IFAC Member Compliance Program Dashboard Rept February 2017 F me infmation on IFAC Member Compliance Program Dashboard Repts and the legends used to describe the status of adoption of international standards, best practices, and fulfillment of SMO requirements please refer to IFAC Member Compliance Program Dashboard Rept Explanaty Note. Iraq / The Iraqi Union of Accountants & Audits (IUAA) Established: 1969 IFAC status: Member since 1984 Recognition: Membership: Commitment to the IFAC mission: Capacity to actively participate in the IFAC Compliance Program: Financial and operational viability: Governance structure: Internal operational structure: Law Mandaty Demonstrated Demonstrated Appropriate Appropriate Appropriate Membership Composition (2014) Sect Profile (2014) Accountants & Audits 700 Business / Industry 7,000 Associates & Bookkeepers 150 Public Practice 500 Accounting / Audit Firms 450 Public Sect 19,050 Other 26,200 Academia / Education 1,000 Students 500 Accounting / Audit Firms 450 Total: 28,000 Total: 28,000 Page 1 of 21
Overview of Statuty Framewk f Accounting and Auditing The Iraqi Company Law No. 21 of 1997 establishes financial repting requirements in Iraq. Accding to the Law, all companies must apply IFRS IFRS f Small and Medium-sized Enterprises (SMEs). Full IFRS are required to be used by companies whose securities are publicly traded, private banks, private shared companies; and consultancy companies. The Law of Iraqi Union of Accountants & Audits (IUAA) No. 185 of 1969 requires audits to apply international standards on auditing; however, the standards are not specified and the scope of mandaty audits is unclear. Regulation of the Accountancy Profession The Law of the Iraqi Union of Accountants & Audits (IUAA) No. 185 of 1969 grants the Iraqi Union of Accountants and Audits (IUAA), a professional association f accountants and audits in Iraq, the authity to regulate the accountancy and audit profession. Accding to the Law, all accountants and audits are required to be members of IUAA. The Law authizes the IUAA to carry out the following functions: (i) implement initial professional development (IPD) and continuing professional development (CPD) requirements f professional accountants; (ii) recommend and translate auditing standards; (iii) set ethical requirements; (iv) establish and operate an investigative and disciplinary system; (v) oversee the associations that operate under its auspice. In addition, audits are subject to quality assurance reviews that carried out by the fmally independent Quality Assurance & Inspection Committee (QAIC). Professional Accountancy Organizations The Law of the Iraqi Union of Accountants & Audits (IUAA) No. 185 of 1969 grants the Iraqi Union of Accountants and Audits (IUAA), a professional association f accountants and audits in Iraq, the authity to regulate the accountancy and audit profession. Accding to the Law, all accountants and audits are required to be members of IUAA. The Law authizes the IUAA to carry out the following functions: (i) implement initial professional development (IPD) and continuing professional development (CPD) requirements f professional accountants; (ii) recommend and translate auditing standards; (iii) set ethical requirements; (iv) establish and operate an investigative and disciplinary system; (v) oversee the associations that operate under its auspice. The associations the IUAA repts to administer include: Association of Audit Offices Association of Cost and Managerial Accountants (ACMA) Association of Internal Audits (AIA) Association of Organizer of Accounts Offices International Association of Certified Public Accountants (IACPA) Page 2 of 21
Projects and Other Initiatives Audit Oversight Arrangements There are no independent audit oversight arrangements in Iraq. Audits are regulated by the Iraqi Union of Accountants and Audits (IUAA), a professional association f both accountants and audits in Iraq, under the Law of the Iraqi Union of Accountants & Audits (IUAA) No. 185 of 1969. Accding to the Law, audits are required to be members of IUAA. The Law authizes the IUAA to carry out the following functions: (i) implement initial professional development (IPD) and continuing professional development (CPD) requirements f professional accountants; (ii) recommend and translate auditing standards; (iii) set ethical requirements; (iv) establish and operate an investigative and disciplinary system; (v) oversee the associations that operate under its auspice. Jurisdiction Status of Adoption PAO Status Responsibility Notes QA Shared The Law of the Iraqi Union of Accountants and Audits (IUAA) No. 185, 1969 establishes the requirement f a QA review system f all audits of financial statements. The IUAA repts