slide 1 education professional qualification wim moleveld chairman fee education subgroup road to...

Education Professional Qualification

Wim MoleveldChairman FEE Education Subgroup

ROAD TO EUROPE – PROGRAM OF ACCOUNTING REPORTING AND

INSTITUTIONAL STRENGTHENING

Education Professional Qualification

AGENDA

1. The FEE Education Subgroup

2. Regulatory framework for the education for professional qualification

3. Developments influencing the teaching of accountancy

4. Education of statutory auditors in EUDirective on Statutory Audit and a position of FEE

5. Recognition of Professional Qualifications in the EU Compensation measures and initiatives in order to improve comparability of education and qualifications

6. Setting the national policy of the education A practical model

7. Conclusions

The FEE Education Subgroup

Terms of reference: Develop proposals concerning amendment of European

Commission’s initiatives relevant to educational of accountants

Commenting on future IFAC ED’s on education standards Developing a strategy on recognition of professional

qualifications Addressing issues like continuous education etc

Membership is open to all Member Bodies of FEE The Education Subgroup reports to the

Liberalisation/Qualification Working Party

Regulatory framework for the education for professional qualification

A summary

National legislation and regulation of the national Professional Body

International: IFAC Statement of Membership Obligations 2

• International Education Standards and other guidance, applicable to Professional Accountants(REPARIS, presentation by Mark Allison)

Europe EU Directory on Statutory Audit; applicable to statutory auditors

(REPARIS presentation by Anne-Françoise Mélot) EU Directive Recognition of Professional Qualification;

applicable to all professional qualifications(REPARIS, presentation by Henri Olivier)

European Commission:

“To ensure the continued relevance of the educational requirements, the contents of the

curriculum should be assessed against relevant developments in business practice and financial

reporting (e.g. the IAS Regulation), taking account of international research and developments. Such an

assessment should draw upon international education guidelines such as IFAC’s International

Education Standards for Professional Accountants”

(Communication on Reinforcing the Statutory Audit in the EU, 15 May 2003)

:

Developments influencing the teaching of

accountancy

Continuing internationalisation Changes in the capital markets Information and Communication Technology Growing importance of management systems Increasing need for corporate governance A change of emphasis in legislation Trends in reporting

Education of statutory auditors in EU Directive on Statutory Audit

Includes qualification requirements for natural persons to be approved to carry out statutory audits: article 6 – 12

A new requirement on continued education: article 13

FEE presented a position paper, prepared by the FEE Education Subgroup. Although most of the suggestions are not -or not yet- accepted by EC, this position paper is of interest because it reflects the views of the large group of member bodies represented.


article 6

(…) a natural person may be approved to carry out a statutory audit only after having attained university entrance or

equivalent level, then completed a course of theoretical instruction, undergone practical training and passed an

examination of professional competence of university final or equivalent examination level, organized or recognized by the

Member State concerned.

Education of statutory auditors in EUA position of FEE

(article 6)

university final or equivalent examination level: to be defined along the lines approved in the Bologna Agreement. Suggested wording of article 6 of the new Directive:

“The learning and assessment must be at a level at least equivalent to a three-year university first degree; significant parts of the learning and assessment will be at second-degree level i.e. equivalent to more than a three-year university first degree.”


article 7

The examination of professional competence referred to in Article 6 shall guarantee the necessary level of theoretical knowledge of subjects relevant to statutory audit and the

ability to apply such knowledge in practice. Part at least of that examination must be written.


(article 7)

FEE believes the word ‘examination’ should be replaced by ‘assessment’, since bodies may choose to assess people in a variety of ways.

The needed competences should specifically be addressed. Professional ‘skills’ should be added The word ‘written’ should include ‘computer based’.


(article 7)

Some suggested wording of article 7 of the new Directive:

…evaluate the ability of the person being assessed To plan, perform and report on an audit … Understand how to account for transactions and other events … Understand the legal, taxation and business environment … Understand strategic and business management, particularly

financial management and information technology relevant to the audit …

Understand the processes, systems and controls of the business to the extent required to assess risks to the business and to the audit.


article 8

Test of theoretical knowledge…shall cover the following subjects in particular:

…followed by a list of subjects……it shall also cover at least the following subjects in so far as

they are relevant to auditing: …followed by a list of subjects…

The Commission may (…) adapt the list of subjects…The Commission will take into account the developments in

auditing and the audit profession…


(article 8) The description of the examination in article 8 should also

include the test mentioned in Article 10 (see hereafter):

the assessment should evaluate the ability to: Apply relevant theoretical knowledge in practice and integrate

knowledge and experience Exercise the skills of analysis, evaluation, professional

judgement and professional scepticism Act in the public interest in accordance with relevant

professional codes of ethics

List of subjects amended to include new subjects


(article 8)

Suggested list of subjects: Audit Accounting and financial reporting The legal, taxation and business environment

details: see next slides


(article 8)

Suggested list of subjects related to Audit: Assurance engagement concepts, processes and

management (suggested new subject!) International standards and national laws, regulations

and standards relating to the statutory auditing of accounting documents and to those carrying out such audits

