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									Secretariat: Street address: 2nd Floor, Hughes Building Kenyatta Avenue, Nairobi Kenya. Postal Address: P. O. Box 4259 – 00100 Nairobi. Tel: 254 20 219151 Fax: 254 20 229284 Email: ecsafa@africaonline.co.ke Website: www.ecsafa.org

body into being. It is presumed that this will happen in the course of this year. Mauritius The Mauritius Institute of Professional Accountants has not yet been fully set up. However they have written to the secretariat looking for collaboration to work with ECSAFA, in the meantime. Mozambique A contract has now been signed with an international organisation to analyse and recommend the best form of a body for an association of accountants in Mozambique.

Happy New Year and welcome to this issue of ECSAFA News for the quarter ended 31st December 2005. We thank you all for your cooperation during year 2005. We look forward to serving you in year 2006 and working together with you to enhance and improve the development of the accountancy profession in the region and internationally.

Members’ Conferences
ACCA ACCA held a convention for its members in the Eastern Africa Region in Nairobi, Kenya on 1st and 2nd December 2005. The theme of the convention was “Promoting Accountability and Transparency for Good Governance” and 400 people attended.

STAFF NEWS Technical Manager
Following interviews held in Johannesburg on 13th December 2005, ECSAFA Executive Committee has selected Mr. Hennox Mazengera, a Malawi citizen to be the first occupant of the above newly created post. Mr. Mazengera is currently the Chief Executive of the Society of Accountants in Malawi. Once the formalities are concluded, Mr. Mazengera is expected to report at the Secretariat offices in Nairobi by March/April 2006.

Members’ Co-operation
COMESA and ACCA COMESA has partnered with the Association of Chartered and Certified Accountants (ACCA) to encourage and promote corporate governance in both the public and private sector. ACCA runs an on-line diploma course on Corporate Governance, which has attracted students from several COMESA countries. Considering the importance of transparency, accountability and corporate governance, COMESA Secretariat is awarding prizes to three overall graduates in three different levels. This is in line with the cooperation agreement signed between COMESA and ACCA. A survey by both organisations on corporate governance will soon be launched in the region and the outcome will be presented at the proposed regional conference of accountants in 2006. 1

MEMBERSHIP NEWS New Developments
Angola In its published plans, the Government of Angola has included the passing of the legislation necessary to bring an accounting professional

The Executive Committee held a meeting at the SAICA offices in Johannesburg South Africa on 13th and 14th December 2005. The main agenda of the meeting was to conduct interviews for the short listed candidates for the Technical Manager‟s position, whose outcome is reported above.

the Congress's (www.wcoa2006istanbul.org.tr).


IFAC MATTERS Member Body Compliance Program
Part 2 of the Statements of Membership Obligations (SMO) Self-Assessment Questionnaire, of the International Federation of Accounts (IFAC) Member Body Compliance Program is now available for completion by members and associates. We trust that ECSAFA members who are also members or associates of IFAC, have received the package of materials including an instruction guide to Part 2 and confidential access and password information. We encourage you to complete the questionnaire and submit it on time. The questionnaire and other relevant information about Part 2 are also available on the Compliance Programme website (www.ifac.org/ComplianceProgram).

Future Meetings
Dates 18th – 20th May 2006 Meetings EXCOM, Council and Annual General Meetings 7th ECSAFA Congress and EXCOM and Council meetings Host & Location Swaziland Institute of Accountants at Mbabane The Society of Accountants in Malawi at Mangochi near Lake Malawi

27th – 30th September 2006

The theme of the Congress is “Africa’s response to Globalisation – Declarations from the warm heart of Africa”.

Guidance to Help Strengthen Accountancy Bodies and Contribute to Economic Stability Worldwide
IFAC‟s Developing Nations Committee has released new guidance entitled Establishing and Developing a Professional Accountancy Body. The guidance will be a valuable resource to development partners, governments and others seeking to build accountancy capacity in various countries, as well as many of IFAC's current and future member organisations. It addresses a variety of situations, including where a formal accountancy profession does not exist in a country, where the profession exists and there is a desire to establish a professional accountancy body and where an existing professional body requires further development and enhancement. It includes practical implementation guidance, case studies and examples. It is available on a CD-ROM or electronically through the IFAC website (www.ifac.org). The Developing Nations Committee welcomes best practice examples and other input on the guide, which it anticipates updating at least 2

The Secretariat has a new Post Office Box Address (Number 4259 – 00100) which is also shown on the cover page. While the old one remains accessible, correspondence should now be sent to the new box number.



The 17th World Congress of Accountants will be held in Istanbul, Turkey on November 13-17, 2006. The Congress, organised around the theme "Generating Economic Growth and Stability Worldwide," will feature plenary sessions and workshops led by internationally recognised speakers from the public and private sectors. They will address issues of accounting, auditing, ethics and financial management. For more information and to register to attend, please visit

annually. These may be developingnations@ifac.org.



IFAC Board Meetings
At its Council meeting in Auckland, New Zealand on 15 − 18 November 2005, IFAC introduced initiatives to help developing nations and further to support quality performance by accountants worldwide specifically developing a new guidance on “Establishing and Developing a Professional Accountancy Body” as noted above. In addition, it released a new information paper to clarify the roles and responsibilities of professional accountants in business, considered a revised Constitution to continue to strengthen its governance, and appointed six new Board members.

The CAG also acts as an enhancement of the credibility of the standard setting processes and as a result, quite a number of international regulatory forums are represented on the CAG. The following are some of the more interesting and important highlights from these meetings. i) IAASB CAG 1. IAASB and staff members provided feedback on the progress and result of the exposure process of the following proposed new and revised standards:     Audit documentation approved in September 2005. Related Parties – approved in December 2005. The Independent Auditors’ Report on other Historical financial Information. The Audit of Group Financial statements – there are still quite a number of unresolved issues on this document (mainly division of responsibility). Materiality – still under debate. It appears likely that mainly two broad and separate matters will be addressed, namely materiality when planning the audit and the evaluation of misstatement. Estimates – it appears as if this project would ultimately result in two different standards, one addressing estimates and another dealing with the auditing of fair values.

International Auditing And Assurance Standards Board (IAASB) Chair
IFAC is searching for a chair of the IAASB. This is a full time position for a three-year term commencing January 2007 and is appointed by the IFAC Board. The current chairman is Mr. John Kellas. Interested persons are required to complete a Candidate Information Sheet on the IFAC website (www.ifac.org/NominationsForms) and also submit a letter of application. Any questions or further information could be obtained from Lynn Neri via email at LynnNeri@ifac.org or by phone at +1 (212) 471 – 8704. The nominations are due by 15th February 2006.



Consultative Advisory Group (CAG)
The ECSAFA CEO and acting Technical Manager recently attended the IFAC International Auditing and Assurance Standards Board (IAASB) and Ethics Committee Consultative Advisory Group meetings in London. They represent ECSAFA on this forum. The objective of the CAG is to create a consultation link between the IFAC standardsetting bodies and IFAC member organisations. 3


The staff will commence a new project on material weaknesses in internal control – what this term entails and how auditors should report on it. It would probably not result in a separate standard, but modifications to existing standards.

Other new projects include external confirmations and using the work of an expert. 3. 3. It is important to note that the IFAC SME Committee is working on an ISA guide for use in the audits of SMEs. Quite some time was spent on the clarity project, its objectives and benefits for member bodies. (A separate article is written on this). 4.

be provided by the auditor are under discussion. Network firms This matter was recently under discussion and an exposure draft issued for comment. The intention is to expand the definition of a network firm (in the context of considering this when judging auditor independence). Additional guidance will probably be provided. The Ethics Committee is also considering the very topical issue of whistle blowing.



Ethics Committee CAG This is a fairly new body and is still in an infant stage in so far as finalising and clarifying operating procedures are concerned. However, the CAG had an opportunity to receive feedback and comment on a number of important matters relating to the Code, currently under revision. These include: 1.  Auditor Independence It seems as if the 7 year partner rotation will be retained, but the relief for smaller firms would be removed. The 2 year cool-off period for the audit partner rotated off not to be involved in the audit might be extended to 3 year. Compensation schemes for partners and the threat that it could pose for auditor independence is also under review. The provision of tax services is being debated as it is felt that the Code does not sufficiently address this matter. The provision services of non-audit

IFAC proposed new governance structure
IFAC is inviting comments on proposed revisions to its Constitution that will better reflect the purpose of IFAC and how it will meet the expectations of stakeholders. The invitation to comment on Proposed Revision of the International Federation of Accountants' Constitution, proposes changes to reflect threetiered governance document structure, which would include: IFAC constitution, IFAC bylaws and IFAC policies and Procedures Manual. We encourage you to provide comments by February 1, 2006. The revised draft constitution may be downloaded from the IFAC website (www.ifac.org).



Enhancing the clarity of international standards The International Auditing and Assurance Standards Board (IAASB) has issued four Exposure Drafts (EDs) in a new drafting style. One of the issued ED is the proposed ISA 500 (Revised) – Related Parties and IAASB is inviting comments on proposed requirements for auditors regarding the audit of related party 4



Specific examples of non-audit services that could and should not

relationships and transactions by April 30th 2006. The ED may be viewed by going to www.ifac.org/EDS. IAASB has also issued an ED on proposed amendments to the Preface to the International Standards on Quality Control, Auditing, Assurance and Related Services and an explanatory memorandum to accompany the EDs. The release of these documents marks the beginning of the IAASB‟s ambitious 18-month program to re-draft standards and to develop new standards using the new style. The key elements of the new drafting style include basing the standards on objectives, as opposed to procedural considerations; using the word “shall” to identify requirements that the professional accountant is expected to follow in the vast majority of engagements; eliminating the present tense to describe actions by the professional accountant, which some practitioners regarded as ambiguous in terms of obligation; and structural improvements to enhance the overall readability and understandability of the standards. The following four proposed standards have been re-drafted in the new style:   

auditors‟ reports dated on or after 31 December 2006. Linked to this is the auditor‟s consideration of the acceptability of the financial reporting framework applied in preparing the financial statements. This was provided by way of amendments to ISA 200 − Objective and General Principles Governing an Audit of Financial Statements and ISA 210 − Terms of Audit Engagements. Proposed Exposure Draft ISA 701 − The Independent Auditor’s Report on Other Historical Information was issued by the IAASB in June 2005. This was intended to become effective at the same time as ISA 700 (Revised). It will not be finalised before the amendments to ISAs 200 and 210 come into effect. The IAASB has agreed to defer the effective date of certain requirements and guidance in the amended ISA 200 and the amended ISA 210 until ISA 701 becomes effective due to possible inconsistencies or uncertainties between certain requirements of ISAs 200 and 210 and those of the proposed ISA 701.

Proposed ECSAFA Guideline on Financial Reporting by SMEs The comment deadline for the guide was 31 December 2005. The ECSAFA task team will now evaluate the comments received before making recommendations to the ECSAFA EXCOM. The Guide is intended as an interim measure for SMEs preparing financial statements in the ECSAFA region until such time as the International Accounting Standards Board (IASB) has completed its project of developing SME standards. International Financial Reporting Standards ECSAFA encourages members who have adopted International Financial Reporting Standards to refer to the International Accounting Standards Board (IASB) website, particularly the „IASB Update‟ section, in order 5

ISA 240 − The Auditor's Responsibility to Consider Fraud in an Audit of Financial Statements; ISA 300 − Planning an Audi of Financial Statements; ISA 315− Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement; and ISA 330 − The Auditor’s Procedures in Response to Assessed Risks.

A separate detailed article has been included at the end of this Newsletter. Effective dates of recent amendments to ISAs 200 and 210 deferred ISA 700 − The Independent Auditor's Report on a Complete Set of General Purpose Financial Statements, has been issued with effect for

to obtain information relating developments (www.iasb.org).



Strengthening auditor independence The independence of auditors was the focus of an international forum hosted by the IFAC Ethics Committee. Forum participants, including regulators, standard setters, leaders of accountancy organizations and members of the profession, supported the principles-based approach to independence expressed in the IFAC Code of Ethics for Professional Accountants, and suggested ways in which the Code might be clarified or augmented to provide auditors with clearer guidance in addressing independence issues. The need to educate not only members of the profession but also regulators, management, boards of directors and audit committees on the expectations of auditors with respect to independence was emphasised. This could be done through the following:     Implementation guidance, including examples of appropriate and inappropriate safeguards to independence threats. Guidance with respect to public-interest entities and the ethics concepts that apply to such entities. Increased clarity regarding the application of the Code with respect to tax services. Consideration of embracing ethical compliance within a quality control framework.

developments in the equivalent IFRSs. To assist accountants in applying IPSASs, the IPSASB has issued ED 25 − Equal Authority of Paragraphs in IPSASs. This ED proposes that the Prefaces to International Public Sector Accounting Standards, be revised to clarify that all paragraphs within IPSASs have equal authority. Comments on the exposure drafts are requested by 31 January 2006.

Standards to enhance transparency of government financial statements The exposure draft ED 27 − Presentation of Budget Information in Financial Statements has been issued and deals with the reporting of budget information in general purpose financial statements. It applies to entities that are required to make publicly available the approved budgets for which they are held accountable. It proposes the disclosure of the original and final approved budgets and actual financial information on a comparable basis to the budget. The IPSASB has also issued ED 28 − Disclosure of Financial Information about the General Government Sector. Statistical bases of financial reporting require governments to present financial information about the general government sector, which comprises those entities that fulfil the core functions of government as their primary activity. Statistical reporting bases and IPSASs have many similarities in their treatment of particular transactions and events, but there are also differences. This can be confusing to users, particularly in jurisdictions in which governments issue financial reports prepared in accordance with both statistical and accounting reporting bases. This exposure draft proposes disclosure about the general government sector in general purpose financial statements and mechanisms to better explain those differences. The ED does not require disclosure of such information, but prescribes reporting requirements that must be adopted by governments that elect to make such disclosures. 6

The IFAC Ethics Committee will be considering these and other issues raised through its public consultation process, as it updates the independence section of the Code.

Public Sector
International public sector standards updated to conform with IFRSs The International Public Sector Accounting Standards Board (IPSASB) has issued ED 26 − Improvements to International Public Sector Accounting Standards that proposes changes to 11 accrual basis IPSASs to better reflect

Comments on both ED 27 and ED 28 are requested by 10 February 2006.

AUDITING ARTICLE Will the IAASB’s clarity project clarify auditing standards?
As a result of pressure from countries adopting International Standards on Auditing (ISA), mainly in the European Union and mostly nonEnglish speaking countries, the International Auditing and Assurance Standards Board (IAASB), has embarked on a mission to “clarify” all of its standards. Some of the matters that need clarification include the following:   Understanding the objective of each standard and what its desired outcome is. Explaining what the absolute “must do‟s” of each standard are – thus, what must be done (requirements that are obligatory) and what comments are just intended as further recommendations or guidance. Removing the ambiguity about certain requirements by using understandable language. Currently, the standards are often written in less than plain English. This makes translation quite difficult. Restructuring the contents and reformatting the lay-out of standards to make them more understandable and user-friendly.

of particular importance to small and medium practitioners and those auditing SMEs. The clarified standards would therefore highlight aspects of specific interest to SMEs. This will be done under a specific sub-heading, but at the relevant juncture within the standard, in order to read this guidance within context. Each clarified ISA will therefore consist of the following:  Scope of the ISA.  Effective date.  Objective to be achieved.  Definitions.  Requirements (with appropriate subheadings). This is the “must do‟s”.  Application Material (with the same subheadings as the requirements). This serves as guidance and the “must-do” requirement gets cross-referenced to the paragraphs in the Application Material section to provide additional explanations and guidance.  Appendices and examples, where applicable. This will be cross-referenced back to the Application Material. Besides the new structure, which is a vast improvement, attempts have been made to clarify the language by using shorter sentences, removing obvious ambiguity and being explicit on what are required and what not. The IAASB has started these new drafting conventions on ISAs currently under review and recently issued ISAs. More problematic ISAs will also be identified and focused on. Ultimately, and ideally in the not-too-distant future, ISAs will all be clarified.



The objective of the clarity project is thus to address shortcomings and come up with standards that are structured and presented in such a way that it is much easier for a practitioner to navigate his/her way through them and to access the required sections, topics and information with reasonable ease, both in electronic and hard copy format. The IAASB also recognised that the ability to navigate the ISAs to locate relevant material was

ECSAFA provides a service to member bodies by assisting members with technical queries. We encourage you to channel technical queries to the ECSAFA office, ecsafa@africaonline.co.ke.


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