IAS 28.
•   IAS 4 Depreciation Accounting
    Withdrawn in 1999, replaced by IAS 16, 22, and 38, all
    of which were issued or revised in 1998. IAS 5
    Information to Be Disclosed in Financial Statements
    Originally issued October 1976, effective 1 January
    1997. Superseded by IAS 1 in 1997. IAS 6 Accounting
    Responses to Changing Prices
    Superseded by IAS 15, which was withdrawn
    December 2003 IAS 7 Cash Flow Statements IAS 8
    Accounting Policies, Changes in Accounting Estimates
    and Errors IAS 9 Accounting for Research and
    Development Activities Superseded by IAS 38 effective
    1.7.99 IAS 10 Events After the Balance Sheet Date IAS
    11 Construction Contracts IAS 12 Income Taxes IAS
    13 Presentation of Current Assets and Current
    Liabilities
    Superseded by IAS 1. IAS 14 Segment Reporting.



                                                        15
• Segment Reporting
• IAS 15 Information Reflecting the Effects of
  Changing Prices
  Withdrawn December 2003
• IAS 16 Property, Plant and Equipment
• IAS 17 Leases
• IAS 18 Revenue
• IAS 19 Employee Benefits
• IAS 20 Accounting for Government Grants
  and Disclosure of Government Assistance
• IAS 21 The Effects of Changes in Foreign
  Exchange Rates
• IAS 22 Business Combinations
  Superseded by IFRS 3 effective 31 March
  2004.
• IAS 23 Borrowing Costs
• IAS 24 Related Party Disclosures




                                            16
•   IAS 25 Accounting for Investments
    Superseded by IAS 39 and IAS 40 effective
    2001.
•   IAS 26 Accounting and Reporting by Retirement
    Benefit Plans
•   IAS 27 Consolidated and Separate Financial
    Statements IAS 28 Investments in Associates
•   IAS 29 Financial Reporting in Hyperinflationary
    Economies
•   IAS 30 Disclosures in the Financial Statements of
    Banks and Similar Financial Institutions
    Superseded by IFRS 7 effective 2007.
•   IAS 31 Interests In Joint Ventures
•   IAS 32 Financial Instruments: Presentation
    Disclosure provisions superseded by IFRS 7
    effective 2007.
•   IAS 33 Earnings Per Share
•   IAS 34 Interim Financial Reporting
•   IAS 35 Discontinuing Operations
    Superseded by IFRS 5 effective 2005.
•   IAS 36 Impairment of Assets
•   IAS 37 Provisions, Contingent Liabilities and
    Contingent Assets
•   IAS 38 Intangible Assets
•   IAS 39 Financial Instruments: Recognition and
    Measurement
•   IAS 40 Investment Property
•   IAS 41 Agriculture

                                                   17
FASB


Since 1973 the FASB has been the
organization designated to establish
authoritative financial accounting
and reporting standards
(Statements of Financial Accounting
Standards, SFAS) for business and
other private-sector entities. Its
mission is to be responsive to the
entire economic community and to
operate in full view of the entire
community through a due-process
system.




                                   18
            SEC


Under the Securities and Exchange Act of 1934,
the SEC has statutory authority to establish
financial accounting and reporting standards for
publicly-held companies. Recent accounting-
related scandals, such as Enron, prompted the
SEC and Congress to get more directly involved
in the oversight of the standards setting process
and the monitoring of corporate governance. In
August 2002, as part of the Sarbanes-Oxley Act,
the SEC's Public Company Accounting Oversight
Board (PCAOB) was created to crack down on
corporate accounting scandals. Authorized to
conduct inspections and discipline accountants,
the oversight board supplants the self-regulation
of CPAs who audit public companies.




                                               19
IASB

 Formed in January 2001, the ISAB replaced its
 predecessor, the International Accounting
 Standards Committee (IASC), as the
 international standards setting body. Looking
 towards greater formalization of international
 accounting standards, IASB is structured
 similarly to the FASB. It is currently the focus of
 the IASB, in collaboration with the FASB and
 other accounting focused organizations, to
 "converge" standards and develop a single,
 universally accepted set of biding international
 accounting standards. The IASC, and now IASB,
 issue a series of standards known as
 International Financial Reporting Standards
 (IFRS), formerly called International Accounting
 Standards (IAS).




                                                  20
IASB, IASCF, and IASC
Defined
 The International Accounting Standards Board is an
 independent, private-sector body that develops and
 approves International Financial Reporting
 Standards. The IASB operates under the oversight
 of the International Accounting Standards
 Committee Foundation. The IASB was formed in
 2001 to replace the International Accounting
 Standards Committee.
 IASCF: International Accounting Standards
 Committee Foundation
 The International Accounting Standards Committee
 Foundation is the independent, non-profit
 foundation, created in 2000 to oversee the IASB.
 Click for more information about the IASCF
 Structure.
 IASC: International Accounting Standards
 Committee
 From 1973 until a comprehensive reorganization in
 2000, the structure for setting International
 Accounting Standards was known as the
 International Accounting Standards Committee.
 There was no actual "committee" of that name. The
 standard-setting board was known as the IASC
 Board.
                                                 21
What is IFAC?

 The International Federation of Accountants
 (IFAC) is an association of national professional
 accountancy organizations that represent
 accountants employed in public practice,
 business and industry, the public sector, and
 education, as well as some specialized groups
 that interface frequently with the profession.
 IFAC works to develop the profession globally
 and to harmonies professional standards
 worldwide to enable accountants to provide
 services of consistently high quality in the public
 interest across political borders. Currently, IFAC
 has 155 member bodies and associates in 118
 countries, representing over 2.5 million
 accountants.




