ROSC 2015Report On Observance Of Standards

And Codes Accounting & Auditing

Twelve Standards and Codes – financial stability

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Macroeconomic policy and data transparency

1. Data Transparency2. Fiscal Transparency3. Monetary and Financial Policy TransparencyFinancial Sector Regulation & Supervision 4. Banking Supervision5. Securities Regulation6. Insurance Supervision 7. Payments Systems8. Anti-money laundering Market Integrity – institutional and market infrastructure 9. Accounting10. Auditing11. Corporate Governance12. Insolvency and Creditor Rights

Bank-Fund Joint Initiative on Standards & Codes

Country Context

• End of civil conflict

• Middle Income Country status

• SL ranked highest in South Asia

for ease of doing business

• Development of the BPO sector

Figure 1.1. GDP Growth and FDI Inflows

Figure 1.2, Capital Market Development

Objectives of the ROSC

Support Sri Lanka’s growth by: Improving the investment climate

Strengthen private sector transparency and accountability Strengthen regulators

Supporting structural shifts in the economy and social inclusion

Strengthening the public sector

Approach

Monitoring, Enforcement & Oversight

Auditing Standards

Accounting Standards

Accountancy Profession &

Ethics

Education & Training

StatutoryFramework

6

Global

IASB(Financial Reporting Standard

Setter)

Sri Lanka

SLAASMB

Profession

CASL Standard Setter for A&A

Stakeholder Consultations

• CASL – main partner

• PFM Steering Committee

• Preparers of financial statements

• SME and Financial Institutions

• All PAOs

• Auditor roundtables (large and SMPs separately)

• All regulators (separate meetings), Registrar of Companies, Dept of Inland Revenue

• Auditor General

• DG MOF (SOE)

• Chamber of Commerce

• Statutory Auditing Standards Committee & Accounting Standards Committee

• Learning providers

• Ministry of Finance

• DG’s and staff of State Accounts, Public Finance, Public Enterprises

7

Achievements and Challenges

• Achievements• Contributes to the growth of a

knowledge hub• Professional Education aligned with

international education standards

• Challenges • Growth of profession is mainly

Colombo centric• Qualification framework is not in

place• Credibility of SME financial

reporting

Structural Changes

8

• Achievements• Adoption of international reporting and

auditing standards • Introduction of simplified standards • Introduction of audit quality assurance• Issuance of updated Corporate Governance

Code• Increased capacity and efficacy of regulators

• Challenges • Requirement of new skills• No legal backing for the simplification

agenda• Dual Reporting – CBSL & Inland Revenue • Registered Auditors/ low capacity SMPs

Investment Climate

Achievements and Challenges

Achievements and Challenges

• Achievements• Professions Support to the Public

Sector – Reporting standards/Training/Qualification

• SOEs following IFRSs

• Challenges • SOEs – quality and timeliness of

reporting

Public Sector

10

• Companies Act • Differential reporting• Require sufficient information on annual

return• Information to the Registrar of

companies• Auditor Categories

• ICASL Incorporation Act• Registration of practicing audit firms

Statutory Framework

• Code of Conduct and disciplinary procedures of members

Local PAOs

Policy Recommendations

• Develop policy for re-admitting auditors who have been out of practice for more than 3 years

• Voluntary merger program for sole practitioners

Auditing Profession

• Expand National Quality Framework to include all PAOs

• Implement structured framework for monitoring learning providers and employers

• Monitor CPD and sanction non-compliance• Reduce disparity in service between Western

Province and other provinces

Education & Training

Policy Recommendations

Policy Recommendations

• Revisit representation of professional accounting organisations in standard-setting

• Increase influence at international standards setting level• Increase support for preparers of financial statements • Customised training for key stakeholder groups• SMEs, SMPs, CASL, chambers of commerce and providers of

capital must work together to facilitate access to capital

Accounting & Auditing Standards

• Enhance methodologies, capacity and information sharing processes

• Enhance SLAASMB reviews to adopt more risk based methods

• Implement a mandatory audit quality assurance review process for audit firms to fully implement SLSQC 1

Monitoring, Compliance & Enforcement

Thank You