that ISQC 1 was adopted and the QA review system is administered by the Quality Assurance & Inspection Committee (QAIC). Despite being fmally independent, the QAIC s development and functions are suppted by the IUAA Board. The IUAA completed a self-assessment of the QA review system against the revised SMO 1 and repts that the QA review system is in line with the SMO 1 requirements. IES Shared The Law of the Iraqi Union of Accountants and Audits (IUAA) No. 185, 1969 sets initial professional development (IPD) and continuing professional development (CPD) requirements f professional accountants in Iraq. Non-audits are not required to fulfill CPD requirements. There are several bodies involved in the certification and education of professional accountants in the jurisdiction. The Ministry of Higher Education s Accounting Sect Committee (ASC) is responsible f developing the accountancy education curricula and suppts universities in delivering undergraduate accountancy Page 3 of 21
Status PAO Responsibility Notes education. It is unclear if universities comply with the IES content requirements. The IUAA repts that it implements CPD requirements established in law through its Training & Continuous Professional Development Committee (TCPDC), Consultancy Office (CO) and in codination with the International Association of Certified Public Accountants (IACPA). The IUAA repted in 2014 that adjustments to its CPD system need to be made to ensure alignment with IES. The extent of alignment with IES needs to be established. ISA Shared The Law of Iraqi Union of Accountants & Audits (IUAA) No. 185 of 1969 requires audits to apply international standards on auditing; however, the standards to be applied are not specified. The Law stipulates that the Accounting and Auditing Standards Iraq Board (AASIB) is responsible f setting auditing standards. However, AASIB has not been operational since 2001 and de facto ISA are being applied. The version of the international standards applicable in Iraq as of 2017 needs to be established. IESBA Code of Ethics Direct The Law of the Iraqi Union of Accountants and Audits (IUAA) No. 185 of 1969 grants the IUAA with the authity to set ethical requirements f professional accountants in Iraq. To this effect, in 1983 the IUAA adopted a Code of Ethics; however, the extent of its alignment with the IESBA Code of Ethics needs to be established. IPSAS No Direct The Ministry of Finance (MoF) is responsible f setting the public sect accounting standards. The IUAA repts that in Iraq, public entities that are self-financed apply accrual-basis IPSAS, while governmental entities with central funding use cash-basis IPSAS under the Financial Management and Public Debt Law 95 of 2004 (Para 11). I&D Shared Accding to Article 28 of the Law of the Iraqi Union of Accountants and Audits (IUAA) No. 185 of 1969, IUAA s Discipline Committee (DC) has the authity to investigate and discipline (I&D) its members. Page 4 of 21
Status PAO Responsibility Notes Accding to the IUAA, the DC investigates infringements and complaints. Disciplinary cases are reptedly transferred to specialized courts to decide on and apply sanctions. The Justice Council, a part of the Ministry of Finance, may be involved if a serious crime has been committed. An appeals mechanism is reptedly in place. The IUAA completed a self-assessment of its I&D system against the revised SMO 6 and repts that the I&D system is in line with its requirements. The IUAA submitted amendments to the Law in der to make the procedures binding. However, the Parliament s approval of the law is still pending. IFRS No Direct The Iraqi Company Law No. 21 of 1997 establishes financial repting requirements in Iraq. Accding to the Law, all companies must apply IFRS IFRS f Small and Medium-sized Enterprises (SMEs). Full IFRS are required to be used by companies whose securities are publicly traded, private banks, private shared companies; and consultancy companies. Status of SMO Fulfillment by the PAO Status Notes SMO 1 Execute The Law of the Iraqi Union of Accountants and Audits (IUAA) No. 185, 1969 establishes the requirement f a QA review system f all audits of financial statements. The IUAA repts that ISQC 1 was adopted and the QA review system is administered by the Quality Assurance & Inspection Committee (QAIC). Despite being fmally independent, the QAIC s development and functions are suppted by the IUAA Board. After the revised SMO 1 requirements were issued in 2012, the IUAA indicates that it reviewed the requirements of the QAIC system against SMO 1, and suppted the QAIC in making adjustments necessary to ensure continued compliance. Furtherme, the IUAA repts that it suppts the QAIC in developing education programs to raise awareness of the imptance of QA reviews and quality control standards, including the requirements of ISA 220 and ISQC 1, which have been adopted. Additionally, the IUAA indicates it intended to hold a wkshop in 2014 in der to raise awareness of SMO 1 requirements; however, it is unclear if the institute progressed with the initiative as planned. Page 5 of 21