                                                  22
International Accounting
Education Standards
Board

•   The International Accounting Education
    Standards Board (IAESB) – formerly the IFAC
    Education Committee – develops guidance to
    improve the standards of accountancy education
    around the world and focuses on two key areas:
•   The essential elements of accreditation, which
    are education, practical experience and tests of
    professional competence; and
•   The nature and extent of continuing professional
    education needed by accountants.




                                                  23
International Auditing
and Assurance Standards
Board
 International Standards on Auditing (ISAs) are
 set by the International Auditing and Assurance
 Standards Board (IAASB) -- until 2002 known as
 the International Auditing Practices Committee
 (IAPC). The ISA on the auditor's report on
 financial statements requires that the auditor's
 opinion must clearly indicate the financial
 reporting framework used to prepare the
 financial statements (including the country of
 origin of the financial reporting framework when
 the framework used is not International
 Accounting Standards) and state the auditor's
 opinion as to whether the financial statements
 give a true and fair view (or are presented fairly,
 in all material respects) in accordance with that
 financial reporting framework and, where
 appropriate, whether the financial statements
 comply with statutory requirements.




                                                  24
•   Originally, the AICPA, the memberships association for
    CPAs, was the body responsible for defining accounting
    standards.
•   1939-1959 - issues Accounting Research Bulletins (ARB)
•   1959-1973 - Accounting Principles Board (APB) issues
    series of opinions
•   1973 - Accounting Principles Board dissolved and
    standards setting responsibility is transferred to FASB. The
    AICPA continues its role as authoritative body for
    establishing auditing standards (Statement of Auditing
    Standards, SAS)
•   In 1973, the AICPA shifted its focus to supporting it
    membership and constituency and bringing to the
    attention of the FASB and SEC issues that it determined
    important to the accounting and auditing professional
    communities. While the AICPA continued issuing auditing
    standards, this responsibility is now being assumed by the
    Public Company Accounting Oversight Board (PCAOB), a
    body created by the Sarbanes-Oxley Act of 2002. The
    Oversight Board's recent authorization to become directly
    involved with issues auditing standards could have
    significant impact on the current standards setting
    process.
•   AICPA has given a thumbs – up to a Securities and
    Exchange Commission plan that would allow U.S.
    corporations to abandon generally accepted accounting
    principles and report their financial results using
    international accounting standards.
    This concept release was issued on the heels of a separate
    SEC proposal that would permit foreign companies filing
    with the SEC to use IFRS without reconciling to U.S GAAP.




                                                              25
Accounting
The House of GAAP
•   The role that accounting standards play in establishing the
    rules for disclosing both public and private financial
    reporting assumes levels of authority of "more to less"
    which guide reliance on and determines the weight of the
    standards. Understanding this hierarchy is paramount to
    grasping the meaning of "generally accepted accounting
    principles" (GAAP), and the many supporting documents.
•   The concept of the "house of GAAP" was introduced in a
    1984 article from the Journal of Accountancy. The author
    describes and defines the vast universe of accounting
    standards as a hierarchy structured along the lines of the
    floor plan of a house. "Like any other structure, the house
    of GAAP rests on a foundation, in this case a foundation of
    the basic concepts and broad principles that underlie
    financial reporting, without which, like a house of cards,
    the house of GAAP would tumble."
•   In 199I the AICPA's Auditing Standards Board remodeled
    the house of GAAP by changing some of the levels of
    authority of certain accounting pronouncements and
    distinguishing between the standards defining state and
    local government entities, established by the Government
    Accounting Standards Board (GASB) and those for all
    others, falling under the FASB's jurisdiction.




                                                             26
PCAOB (USA)


•    Formed in 2002 to oversee the audit of public
    companies that are subject to the securities laws
    in the preparation of informative, fair and
    independent audit reports. The Board's authority
    includes:
•   ..Registering public accounting firms that
    prepare audit reports for issuers
    ..Conducting inspections of registered public
    accounting firms
    ..Conducting investigations and disciplinary
    proceedings and impose appropriate sanctions
    ..Enforcing compliance by registered public
    accounting firms relating to the preparation and
    issuance of audit reports and the obligations and
    liabilities of accountants
    ..Establishing auditing, quality control, ethics,
    independence, and other standards relating to
    the preparation of audit reports for issuers




                                                   27
POB (UK)
•   The Professional Oversight Board contributes to
    the achievement of the Financial Reporting
    Council's own fundamental aim of supporting
    investor, market and public confidence in the
    financial and governance stewardship of listed
    and other entities by providing:
•   Independent oversight of the regulation of the
    auditing profession by the recognized
    supervisory and qualifying bodies
•   Monitoring of the quality of the auditing function
    in relation to economically significant entities
•   Independent oversight of the regulation of the
    accountancy profession by the professional
    accountancy bodies
•   Independent oversight of the regulation of the
    actuarial profession by the professional actuarial
    bodies and promoting high quality actuarial
    work.
•   The Professional Oversight Board for
    Accountancy has changed its name as of 5 May
    2006 to the Professional Oversight Board. This
    reflects the extension of its board's remit to
    include oversight of the regulation of the
    actuarial profession.
                                                    28
AADB (UK)
•   The Accountancy & Actuarial Discipline Board ("AADB") is the
    independent, investigative and disciplinary body for
    accountants and actuaries in the UK. It has up to eleven
    members.
•   The AADB is responsible for operating and administering an
    independent disciplinary scheme (the Accountancy Scheme)
    covering members of the following accountants' professional
    bodies:- the Association of Chartered Certified Accountants,
    the Chartered Institute of Management Accountants, the
    Chartered Institute of Public Finance and Accountancy and the
    Institute of Chartered Accountants in England and Wales; The
    Institute of Chartered Accountants of Ireland and the Institute
    of Chartered Accountants of Scotland.
•   The AADB will operate & administer a separate independent
    disciplinary scheme (the Actuarial Scheme) covering members
    of the Faculty & Institute of Actuaries, which will be adopted
    as soon as necessary formalities have been completed.
•   The focus of the AADB is on cases of public interest; other
    cases will continue to be dealt with by the individual
    accountancy body of the member concerned or by the Faculty
    & Institute of Actuaries. The normal channel of reference to
    the AADB for 'public interest' cases will be the accountancy or
    actuarial body primarily concerned. However, the AADB also
    has the power to call in cases whether or not they have been
    referred to it by an accountancy body. The AADB will also have
    the power to call in actuarial cases.
•   The AADB was formerly known as the Accountancy
    Investigation & Discipline Board (AIDB). It changed its name
    to the AADB on 16/08/2007.


