Latin American Capital Markets

230 PIETRO MASCI AND IVAN SOTOMAYORFigure 7-3 I Enabling Conditions for Qualityall filings.Thus, it is clear that Latin America and the Caribbean will have to implementenabling conditions and controls through a different mechanism in a coordinated effortwith regulators.A quality control system for accounting firms in private practice consists ofthe application of the quality control standards against which the structural organizationof the firm and its established policies and procedures will be benchmarked. Sucha system should be implemented to reasonably assure that professional accounting,auditing, and ethical standards are observed in the firms' business practices.Figure 7-3 shows the flow of a system of quality control for an audit in whichthe quality control standards are applied against the firm's policies, and the auditingprocedures test management's assertions on the financial statements and the consistentapplication of the accounting standards.In those countries that have not adopted IAS or U.S. GAAP in their entirety,a reconciliation of the financial statements prepared under the countries' GAAPs toIAS and U.S. GAAP should be required for entities listed in the local exchange, banktinsurance companies, investment funds, and, in general, all entities of public interest.Table 7-2 presents a synopsis of the major differences between U.S. GAAP and IAS.Policy Considerations and the Role of MultilateralFinancial InstitutionsThis chapter has shown how healthy development of the financial sector—and ofcapital markets in particular—depends on disclosure and timely information. TheCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub