Post on 07-Mar-2018
IIA Chicago Chapter 53rd Annual SeminarApril 15, 2013, Donald E. Stephens Convention Center
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IFRS Impact on Internal Audit
Debra R. Hopkins
President, Hopkins CPA Knowledge
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 2
• Explore the use of IFRS in today’s reporting arena
• Identify what IFRS consists of
• Review major technical differences
• Discuss the IA’s preparedness strategy
• Provide tips to avoid common conversion mistakes
• Resources
Session Objectives
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 3
• Nonissuer entities
• Issuer entities – foreign issuers
• IFRS for SMEs
Who Uses IFRS?
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 4
Does your entity currently use IFRS?
• If not, have they considered using IFRS?
• If so, what type of entity?
– Foreign subsidiaries
– U.S. based entity
– Other
Audience Polling Question #1
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 5
International GAAP
IAS SICs IFRS IFRICs
The Standards include. . . . . . .
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 6
• FASB works with IASB
• Local GAAP differences
• Over 120 nations have adopted IFRS
• Is U.S. GAAP the “gold” standard?
• Newly created “Accounting Standards Advisory Forum”
Convergence, Harmonization, or Scrap It!
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 7
How involved are you in auditing your entity’s financial reporting accounting process?
– None
– Somewhat • Annual audit area • Review annual report financials
– Considerably• Review monthly reports• Annual audit area• Involved with implementation of new accounting standards
Audience Polling Question #2
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 8
• Form of financial statements?
• Comparison to current applicable financial reporting framework
• “Principles based” = more disclosures; more choices
• Manage conversion risks
• Financial statement analysis
Major Technical Challenges
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 9
• No use of LIFO
• Impairment, one step test
• Many choices in financial statement presentation
• Development costs – capitalize
• Inventory – Lower cost or replacement cost
• Component depreciation
• Revaluation or cost model
• More Choices; Less Rules; Less Industry Guidance
Major Technical Differences
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 10
How technically savvy is your IA staff?
• CIA
– CIA special designation
• CPA
• No training in IFRS
• Some training in IFRS
• Comfortable with IFRS
Audience Polling Question #3
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 11
• Planning for IFRS Implementation
• Technical Knowledge
• Conversion Costs
• Educate – What are the Benefits?
• Manage Risk
• Rewards for those who Do?
– Project
– Ongoing
Internal Audit Challenges
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 12
• Eliminate barriers to cross border funding
• Improve ability to compete in global marketplace –suppliers, customers, competitors
• Centralize business operations
• Standardize internal controls over financial reporting
• Enhance comparability of financial results – create a common platform
• Other benefits. . . . . . .
Benefits of Using IFRS
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 13
Think “Enterprise Risk Management”
• Affects IT system
• Affects performance matrices
• Affects internal controls
• Affects the IA budget and audit plan
• Affects the Audit Committee
• Affects the Audit Charter
• Affects creditors, suppliers, customers
Avoid Headaches
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 14
• Begin Early – Years ahead of time
• IA Involvement before implementation
• Make your financial statement presentation choices before implementation
• Study others – learn about IT systems that worked
• Get your external audit firm involved –remember the financial statements are yours
• Obtain the right people
Conversion Tips
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 15
• 3 Statements of Financial Position
• 2 Statements of Comprehensive Income
• 2 separate Income Statements (if presented)
• 2 Statements of Cash Flows
• 2 Statements of Changes in Equity
IAS No. 1 Revised First IFRS Reporting Period Must Present
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 16
First IFRS Reporting Period
2012 2013 2014
Restate 2012Using IFRS in place
at 2014
Restate 2013Using IFRS in place
at 2014
First IFRS Reporting Period
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 17
What is holding the U.S. back from embracing IFRS?
Audience Polling Question #4
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April 15, 2013 IIA Chicago Chapter 53rd Annual Seminar 18
• www.IFRS.com• www.IASB.com
– International Financial Reporting Standards (Red Book)
• AICPA – IFRS Certification• AICPA – www.cpa2biz
– IFRS Financial Statements Best Practices in Presentation and Disclosures
• Big Four websites• Your external audit firm• Questions email: dhopkins@niu.edu or phone 815-
764-9195
Current Resources
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