                                                                29
GAAS


 Generally Accepted Auditing Standards (GAAS).
 Established by the AICPA, these standards
 govern the conduct of external audits by public
 accountants. The Statement of Auditing
 Standards (SAS) provide guidelines for the
 auditors' field work and financial reporting. They
 frame the format and contents of the Auditor's
 Report or Opinion, which is the formal
 expression of their examination of a company's
 financial statements. In May 2003, the PCAOB
 was given the official go-ahead to assume
 responsibility for establishing GAAS. It remains
 to be seen exactly how the PCAOB's new role
 will play out, its impact on the AICPA's
 responsibilities, and the form in which the two
 entities will co-exist.




                                                 30
GAS

 Governmental Accounting Standards (GAS).
 While GAAP defines the accounting for public
 and private business entities, there also exist
 standards specific to governmental
 organizations. Organized in 1984 to establish
 standards of financial accounting and reporting
 for state and local governmental entities, the
 Governmental Accounting Standards Board
 (GASB), began issues these standards to guide
 the preparation of external reports for these
 types of organizations.




                                                   31
          Sarbanes-Oxley Act
          of 2002
•   The S&O Act was passed as a direct result of a
    series of major corporate financial accounting
    scandals. This legislation directly impacts
    accountants and attorneys, officers and owners
    of publicly traded companies, as well as brokers,
    dealers, investment bankers, and financial
    analysts. The Act, PL 107-204, established the
    Public Company Accounting Oversight Board
    (PCAOB), responsible for registering,
    monitoring, investigating, and disciplining the
    activities of public accounting firms, including
    establishing the guidelines for the conduct of
    several key auditing procedures no delineating
    the types of services that CPAs are prohibited
    from providing to audit clients. The Act
    additionally sets forth a number of requirements
    for corporations, their officers and Board
    members, by redefining working and reporting
    relationships with their internal audit committee
    members and public accounting firms, creating
    changes in internal controls procedures and
    enhancing financial disclosures.
                                                   32
What is Corporate
Governance?

    Good corporate governance is essential to the effective
    operation of a free market, which enables wealth creation and
    freedom from poverty. The main point of Corporate
    governance same Sarbox ,EU & UK regulation requires CEOs
    and CFOs to sign off on their companies' internal controls

•   A framework which should ensure that timely and accurate
    disclosure is made on all matters regarding the corporation,
    including the financial, performance, ownership, and
    governance of the company. It relies on mechanisms and rules
    which ensure the protection of all interest groups and help to
    build and consolidate the reputation and the market value of
    the company.
•   The mechanisms of corporate governance apply to every level
    of authority in the corporation - Board of Directors, Audit
    Committee, Compensation Committees and others. The Board
    of Directors must have strong independent representation.
    The Audit Committee provides the main point of
    communication between the external auditors and the
    shareholders.
•   Auditors also play a primary role in corporate governance. An
    important aspect of their work involves independence from
    any pressure, from either management or shareholders. The
    terms of engagement of their work, and constant contact with
    both operating management, boards of directors and related
    committees will guarantee the independence and reliability of
    financial statements
                                                                  33
Timeline of Corporate
Governance

•   The Cad bury Report (1992), UK
•   Green bury Report (1995) , UK
•    Hampel Report (1998), UK
•   The Smith Report (2003), UK
•   The Higgs Review (2003), UK
•   The Company Law White Paper
    (2002)
•   Sarbanes- Oxley Act 2002 USA
•   The Tyson report on the
    Recruitment
•   Development of Non-Executive
    Directors (2003)
•   Company Law and Corporate
    Governance (2003)




                                     34
The key aspects of
corporate governance in
the UK
•   A single board collectively responsible for the
    success of the company.
•   Checks and balances:
•    Separate Chief Executive and Chairman.
•    A balance of executive and independent non-
    executive directors.
•    Strong, independent audit and remuneration
    committees.
•    Annual evaluation by the board of its
    performance.
•   Emphasis on objectivity of directors in the
    interests of the company.
•   Transparency on appointments and
    remuneration.
•   Effective rights for shareholders.
•   A Code of good practice based on extensive
    consultation with
•   practitioners, and operating on the basis of the
    'comply or explain'
•   principle.


                                                       35
Audit Approach in Iran

• Balance sheet approach (1900-
  1971)
• System approach (1971- 1989)
• Risk approach (1990- 2007)




                              36
Chronology of Events in
the History of the Iranian
Accounting Profession (1)
         Year                                          Event

         1932             Appointment of Inspector to examine the accounts and
 (enactment of business   documents of companies
            law)
           1947           Use of public accountants services in matters of tax
 (the tax law amended)    documentation was permitted

       1949, 1956         Acceptance of the results of the “Accountant Under Oath” ’s
    (income tax law       examinations concerning the accounts or balance sheets of
          enacted)        businessmen and companies for the purpose of tax
                          assessment

         1961             Approval of operating regulations for the use of “Accountants
                          Under Oath)
         1962             Formation of the first association of “Accountant Under Oath”
         1963             Approval of the articles of association of the Center
                          “Accountant Under Oath”
         1964             Foundation of the Iranian Accounting Association
          1966            Formation of the “Center of Public Accountants” permitted
 (enactment of the law
       of direct taxes)