The IUAA is encouraged to update its Action Plan following the guidance of IFAC staff in der to provide me infmation on the activities it is currently undertaking to suppt its members in this area. SMO 2 Plan The Law of the Iraqi Union of Accountants and Audits (IUAA) No. 185, 196) sets initial professional development (IPD) and continuing professional development (CPD) requirements f professional accountants in Iraq. The IUAA shares responsibility f implementing initial and continuing professional development requirements with other entities such as the Ministry of Higher Education s Accounting Sect Committee (ASC) and the Arab Institute of Certified Public Accountants (ARICPA). The IUAA indicates that it has mandated 20-40 hours of CPD f audits, while non-audits are not required to fulfill CPD requirements. Consequently, its CPD requirements require further alignment with IES. The IUAA repts that it has plans in place to address areas of missing requirements based on a 2014 review of the national requirements against those of the IES; however, no progress has been repted. The institute does indicate that it planned to conduct wkshops in 2016 to promote the incpation of the revised IES into local accounting education requirements; however, specific dates were not provided. The IUAA is encouraged to update its Action Plan following the guidance of IFAC staff. The IUAA is also encouraged to review the requirements of the revised IES and indicate actions it will undertake to address gaps, if any, in its next Action Plan submission. The IUAA should also rept on progress, if any, on executing the adoption of missing requirements since 2014. SMO 3 Execute Although the IUAA is not responsible f setting standards, it recommends and translates auditing standards as per the Law of the Iraqi Union of Accountants & Audits (IUAA) No. 185 of 1969. The IUAA indicates that it established the International Association of Certified Public Accountants (IACPA) in 2005 to suppt the use of international standards on auditing through training and education programs on topics such as new technology and auditing, and producing publications related to ISA. However, the IUAA first mentioned these initiatives in 2007 and has not provided an update on their execution. Finally, the institute states that it reviews and submits comments to Exposure Drafts issued by the IAASB. The IUAA is encouraged to update its Action Plan following the guidance of IFAC staff. The IUAA is encouraged to clearly indicate in its Action Plan which version of ISA is applicable in Iraq. Page 6 of 21
SMO 4 SMO 5 Consider Review & Improve The Law of the Iraqi Union of Accountants and Audits (IUAA) No. 185 of 1969 grants the IUAA with the authity to set ethical requirements f professional accountants in Iraq. To this effect, in 1983 the IUAA adopted a Code of Ethics; however, the extent of its alignment with the IESBA Code of Ethics needs to be established. The IUAA indicates that it provides training on the Code of Ethics through its continuing professional development program; however, it has not provided me details on these activities since 2005. The IUAA is encouraged to update its Action Plan following the guidance of IFAC staff. IUAA is also encouraged to clearly indicate in its Action Plan whether the requirements of the most recent version of the IESBA Code have been incpated into its Code of Ethics. Additionally, in its Action Plan, the IUAA is encouraged to indicate if it participates in the international standard-setting process by submitting comments to Exposure Drafts. The IUAA repts that it has no responsibility f the adoption of the IPSAS in Iraq since the Ministry of Finance (MoF) is responsible f setting the public sect accounting standards. In Iraq, public entities that are self-financed apply accrual-basis IPSAS, while governmental entities with central funding use cash-basis IPSAS. Since full accrual-basis IPSAS have not yet been adopted f all entities, the IUAA repts to focus its effts on raising awareness and promoting the adoption of accrualbasis IPSAS to the MoF and Ministry of Planning. The IUAA indicates that its Association of Internal Audits (AIA) is responsible f raising IUAA members awareness of IPSAS and suppting them with implementation by providing training programs f IUAA accountants and audits wking in the public sect. The IUAA indicates that it promotes