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SEC Reminds Auditors to Follow IASB on IFRS

Tammy Whitehouse | March 23, 2012

The Securities and Exchange Commission is reminding auditors that their audit reports on financial statements prepared under International Financial Reporting Standards must comply with the international standard, not national flavors of it.

Staff of the SEC recently alerted the Center for Audit Quality's International Practices Task Force to remind their members that financial statements prepared under IFRS must comply with IFRS as issued by the International Accounting Standards Board. When the SEC decided in 2007 to permit IFRS filings without reconciliation to U.S. Generally Accepted Accounting Principles, the commission specified that the IFRS accounting must comply with the rules as issued by IASB. National exceptions and departures from IASB's standards are not accepted in SEC filings.

The CAQ issued an alert to members to pass along the SEC's reminder. The alert quotes Item 17(c) of Form 20-F, which is the SEC-required form used by foreign private issuers to submit their financial statements. “If the financial statements comply with IFRS as issued by the IASB, such compliance must be unreservedly and explicitly stated in the notes to the financial statements and the auditor's report must include an opinion on whether the financial statements comply with IFRS as issued by the IASB,” the rule says.

If the notes and the auditor's report do not contain that pledge, then the issuer is required to submit a GAAP reconciliation. “Accordingly, auditors are encouraged to review the form of the audit report to be filed with the SEC and to work with clients to help them comply with their filing responsibilities with respect to the auditor's report,” the CAQ advises.