         1967             Approval of regulations governing the selection of public
                          accountants
        1968              Requirement for the use of public accountant’s report
    (amendment of
       business law)
         1970             Approval of operational regulations governing the
                          appointment of persons licensed for the inspection of
                          corporation- type companies
         1971             Foundation of the Audit Firm, Inc.
         1972             Use of public accountant’s report is made a
                          requirement/approval of the Articles of Association of the
                          Center of Public Accountants                                  37
Chronology of Events in
the History of the Iranian
Accounting Profession (2)
1980   Foundation of the Audit Institute Under the Organization of National Industries and
       the Planning and Budget Organization



1983   Enactment of the law decreeing the Establishment of the Iranian Audit organization


1987   Approval of the Articles of Association of the Audit Organization


       Enactment of the law decreeing the Establishment of the Iranian Audit Organization
1993

1995   Approval of the regulations governing the determination of the public accountant’s
       qualifications



1999   Formulation of the Iranian Association of Certified Public Accountants Articles of
       Association

2000   Formulation of the regulations governing the use of the public accountant’s services
       and reports



2000   Formulation of guide for elections to the supreme council of the Iranian Association
       of Certified Public Accountants



2001   Announcement of the first group of public accountants and the convening of the first
       general meeting of the Iranian Association of Certified Public Accountants



2004   The second electing of high council of Iranian Association of Certified Public
       Accountants (IACPA)



2007   The third electing of high council of Iranian Association of Certified Public
       Accountants (IACPA)

                                                                                            38
                 In the Name of God
The Law of Using the Professional Services of the
      Qualified Accountants as Certified Public
                     Accountants
      (Enacted by the Parliament on 1993)
 For the purposes of financial monitoring of the
 manufacturing, commercial and service sections and to
 obtain assurance about the reliability of the related
 financial statements, the interest of public,
 stockholders, and other interested individuals, hereby
 permission was granted to the executive branch to
 make the appropriated arrangements, as required to
 use the professional services of public accountants
 under the following circumstances:
     A.   Auditing and legal inspecting of the public
          corporations or applicants of registration in the stock
          exchange.
     B.   Auditing and legal inspecting of other corporations.
     C.   Auditing of non-corporate entities and also for profit
          and non-for-profit institutions.
     D.   Auditing and legal inspecting of companies and
          institutions subject of paragraphs “a” and “b” of
          article 7 of the legal articles of association of the
          Audit Organization dated 1987.
     E.   Tax auditing of personal and legal entities’ tax
          returns.
          …… (The text does not include the subparagraphs of
          the law)



                                                              39
USE OF Certified Public
ACCOUNTANTS AND
ACCEPTANCE OF RETURNS BY
TAX ASSESSORS (1)
 State tax organization issued a notice to all manufacturing,
 trading and services entities as follows:
 According to the Law on the Use of Specialized and
 Professional Services of Qualified (Official) Accountants ratified
 on 11.01.1994 and the Amendment made by the Islamic
 Consultative Assembly in the said Law on 16.02.1994 as well
 as Article 2 of the Executive Regulation of Note 4 of the above
 Law ratified in the form of a decree by the Council of Ministers
 on 03.09.2000, the following taxpayers are under the
 obligation to appoint the statutory “Inspectors” of their
 companies from among the auditing firms being members of
 the IACPA. Appointment may be made from among natural
 persons accepted as official accountants by IACPA by
 taxpayers mentioned in Sub-clause “f” below, only:

     • Companies accepted by or applying for acceptance by
       the Stock and Negotiable Instruments Exchange as well
       as the companies affiliated to the said companies.
     • Public joint stock companies as well as their subsidiary
       and affiliate companies.
     • The companies described in Sub-clauses a & b of Article
       7 of the Audit Organization in due compliance with the
       procedure set forth in Note 1 of Article 132 of the Public
       Accounts Law.
     • Branches and representative offices of foreign
       companies which are registered in Iran pursuant to the
       permission granted under the Law Authorizing
       Registration of Branches and Representative Offices of
       Foreign Companies, ratified 1997 (Liaison offices
       excluded).
                                                                 40
USE OF OFFICIAL (CHARTERED)
ACCOUNTANTS AND
ACCEPTANCE OF RETURNS BY
TAX ASSESSORS(2)
       E.Non government public entities, foundations,
         companies, and organizations and the entities affiliated
         thereto.
       F.Other natural persons and legal entities whose
         aggregate turn-over (sale of commodities or services
         and aggregate income in respect of contractors made
         and signed by them) shall not exceed eight billion rails
         or whose total assets shall not exceed sixteen billion
         Rails.
 According to Article 2 of the above Executive Regulation, the
 financial statements of the persons and entities mentioned in
 the above sub-clauses being devoid of a confirmatory audit
 report by firms of auditors being members of IACPA or official
 accountants acceptable to IACPA may not be acceptable to the
 ministries, government organizations and companies, banks
 and insurance companies, non bank credit institutes, the
 Organization of Stock and Negotiable Instruments Exchange
 and non government public foundations and institutes. No such
 statements may be used as evidence in favour of the said
 persons and entities.
 According to Article 272 of the Direct Taxation Act as Amended
 on 16.02.2002 by the Islamic Consultative Assembly, those
 who are in charge of accounting works or carry out the duties
 of statutory inspectors of the taxpayers mentioned in the above
 sub-clauses shall be under the obligation to submit an audit
 report on the activities of the said taxpayers and submit same
 to the taxpayer for submission to the State tax office
 concerned in case of a request by the taxpayers in this regard.
 In such case, the State tax office concerned shall be bound to
 accept the said audit report without examination and issue a
 tax assessment sheet based on the said report.
 Acceptance of the audit report by the State tax office
 concerned shall be subject to submission of a tax audit report
 drawn up by the same auditor who prepared the above audit
 report on the basis of auditing norms and standards together
 with tax return or within a maximum period of three (3)          41
 months after the date of expiry of the respite provided for
 submission of returns to the State tax office concerned.
Iranian National
Accounting Standards
No                                              Title