the adoption and implementation of IPSAS through monthly joint committee meetings focused on accrual-basis IPSAS. The institute also planned to hold IPSAS wkshops in December 2016 f MoF staff in der to continue promoting the imptance of adopting accrual-basis IPSAS f governmental entities with central funding. The IUAA is encouraged to update its Action Plan following the guidance of IFAC staff and rept on the outcomes of the meetings with the decisionmakers in government to promote the adoption of accrual-basis IPSAS f all entities as well as subsequent actions that will be taken as a result. SMO 6 Execute The IUAA has direct responsibility f the investigation and discipline (I&D) of its members, which are all professional accountants in Iraq, in accdance with Article 28 of the Law of Iraqi Union of Accountants & Audits No. 185, 1969. The IUAA indicates that it established a Discipline Committee (DC) with the authity to monit compliance with rules, regulations, and standards. Disciplinary Page 7 of 21
decisions and sanctions are enfced by specialized courts, and in the case of serious crimes, by the Justice Council. The IUAA completed a self-assessment of the I&D system against the revised SMO 6 requirements and repts that the system is in line with SMO 6 requirements. The institute submitted amendments to the Law in der to make the procedures binding. However, the Parliament s approval of the law is still pending. As part of awareness-raising activities related to the I&D system, the IUAA repts that it ganized a wkshop in 2013 to promote the imptance of the I&D system and wks to make the public aware of its procedures. Nonetheless, it is unclear if me recent activities have been implemented. The IUAA is encouraged to update its Action Plan following the guidance of IFAC staff. Given that amendments to the law were submitted, in its Action Plan the IUAA should include actions to demonstrate what will be done to implement the changes once the procedures are legally approved. SMO 7 Sustain Accding to the Iraqi Company Law No. 21 of 1997, all companies must apply IFRS IFRS f Small and Medium-sized Enterprises (SMEs). The IUAA repts that it focuses on suppting its members with the implementation of the international standards. The IUAA furthers implementation of IFRS through suppting education and training on those standards which is primarily achieved through the IUAA s adoption and operation of the International Financial Repting Standards Expert (IFRSE) training and certification program. The IUAA also repts to provide trainings and wkshops on both IFRS and IFRS f SMEs f its members, students, and public sect professionals. Lastly, IUAA repts to participate in the international standard-setting process through providing responses to Exposure Drafts issued by the IASB. The IUAA is encouraged to update its Action Plan following the guidance of IFAC staff and include activities that it has planned f 2017 to continue suppting its members implementation of the standards Page 8 of 21
Sources Relevant Organizations Iraqi Union of Accountants & Audits (IUAA) Central Bank of Iraq Iraq Securities Exchange Commission. Relevant Legislation Companies Law Relevant Publications Deloitte, Iraq highlights, 2016 IFRS Foundation, IFRS Application Around the Wld Jurisdictional Profile: Iraq, June 2016. Page 9 of 21
Appendix I Definitions of Legends Quality Assurance (QA) Not A QA review system, incpating the requirements of SMO 1, has been established and is operational f all mandaty audits. A QA review system, incpating the requirements of SMO 1, has been established and is operational f some of the mandaty audits (e.g., public interest entities). A QA review system f all mandaty audits has been established and is operational, but does not fully incpate the requirements of SMO 1. A QA review system, incpating the requirements of SMO 1, has been established, but is not yet operational. No QA review system has been established. International Education Standards (IES) Not The IES have been adopted f entry-level, initial, and continuing professional development of professional accountants as well as engagement partners. Not all the IES have been adopted. The IES have been adopted f only some professional accountants. The IES have not been adopted. International Standards on Auditing (ISA) Not The Clarified ISA later version of ISA have been adopted and are currently effective f application in all mandaty audits. Not all Clarified ISA have been adopted. The Clarified ISA are required f only selected types of audit. The ISA have not been adopted. Page 10 of 21
