IAASB forced to look for new chief

The International Auditing & Assurance Standards Board body has been forced to search for a new head just as its work is due to come under intense scrutiny.

John Kellas, chairman, and a retired KPMG partner, has decided not to renew his term at the end of next year.

IAASB standards act as guidelines for external auditors who check whether companies have applied accounting rules correctly and look for evidence of reporting fraud.

The body is seeking to upgrade its standards, which have been criticised for being too wordy and prescriptive. The European Union is considering when and how to adopt them.

The IAASB is not directly related to its near-namesake, the International Accounting Standards Board (IASB), which now sets accounting rules for the EU. But the two have much in common.

Both have risen to prominence as their standards are adopted by governments and regulators seeking to promote the global harmonisation of corporate reporting.

But the increased influence of the IASB and the IAASB has raised questions about accountability.

The European Commission has been infuriated by its inability to influence IASB rules and this year launched a campaign to reform the organisation's governance. The Commission has won some concessions, the most notable last week when Tommaso Padoa-Schioppa, an Italian, was appointed to replace Paul Volcker, former chairman of the US Federal Reserve, as head of the trustees that oversee the IASB.

Stung by its experience with the IASB, the Commission has been more wary about auditing standards.

A new EU audit directive this year provided an opportunity to adopt international auditing standards in the EU without reservation. But the Commission said it would endorse the standards only once it was satisfied they were credible, developed in line with due process, and subject to satisfactory oversight.

The IAASB is working on a “clarity project” to make its standards clearer and improve their structure. Critics, including some European investors and accountants, have said the standards are too complex and risk encouraging a box-ticking approach to auditing.

A Public Interest Oversight Board was established in February to oversee the IAASB and ensure it was “properly responsive to the public interest”.

IAASB standards are used as the basis for auditing rules in more than 70 countries. The drive to harmonise accounting and auditing standards has been accelerated by scandals such as Enron and Parmalat, which highlighted deficiencies in local reporting regimes, and by investor demands for consistent information from different markets.

Mr Kellas said he was not seeking a second three-year term as IAASB chairman because he wanted more free time in his retirement. Ian Ball, chief executive of the International Federation of Accountants, an umbrella organisation for the IAASB, said: “John has done a terrific job and we were disappointed that he wasn't able to stay on.”