1    Presentation of financial statements

2    Cash flow statements

3    Revenue

4    Accounting for contingencies

5    Events after the balance sheet date

6    Reporting financial performance

7    Research and development cost

8    Inventories

9    Construction contracts

10   Accounting for government grants

11   Tangible fixed assets

12   Related party disclosures

13   Borrowing costs

14   Presentation of current assets & current liabilities

15   Accounting for investments

16   Foreign Exchange Translation

17   Intangible Assets

18   Consolidated financial statements and accounting for investments in subsidiaries

19   Business combinations

20   Accounting for investments in associates

21   Leases

22   Interim financial reporting

23   Financial reporting of interests in Joint Ventures

24   Financial reporting by development stage enterprises

25   Segment reporting

26   Agriculture

27   Retirement benefit plan
                                                                                        42
28   Real state & construction
What is comparative table
between Iran & IAS Auditing
standards
    No         Title                                                                        Compatible with

     ---       Introductory Matters                                                        Preface

     20        Objectives and General Principle Governing Audit of Financial Statements         ISA 200

     21        Terms of Audit Engagements                                                       ISA 210

     22        Quality Control for Audit Work                                                   ISA 220


     23        Documentation                                                                    ISA 230


     24        Fraud and Error                                                                  ISA 240


     25        Consideration of Laws and Regulations in an Audit of financial statements        ISA 250

     30        Planning                                                                         ISA 300

     31        Knowledge of Business                                                            ISA 310


     32        Audit Materiality                                                                ISA 320


     40        Risk Assessments and Internet Control                                            ISA 400


     50        Audit Evidence                                                                   ISA 500


     51        Initial Engagement- Opening Balances                                             ISA 510


     52        Analytical Procedures                                                            ISA 520


     53        Audit Sampling                                                                   ISA 530


     54        Audit of Accounting Estimates                                                    ISA 540


     55        Related Parties                                                                  ISA 550


     56        Subsequent Events                                                                ISA 560


     57        Going Concern                                                                    ISA 570


     58        Management Representations                                                       ISA 580


     60        Using the work of another auditor                                                ISA 600


     61        Considering the work of internal auditing                                        ISA 610


     62        Using the work of and expert                                                     ISA 620


     70        The auditor report on financial statements                                      IAS 700*


     80        The auditor’s report on special purpose audit engagement                         ISA 800


     91        Engagements to review financial statements                                       ISA 910


     92        Engagements to perform agreed-upon-procedures                                    ISA 920


     93        Engagements to compile financial information                                     ISA 930


    105        Particular considerations in the audit of small businesses                      ISA 1005


    107        Communications with management                                                  ISA 1007       43
  *Except for legal requirements
Iran, IAS, UK, and US GAAP Comparison:
Consolidated Financial Statements Iranian
Accounting Standards comparison with
International Accounting Standards
                         Iranian Accounting Standards                                                        International Accounting Standards (IAS)


Standard No.                                 Standard Title                             Standard No.                                     Standard Title

     1         Presentation of Financial Statements                                         IAS 1               Presentation of Financial Statements

     2         Cash Flow Statement                                                  IAS 7, except for (a)       Cash Flow Statement

     3         Revenue                                                                     IAS 18               Revenue

     4         Accounting for Contingencies                                                IAS 37               Provisions, Contingent Liabilities and Contingent assets

     5         Events After the Balance Sheet Date                                         IAS 10               Events After the Balance Sheet Date

     6         Reporting Financial Performance                                              IAS 8               Net Profit or Loss for the Period, Fundamental Errors and
                                                                                                                Changes In Accounting Policy

     7         Accounting for Research and Development costs                               IAS 38               Intangible Assets

     8         Accounting for Inventories                                                   IAS 2               Inventories

     9         Accounting for Long-term Construction Contracts                             IAS 11               Construction Contracts

    10         Accounting for Government Grants                                     IAS 20 except for (b)       Accounting for Government Grant and Disclosure of
                                                                                                                Government Assistance

    11         Accounting for Fixed Tangible Assets                                        IAS 16               Property, Plant and Equipment

    12         Related Party Disclosures                                                   IAS 24               Related Party Disclosures

    13         Accounting for Borrowing Costs                                              IAS 23               Borrowing Costs

    14         Presentation of Current Assets and Current Liabilities                       IAS 1               Presentation of Financial Statements

    15         Accounting for Investments                                                  IAS 25               Accounting for Investments

    16         Foreign Currency Exchange                                            IAS 21 except for (c )      The Effects of Changes in Foreign Exchange

    17         Accounting for Intangible Assets                                            IAS 38               Intangible Assets


    18         Consolidated Financial Statement and Accounting for Investments in   IAS 27 except for (d)       Consolidated Financial Statement and Accounting for
               Subsidiaries                                                                                     Investments in Subsidiaries

    19         Business Combination                                                        IAS 22               Business Combination

    20         Accounting for Investments in Associates                             IAS 28 except for (e)       Accounting for Investments in Associates

    21         Accounting for Leases                                                       IAS 17               Leases

    22         Interim Financial Reporting                                                 IAS 34               Interim Financial Reporting

    23         Accounting for Joint Ventures                                               IAS 31               Financial Reporting of Interest in Joint Ventures

    24         Financial Reporting of Development- stage Enterprises                         ---                                              ---

    25         Segment Reporting                                                     IAS 1 except for (f)       Segment Reporting

    26         Agriculture                                                                 IAS 41               Agriculture

    27         Retirement Benefit plan                                                     IAS 26               Accounting and reporting by retirement benefit plan