IESBA Code of Ethics Not A 2009 later version of the IESBA Code of Ethics f Professional Accountants has been adopted f all professional accountants. Not all of the requirements of the 2009 later version of the IESBA Code of Ethics have been adopted. The IESBA Code of Ethics has been adopted f only some professional accountants. A 2009 later version of the IESBA Code of Ethics has not been adopted. A pre-2004 version of the IESBA Code has been adopted. International Public Sect Accounting Standards (IPSAS) Not Accrual-basis IPSAS have been adopted as accounting standards f all public sect entities. Not all IPSAS have been adopted. Cash-basis IPSAS has been adopted. The IPSAS have been adopted f only some public sect entities. The IPSAS have not been adopted. Investigative and Disciplinary (I&D) System Not An I&D system, incpating the requirements of SMO 6, has been established and is operational f all professional accountants. An I&D system, incpating the requirements of SMO 6, has been adopted and is operational f some professional accountants. An I&D system f all professional accountants has been established and is operational, but does not fully incpate the requirements of SMO 6. An I&D system, incpating the requirements of SMO 6, has been established, but is not yet operational. No I&D system has been established. Page 11 of 21
International Financial Repting Standards (IFRS) Not The IFRS have been adopted and are currently effective f all public interest entities. Not all the IFRS have been adopted. The IFRS have been adopted f selected types of public interest entities. The IFRS have not been adopted. SMO Fulfillment Status Sustain Review & Improve Execute Plan Consider Not Active Q&M Staff Assessment PAO maintains well-established ongoing processes to fulfill its relevant obligations. In fulfilling this SMO, PAO considers, plans, executes, reviews and improves as part of an ongoing commitment to continuous improvement. Given the nature of its mandate, membership composition, and the legal and regulaty environment, PAO is not involved in activities related to this area. PAO has recently fulfilled its relevant obligation and is reviewing the implemented plan to identify and apply improvements. PAO demonstrates it is executing the plan. PAO has a defined plan to fulfill the requirements of this SMO. PAO is considering how to fulfill the requirements of this SMO. PAO is not active in this SMO area. Page 12 of 21
Appendix II Main Requirements of SMO 1 Requirements Y N Comments Scope of the system 1. At a minimum, mandaty QA reviews are required f all audits of financial statements. Quality Control Standards and Other Quality Control Guidance 2. Firms are required to implement a system of quality control in accdance with the quality control standards. Audits of financial statements consists beside the accounting matters- all the matters relate to auditing & accounting standards All items of the quality control standers are required from all firms. Page 13 of 21
3. Most up to date versions of ISQC 1 and other relevant ISAs are adopted as the quality control standards. Yes, all the versions of ISQC 1 and other relevant ISAS are adopted in the quality control programs as quality control standards. 4. Member Body assists firms in understanding the objectives of quality control and in implementing and maintaining appropriate systems of quality control. Review cycle 5. A cycle-based, risk-based, a mixed approach f selecting firms f QA review is used. 6. F cycle-based approach, quality control reviews are required to take place at least every six years (and every three years f audits of public interest entities). A AIS attends many seminars, and visits ti the firms to assist them in under sanding, implementing & maintaining appropriate system of Q.C. All of these approaches are adopted whenever the matter needs. Review cycle is yearly f the firms which need continues review, f others it take place every three years. Page 14 of 21
Requirements Y N Comments QA Review Team 7. Independence of the QA Team is assessed and documented. 8. QA Team possesses appropriate levels of expertise. All QA team reviews & other actions are assessed and documented. AQ team consists Five member, the chief is CPA Repting 9. Documentation of evidence suppting the quality control review rept is required. 10. A written rept is issued upon conclusion of the QA review and provided to the firm/partner reviewed. Yes and it is documented in IUAA. A written rept is issued upon conclusion of QA review & provided to the firm to make the crection actions if it is need. Crective and disciplinary actions 11. Reviewed firms/partners are required to make timely adjustments to meet recommendations from the review rept. 12. QA review system is linked to the Investigation and Discipline system. Yes & it is follow-up by QA team. QA review system is linked with investigation and discipline system to take the proper action if it is need. Consideration of Public Oversight 13. The body responsible f QA reviews cooperates with its oversight body and shares infmation on the functioning of the QA review system, as needed. There are codination between IUAAB and QA team by sharing infmation which in light of it IUAAB take the proper actions. Page 15 of 21
