Beginning with the Sarbanes-Oxley Act in the United States and the creation of the Public Company Accounting Oversight Board (PCAOB) in 2003, a global movement has developed to require independent oversight of corporate auditors. The movement is premised on the notion that independent oversight of auditors is critical for investor confidence, stronger corporate governance, and more financial transparency. A signal event in this movement was the EU’s Statutory Audit Directive of 2006, which required independent oversight to be developed in all EU member countries. Similar strong commitment to independent oversight has been developed in South Africa, in the ASEAN region, and in Taiwan and Japan, among other regions and jurisdictions. Now a number of emerging and transitional market countries are developing or considering similar mechanisms to assure rigorous auditing and reliable corporate reporting. The Centre for Financial Reporting Reform (CFRR) has finalized an analytical paper that seeks to inform World Bank clients, and capture experiences for World Bank staff learning; The paper reflects the unique challenges pertaining to the establishment and effectiveness of audit oversight bodies in emerging and transitional economies and aims to improve understanding of the importance of a high quality system for corporate financial reporting and auditing. The paper explores possible approaches, tools and solutions to resolve impediments, including through leveraging innovative approaches in the global developmental infrastructure. The paper also takes into consideration extant literature, bank experience with client countries, and findings published by the International Forum of Independent Audit Regulators (IFIAR) and its member bodies.
Audit Oversight to Enhance Trust and Transparency in Corporate Financial Statements: Challenges in Developing Countries