    28         Real Estate & Construction                                                  IAS 40               Investing property




                                                                                                                                                                       44
Auditing Project in progress
No                        Title                            Stage       Based on
10     Assurance Engagements                          Study and        ISA 100
                                                      preparation
12     Framework of Auditing Standards                Study and        ISA 120
                                                      preparation
24     The Auditor’s responsibility to consider       Revised,         ISA 240
       fraud and error in an audit of financial       Exposure draft
       statements
40-1   Auditing in a computer information             Study and        ISA 401
       systems environment                            preparation
40-2   Auditing considerations relating to entities   Study and        ISA 402
       using service organizations                    preparation
50-5   External confirmation                          Exposure draft   ISA 505
53     Audit sampling and other selective testing     Revised,         ISA 530
       procedures                                     exposure draft
57     Going concern                                  Revised,         ISA 570
                                                      exposure draft
70     Auditor’s report on financial statements       Revision         ISA 700
71     Comparatives                                   Study and        ISA 710
                                                      preparation
72     Other Information in documents                 Study and        ISA 720
       containing audited financial statements        preparation
81     The examination of prospective financial       Study and        ISA 810
       information                                    preparation
101    The consideration of Environmental             Study and        ISA 1010
       Matters in the audit of financial              preparation
       statements
 --    Glossary of Audit Terms                        Study and        ISA
                                                      preparation      Glossary
                                                                          45
Iran, IAS, UK and US GAAP
Comparison: Consolidated Financial Statements


             Subject                                    IAS               UK                US

 Accompanying Parent’s Separate      Mandatory      Not required    Comparable to     Comparable to
 Financial Statements with                                              IAS               IAS
 consolidated financial
 statements

 The main criterion of subsidiary     Control       Comparable      Comparable to     Control through
 definition                                           to Iran           Iran            majority of
                                                                                       voting shares

 Exempt subsidiaries                Subsidiaries    Comparable       Subsidiaries     Comparable to
                                       under          to Iran       with dissimilar       Iran
                                     temporary                       activities are
                                     control or                     also excluded
                                    server long
                                        term
                                     restriction

 Measurement of minority              Based on       Based on       Based on fair     Comparable to
 interest in net assets               carrying       carrying          values             Iran
                                      amounts       amounts or
                                                    fair values

 Presentation of minority             Should be     Not specified   Not specified        Should be
 interests in balance sheet          included in                                         presented
                                       equity                                             between
                                                                                       liabilities and
                                                                                           equity

 Elimination of intra-group          Complete       Comparable      Comparable to     Comparable to
 balances and transactions          elimination       to Iran           Iran              Iran

 Assigning unrealized gains and     Not specified   Comparable        Mandatory          Allowable
 losses to minority                                   to Iran

 Goodwill amortization               Amortized      Comparable      Comparable to     Not amortized
                                                      to Iran           Iran

 Allowable difference between         Three         Comparable      Comparable to     Comparable to
 reporting dates                      months          to Iran           Iran              Iran




                                                                                                   46
Accounting Standards -
Due Process (1)

Due process of accounting standard development is as following:
1.    Deciding on a subject for research. Theَ Accounting
      Standard Setting Committee decides on the topics to be
      considered by Standard Setting Department.
2.    Preliminary studies. After deciding on the subject,
      necessary research and studies are commenced by the
      advisors of the Standard Setting Department. In this phase,
      the standards of other countries like USA, UK, Australia and
      Canada, International Accounting Standards, research
      carried out in relation to the subject, accounting practice in
      Iran and the law and all issues relating to the subject are
      recognized, collected and studied. The result of this phase
      is presentation of study reports.
3.    Deciding on necessity of a standard development. The
      Standard Setting Committee decides on the necessity of
      development of a standard based on the result of
      preliminary studies.
4.    Preparation of primary draft. If the standard development
      is required by the Accounting Standard Setting Committee,
      the advisory group prepare a primary draft based on study
      reports, after field studies and some meetings with
      professionals and constituents. One of the main policies of
      accounting standard development is compliance with
      International Accounting Standards. Therefore, concerning
      the subject on which there is an International Accounting
      Standard, this International Accounting Standard is used as
      the main basis for the standard development. The outcome
      of this phase is the primary standard draft.

                                                                  47
Accounting Standards -
Due Process
5.   Development of standard draft. In this phase, the
     Accounting Standard Setting Committee presents the final
     standard draft, after deep and broad reviews and necessary
     amendments. The outcome of this phase is the standard
     draft.
6.   Public comment. For public comment, any standard draft is
     made available to the public by different ways like
     publishing in professional journals, Internet (Organization
     Site), etc. Also, according to the subject nature, the
     standard draft is separately sent to some authorities.
     The opinions received in respect of the standard draft is
     concluded and presented to the Accounting Standard
     Setting Committee by the Standard Setting Department.
     The Committee amends, if necessary, the standard draft
     and after approval by the Technical Committee, the revised
     standard draft is presented to the Board of Executive of the
     Organization.
7.   Ultimate approval. The final statement will be published
     when the final text of the standard is approved by the
     Board of Executive and the Board of Governors of the
     Organization. The Board of Executive reviews the
     Accounting Standard and, after possible amendments,
     approves and sends them to the Board of Governors of the
     Organization for the ultimate approval. After approval by
     the Board of Governors, the final text of the accounting
     standard is published and becomes operative.                48
Accounting Standards -
Due Process (2)




                         49
Comparison of Iranian
Accounting Standards with
IFRSs
    Accounting standards have been developed based
    on International Accounting Standards. National
    Accounting Standards (NASs) are presented in
    comparative form with International Accounting
    Standards (IAS) in the following table.
    In this table:
•   The first column notifies the number of NASs.
•   The second column designates the subject of
    NASs.
•   The third column presents the number of IASs
    which have been compared with their equivalent
    NASs.
•   The fourth column specifies NASs which have
    minor departures from IASs.
    These are shown by notes presented in this
    column and are explained thereafter.