Requirements Y N Comments Regular review of implementation and effectiveness 14. Regular reviews of implementation and effectiveness of the system are perfmed. QA system are always reviewed to insure its effectiveness & efficiency. Page 16 of 21
Appendix II Main Requirements of SMO 6 Requirements Y N Comments Scope of the system 1. A system of investigation, discipline and appeals exists f the accountancy profession. The system is operational. All professional members subject to the system. Page 17 of 21
2. Infmation about the types of misconduct which may bring about investigative actions is publicly available. Initiation of Proceedings 3. Both a complaints-based and an infmationbased approach are adopted. 4. Link with the results of QA reviews has been established. Investigative process 5. A committee similar body exists f perfming investigations. All the infmation about the types of misconduct is publicly available some of them have been referred to the cometent courts. Yes, both approaches are adopted in any case the matter subject to verification and investigation to insure from the accuracy of the infmation in this light are appropriate action is taken accding to the law (IUAA law) and instructions issued in this regard. Yes there is a constant codination between the DC&QULAC, QA reviews output is regarded one recourses of the input to DC actions. The disciplinary committee (DC) consists of Five members headed by a charterecl accountant and are affiliated with IUAAB, its decision challenged by the federal court of cassation. Page 18 of 21
Requirements Y N Comments 6. Members of a committee are independent of the subject of the investigation and other related parties. Disciplinary process 7. A separate disciplinary committee/entity exists to make disciplinary decisions on referrals from the investigation committee. 8. Members of the committee/entity include professional accountants as well as nonaccountants. 9. The tribunal exhibits independence of the subject of the investigation and other related parties. Sanctions 10. The disciplinary system allows imposing an extensive range of penalties. It is particularly imptant to include (a) loss of professional designation; (b) restriction and removal of practicing rights; and (c) exclusion from membership. Rights of representation and appeal 11. A third appeals body exists which is separate from both the disciplinary committee and investigative committee. Yes, there is another committee f investigation. Yes, these two committees, one independents of the other. Yes, it consists many member one of them CAP and other accountants & non accountant. Yes, there is tribunal exhibits independence of the subject. Yes, all of these sanctions in place and applicable. Yes, there is appeals bode. Page 19 of 21
Requirements Y N Comments Administrative Processes 12. Timeframe targets f disposal of all cases are set. 13. Tracking mechanisms to monit progress in investigation and discipline and related procedures are established. 14. Recds of investigations and disciplinary processes are established. Public Interest Considerations 15. Activities are suppted to ensure that the public is aware that an investigative and disciplinary system exists in the jurisdiction. 16. A process f the independent review of complaints on which there was no follow-up is established. 17. The results of the investigative and disciplinary proceedings are made available to the public. Liaison with Outside Bodies 18. There is an appropriate process f liaison with outside bodies on possible involvement in serious crimes and offences. All cases are scheduled in a time frame. There is tracking mechanism to investing action & discipline and its procedure wherever it necessary. Yes, all investigations and disciplinary are documented by recds and repts. All IUAA member know that. There is independent review of all complaints which introduced to IUAA. Yes, the results are available. Yes, there is continues liaison with other bodies. Page 20 of 21
Requirements Y N Comments Regular review of implementation and effectiveness 19. Regular review of implementation and effectiveness of the system are perfmed and crective actions are implemented. IUAAB always review the implementation to ensure the effectiveness and efficiency of the perfmance, and a crective action are take place when it is necessary. Page 21 of 21