Analysis and critical assessment of financial statements


(article 8)

Suggested list of subjects related to Accounting and Financial Reporting: Financial accounting and reporting Management accounting Management control International standards and national laws, regulations

and standards appropriate to the preparation of company and consolidated financial statements and to the methods of valuing balance sheet items, of computing profits and losses, reporting cash flows and changes in equity


(article 8)Suggested list of subjects related to Knowing the legal, taxation and business environment (the underlined subjects relate to subjects that are suggested to be mentioned more specifically, given its present relevance) :

Business and commercial law, civil law, the law of insolvency and similar procedures, and the fundamentals of laws governing capital markets and employment

Business valuations Taxation and its impact on financial and management decisions Business systems and controls Organisational and business knowledge (see next slide)


(article 8)

The subject Organisational and business knowledge includes:

General and financial economics Corporate governance Management science (including quantative methods) Organisational behavior Financial management International business and globalisation


article 10

Practical trainingIn order to ensure the ability to apply theoretical knowledge in practice, a test of which is included in the examination, a trainee shall complete a minimum of three years practical

training (...)

FEE’s comments: see suggested amendment of the text of Article 8


article 11

Qualification through long term practical experience

Note: in all cases the condition of passing the examination of

professional competence referred to in article 7 remains.

Education of statutory auditors in EU

Directive on Statutory Audit

article 13Continuous education

“… statutory auditors are subject to appropriate programmes of continuous education …”

In its position paper FEE welcomed this new article. FEE Education Subgroup discussed this issue in a recent meeting together with

representatives of the member bodies who are responsible for the continuous education programmes in their institutes. The member bodies represented reported that basically this requirement is met in accordance

with IFAC International Education Standard 7. The FEE Education Subgroup is planning to circulate a short questionnaire in order to review

the present status in FEE membership and to make an inventory of

possible problems in practice, where FEE could be of help.

Recognition of Professional Qualifications in the EU

Background

The objectives of the European Union, which include ensuring free movement of professionals and free provision of professional services throughout the Community, fully apply to accountancy services

Free movement raises the question of equivalence of the qualifications of migrants

The new Directive on Statutory Audit covers the aspects of the activity of the statutory audit, including free movement of auditors throughout the single market

The new Directive on recognition of professional qualifications is meant to improve the existing system of recognition of professional qualifications


Principles

1. The host Member may verify the qualification of accountants establishing on its territory

2. The host Member recognises the equivalence of the qualifications delivered in the member state of origin but it may impose compensation measures when substantial differences are present


Compensation measures

Compensation measures can be: an aptitude test with the aim of assessing the ability

of the applicant to pursue a regulated profession in the host member state; it must take into account the fact the the applicant is a qualified professional in his home country

An adaptation period under the supervision of a qualified professional in the host member state; maximum 3 years, possibly accompanied by practical training and subject to an assessment


Waiving of compensation measures on the basis of common platforms

Directive Recognition of Professional Qualifications Article 15:“For the purpose of this Article, ‘common platforms’ is defined

as a set of criteria of professional qualifications which are suitable for compensating for substantial differences which have been identified between the training requirements existing in the various Member States for a given profession.”

The purpose of this provision is that professionals will compensate for differences between the training conditions in the different Member States by compliance with the criteria of the platform.

Adoption of the common platforms is voluntary.


Some initiatives in order to improve comparability of education and qualifications

Bologna process: The Bologna Declaration is a pledge by 29 countries to reform the

structures of their higher education systems in a convergent way. Adopted a system essentially based on two main cycles, undergraduate and graduate.

EU project European Qualification Framework for Lifelong Learning (EQF)

A meta-framework that will enable the transfer, transparency and recognition of qualifications, understood as learning outcomes assessed and certified by a competent body at national or sectoral level.

Professional Accountancy Qualifications Common Content Project Reference is made to the REPARIS presentation by Gert Karreman.

Setting the national policy of the education

a practical model The regulatory body and/or professional body define:

1. Education policy and 2. Professional profile and related qualification requirementsItems: regulatory framework, scope and objectives, responsibilities,

planning of activities, organisation, general policy on the content of the education programme(s) and the form of the assessment(s), including the quantitative aspects (ect;s, hours)

The education institutes (professional body and/or universities) define: 3. Profile of the education programme and curriculum

(subjects and volume in ect’s), and 4. Description of subjects: learning outcomes and basis of

knowledge

Conclusions The regulatory framework for the education of professional accountants

and statutory auditors is complex. Various developments influence the teaching of accountancy, in

particular the internationalisation of the economies. To be able to react on future developments the concept of lifelong

learning should determine the nature of the education of professional accountants. Continued education is an obligation for professional accountants of IFAC member bodies and for statutory auditors in the EU.

Globalisation requires more and more the free movement of professionals and free provision of professional services. This raises the question of equivalence of qualifications. Various processes are initiated in order to improve the recognition of professional qualifications.Transparency and comparability of the education system is essential.

Questions for the REPARIS participants

What topics should FEE Education Subgroup take on its agenda for the next period?

How can FEE Education Subgroup –reasonably- be of help to you?

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