                                                 50
NASs                                                          IASs    Explana
       Subject
Nos.                                                          Nos.    tions
1      Presentation of Financial Statements                   1       ---

2      Cash Flow Statements                                   7       Note A

3      Revenue                                                18      ---

4      Accounting for Contingencies                           10      ---

5      Accounting for Events After the Balance Sheet Date     10      ---

6      Reporting Financial Performance                        8       ---

7      Accounting for Research & Development Costs            38      ---

8      Accounting For Inventories                             2       ---

9      Accounting for Long-term Contracts                     11      ---

10     Accounting for Government Grants                       20      Note B

11     Accounting for Tangible Fixed Assets                   16      ---

12     Related Party Disclosures                              24      ---

13     Accounting for Borrowing Costs                         23      ---

14     Presentation of Current Assets & Current Liabilities   1       ---

15     Accounting for Investments                             32,39   Note C

16     Foreign Currency Translation                           21      Note D

17     Accounting for Intangible Assets                       38      ---

       Consolidated Financial Statements and Accounting for
18                                                                    Note E
       Investments in Subsidiaries                            27

19     Business Combinations                                  22      ---

20     Accounting for Investments in Associates               28      Note F

21     Accounting for Leases                                  17      ---

22     Interim Financial Reporting                            34      ---

23     Accounting for Joint Ventures                          31      ---

24     Financial Reporting by Development Stage Entities      N/A     Note G

25     Segment Reporting                                      14      Note H

26     Agriculture                                            41      Note I


27     Retirement Benefit Plans                               26      ---

                                                                                51
Explanations

Note A (NAS # 2 and IAS # 7)
   With the exception of the following requirements,
   application of NAS No. 2, results into compliance with
   IAS No. 7:
    • “Returns on Investments, and Servicing of Finance”
       and “Income Tax” activities have been segregated
       from the other major classifications used in the
       cash flow statements.
    • (b) Cash equivalents have been excluded from the
       definition of cash.
Note B (NAS # 10 and IAS # 20)
   With the exception of the following requirements,
   application of NAS No. 10 results into compliance with
   IAS No. 20:
    • (a) If an accounting treatment for government
       grants is specified in statutory regulations, the
       treatment should be followed by the entity.
    • (b) When the evaluation bases of non-monetary
       assets received, are specified in the statutory
       regulations, the application of these bases is
       acceptable provided that it does not result in
       reflecting the granted assets in more than the fair
       value at the time of transfer.

                                                        52
•   Note C (NAS # 15 and IAS # 32 & 39)
    With the exception of the following requirement application of NAS No. 15
    results into compliance with IAS No. 32, 39:
    The most current financial instruments in Iran are shares and the instruments
    like options, futures and forward hardly exist in Iran. Accounting Standard 15,
    Accounting for Investments, permits using either the fair value or cost for
    measuring current and long-term investments.
•   Note D (NAS # 16 and IAS # 21)
    With the exception of the following requirements, application of NAS No. 16
    results into compliance with IAS No. 21:
      •   (a) Exchange differences arising on foreign currency assets and liabilities
          of government entities should be, according to substances of the Article
          136 of the General Inspection Act approved in Sharivar 1366 (August
          1987), included in the account of translation reserve of foreign currency
          assets and liabilities and classified as equity. If at the end of the financial
          period, the reserve account balance is debit, the amount will be included
          in loss and gain of the period. Also, net exchange differences which, in the
          order mentioned above, result in a change in exchange reserve during the
          period, should be included in comprehensive income statement of the
          period.
      •   (b) Exchange differences arising on a monetary item that, in substance,
          forms part of an entity’s net investment in a foreign entity should be
          classified as equity in the entity’s balance sheet and be presented in
          comprehensive income statement until the disposal of the net investment.
          The differences, at the time of investment disposal, should be taken into
          account of accumulated loss and gain.
      •   (c) Exchange differences arising on a foreign currency liability accounted
          for as hedge of an entity’s net investment in a foreign entity should be
          classified as equity in the entity’s balance sheet and be included in
          comprehensive income statement until the disposal of net investment. The
          differences, at the time of net investment disposal should be taken into
          account of accumulated loss and gain.
      •   (d) On the disposal of a foreign entity, the cumulative amount of the
          exchange differences on foreign currency items which relate to that
          foreign entity and which have been recognized as equity, should be taken
          in to account of accumulated loss and gain on disposal.
•   Note E (NAS # 18 and IAS # 27)
    With the exception of the requirements relating to the proper accounting
    treatment of the debit balance of the minority interests account, application of
    NAS No. 18 results into compliance with IAS No. 27:
    Profits or losses arising in a subsidiary should be apportioned between
    controlling and minority interests in proportion to their respective interests held
    over the period. When losses attributable to the minority interest result in debit
    balance, the controlling interest should be adjusted to the extent that it has any
    commercial or legal obligations to provide finance that may not be recoverable
    in respect of the accumulated losses attributable to the minority interest.




