International Federation of Accountants

Definition of Professional Accountant

Bob Rutherford

IESBA Meeting

New York, USA

October 2011

Definition of Professional Accountant

“An individual who is a member of an IFAC member body”

• Use of definition:– IESBA – defined term, which is further sub-

divided into “professional accountant in public practice” (Part B) “professional accountant in business” (Part C)

– IAASB Glossary– IAESB - Framework

Existing Definition

Definition of Professional Accountant

• Too simplistic – does not convey understanding of roles, functions and competence demonstrated by a professional accountant

• Does not recognize that professional accountants not necessarily members of IFAC member bodies (e.g. some professional accountants in business and public sector)

• Does not recognize that professional standards are adopted and enforced at the national/regional level

• Not helpful in the public’s understanding of the term professional accountant

Concerns With Existing Definition

Definition of Professional Accountant

• Provide an understanding of the breadth of competence, roles and functions demonstrated by professional accountants

• Embrace those professional accountants not members of member bodies that are subject to qualification and oversight

• Provide help in identifying users of IFAC standards and the publics understanding of the term professional accountant

Elements of a New Definition

Definition of Professional Accountant

The term professional accountant describes a person who has expertise in the field of accountancy, achieved through formal education and practical experience, and who:• Demonstrates and maintains competence;• Complies with a code of ethics:• Is held to a high professional standard; and,• Is subject to enforcement by a professional

accountancy organization or other regulatory mechanism

Proposed Definition of IFAC Task Force

Definition of Professional Accountant

1st Bullet: Demonstrates and maintains competence• Working Group (WG) agreed a PA “maintains

competence” through CPD• IESs defines CPD as Learning and development

that maintains and develops capabilities to enable professional accountants to perform their roles competently

• WG recommends delete 1st bullet and insert: “and maintained through continuous learning and development”

• “Expertise” in lead-in sentence covers “demonstrates competence”

Proposed Revisions to Task Force Definition

Definition of Professional Accountant

2nd Bullet: Complies with a code of ethics3rd Bullet: Is held to a high professional standard • To ensure PAs who are not members of IFAC

member body follow robust code of ethics and held to a “high professional standard,” WG recommends:– Delete 2nd and 3rd bullets; and– Insert “high professional standards equivalent to

IESBA Code of Ethics for Professional Accountants and IAESB International Education Standards”

Proposed Revisions to Task Force Definition

Definition of Professional Accountant

4th Bullet: Is subject to enforcement by a professional accountancy organization or other regulatory mechanism• WG recommends revise to state that “compliance

with such standards” is subject to enforcement– PA may be subject to discipline, but it is the PA’s

compliance with standards that is subject to enforcement

Proposed Revisions to Task Force Definition

Definition of Professional Accountant

Professional Accountant - A person who has expertise in the field of accountancy, achieved through formal education and practical experience and maintained through continuous learning and development; is held to high professional standards equivalent to the IESBA Code of Ethics for Professional Accountants and IAESB International Education Standards, and whose compliance with such standards is subject to enforcement by a professional accountancy organization or regulatory mechanism.

Proposed Definition of IESBA Working Group

Definition of Professional Accountant

Professional Accountant – An individual who i) is a member of an IFAC member body or ii) has expertise in the field of accountancy, achieved through …• WG does not recommend alternate definition

– May be associate member bodies of IFAC whose education standards are not as robust as IESs

– Some IFAC member bodies have affiliate memberships that allow for non-accountants and students who do not meet PA qualifications

– Could be misleading to public– Definition of PA should be based on “high standard”

Considered Alternate Definition

Definition of Accountancy

A field of practice in which a professional accountant provides the measurement, recognition, preparation, analysis, and/or disclosure of financial and relevant nonfinancial information, or auditing of or provision of assurance and advisory services on financial information and, where applicable, nonfinancial information. Such information assists managers, investors, tax authorities, and other decision makers in resource-allocation decisions. The field of accountancy involves includes the study of accounting, auditing, finance, management consulting, financial management, and/or tax.

Proposed Edits to Definition of Accountancy

Definition of Accountancy

• WG considered comments of CAP, IAASB, IAESB, IAESB CAG, PAIB, SMP Committee, IFAC Translation Dept.

• WG concluded that many of the comments have already been addressed in the proposed definitions

• WG does not believe any further revisions to the definitions are necessary

Comments Submitted by Others

Questions?