                                                                                      53
Note F (NAS # 20 and IAS # 28)
   With the exception of the following requirements, application
   of NAS No. 20 results into compliance with IAS No. 28:
     (a) An investment in an associate that is included in the
        separate financial statements of an investor that issues
        consolidated financial statements should be carried at
        cost after deduction of perpetual impairment provision or
        revaluation amount as an allowed alternative treatment,
        conforming to the investor’s accounting policies on long-
        term investments, according to NAS No.15, Accounting for
        Investments.
     (b) When the investor does not issue consolidated financial
        statements, the amounts related to the associate should
        be presented under equity method as following:
          (a) preparation and presentation of total financial
             statements, or
          (b) disclosure of supplementary information in
             explanatory notes of the investor’s financial
             statements.
Note G (NAS # 24)
   There currently exists no specific International Accounting
   Standard relating to this subject.
Note H (NAS # 25 and IAS # 14)
   With the exception of the following requirements, application
   of NAS No. 25, results into compliance with IAS No. 14:
     (a) According to IAS No. 14, the dominant source and nature
        of an entity’s risks and returns should govern whether its
        primary reporting format will be business segments or
        geographical segments. Detailed information is normally
        presented in the primary format and the secondary format
        contains condensed information. NAS No.25 has excluded
        the application of the primary and secondary format in
        order to narrow the extent of personal judgments and
        unnecessary technical complexity.
     (b) According to IAS No. 14, segment revenue should include
        an entity’s share of profits and losses of associates, joint
        ventures, or other investments accounted for under the
        equity method. Such requirements do not exist in NAS No.
        25.



                                                                 54
Note I (NAS # 26 and IAS # 41)
With the exception of the following
requirements, application of NAS No. 26 results
into compliance with IAS No. 41, Agriculture:
 (a) According to IAS No. 41, Agriculture, all
    biological assets should be measured at fair
    value less costs estimated on disposal, unless
    the fair value is not reliably determinable.
    However, according to this standard, with a
    reference to environmental conditions of the
    country and lack of an active market for
    biological productive assets, these assets
    should be measured at cost, according to
    NAS No. 11, Accounting for Tangible Fixed
    Assets.
 (b) According to IAS No. 41, Agriculture, a
    government grant related to biological
    productive assets recognized at fair value
    less costs estimated on disposal, is
    recognized as income (if not conditioned)
    when it is collectible and (if conditioned)
    when the conditions are satisfied. However,
    according to this standard, all government
    grants related to biological productive assets
    are recognized according to NAS No. 10,
    Government Grants.



                                                55
Iran Accounting
Standards - Projects in
Process
• Amendments of Accounting
  Standards according to the
  changes in International
  Accounting Standards.
• Standard Interpretation.
• Impairment of Assets.
• Financial Instruments.
• Accounting for Oil and Gas.
• Amendment of the Financial
  Reporting Framework.
• Entities going into liquidation.




                                     56
Iran Auditing Standards -
Projects in Process


• Knowledge of the Business and Its
  Environment and Risk Assessments of
  Material Alternations (315)
• Consideration of Environmental Matters in
  the Audit of Financial Statements (1010)
• Audit Considerations relating to Entities
  Using Service Organizations (402)
• Conceptual Framework
• Objective and General Principles Governing
  an Audit of Financial Statements (200)
• Audit Procedures for Risks Estimated (330)




                                          57
Auditing standard
approved                                Standard Title                               Standard Number
External Confirmations                                                                    5-50

Preface to International Auditing Standards                                                10
Objective and General Principles Governing an Audit of Financial Statements                20

Audit Engagements                                                                          21

Quality Control for Audit Work                                                             22

Documentation                                                                              23
The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements         24
Consideration of Laws and Regulations in an Audit of Financial Statements                  25
Planning                                                                                   30

Knowledge of the Business                                                                  31

Audit Materiality                                                                          32

Risk Assessments and Internal Control                                                      40

Audit Evidence                                                                             50

Initial Engagements - Opening Balances                                                     51

Analytical Procedures                                                                      52

Audit Sampling and other Selective Testing Procedures                                      53

Audit of Accounting Estimates                                                              54

Related Parties                                                                            55

Events after the Balance Sheet Date                                                        56

Going Concern                                                                              57

Management Representations                                                                 58

Using the work of Another Auditor                                                          60

Considering the work of Internal Auditing                                                  61

Using the work of an Expert                                                                62

The Independent Auditor’s Report                                                           70

Comparatives                                                                               71
Other Information Included in the Reports Containing Audited Financial Statements          72
The Auditor’s Report on Special Purpose Audit                                              80

Engagements to Review Financial Statements                                                 91
Engagements to Perform Agreed–Upon Procedures Regarding Financial Information              92
Engagements to Compile Financial Information                                               93

The Audit of Small Entities                                                                105

Communications with Management                                                             107

Examination of Prospective Financial Information                                           340


                                                                                                       58
•   What Will the Next 15 Years Bring?
    The single greatest change agent facing
    accounting in the next 15 years is technology.
    Emerging trends in technology will
    fundamentally alter the way in which both
    business and accounting will be conducted. The
    measurement and reporting of business
    transactions, long considered a core competency
    of accountants, will be challenged by the
    information economy, forcing accountants to
    justify their role in business. The foundations of
    the profession will be eroded by the opposing
    demands of emerging services and established
    values.




                                                    59
•   The prospects for accountants have never looked
    better: There is a growing demand for the
    provision and analysis of information in the new
    economy. But the value chain that accountants
    used to dominate, that between the firm and the
    long-term shareholder, is now on the margins of
    a wider environment marked by day traders,
    continuous media coverage, and rapid equity
    shifts. Accountants have yet to come up with a
    strategy, much less products, for how they will
    take a larger share of this marketplace. While
    continuous reporting and assurance are
    promising, there is no guarantee that the market
    will grant accountants a monopoly on these
    products; their legally protected role as auditors
    might actually be an artificial barrier to tackling
    competitive threats head on. It makes little
    difference to the emerging global economy
    whether its information processing needs are
    carried out by professionals called "accountants"
    or someone else. But that choice will clearly
    determine the future of the profession.




                                                     60
Sources: Accounting in 2015 CPA Journal
By Michael Alles, Alexander Kogan, and
Miklos A. Vasarhelyi




                                          61
Sources:
1- Accounting in 2015 CPA Journal by Michael Alles,
   Alexander Kogan, and Miklos A. Vasarhehyi
2- www.IASPLUS.com
3- www.frc.org.uk
4- www.audit.organization.ir
5- www.IFAC.com




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