If you are going to set the standards for others to follow, you had better make sure your own act is beyond reproach. This is the rather awkward lesson the International Accounting Standards Board (IASB) and its Delaware-based parent body, the International Financial Reporting Standards (IFRS) Foundation, have spent most of 2014 learning on the corporate governance naughty step.

In February we had the revelation that the foundation had failed to register all of its trustees as directors of its UK company at Companies House. At the root of this was a decision to delegate management authority to a five-strong ‘executive committee’.

Rather than registering all of its trustees as directors, it registered just five – those on the so-called executive committee. The foundation’s chief executive Yael Almog explained on the 25 February that this was understood to be “the most correct interpretation of the legal requirement to register details of its ‘directors’”.

Her statement continues: “Over the course of 2011 and 2012, the foundation became aware that the particulars of its directors had not been updated since its initial registration of a place of business in the UK in 2001, and that retiring trustees who were original members of the executive committee had not been removed from the Companies House register.”

The admission was all the more embarrassing because it followed an aggressive rebuttal of UK press reports about the state of the foundation’s filing. To make matters worse, the issue was first highlighted on Twitter. Politicians in Brussels are now raking over the remains of a decade-old court case that the foundation could have been forgiven for hoping was dead and buried.

In 2004, the IFRS Foundation lost an action against it by the translator of the Russian text of reporting standards. According to the foundation’s 2006 annual report, the cost of that litigation was £260,000 (€313,000). The Russian translator then sued in Delaware. That action was later settled.

The real damage was done in London, where High Court Judge Weeks delivered a scorching verdict on both the foundation and its commercial director Kurt Ramin: “The abandonment of the [foundation’s] counterclaim seems to me to be no more than the recognition that Mr Ramin’s evidence was not credible on that subject, as indeed his evidence on other subjects was found not credible by a judge in the US. The defendant company was therefore relying on the false evidence of its commercial director to maintain the counterclaim.”

In an addendum to its 25 February statement, the IFRS Foundation said: “The case between the foundation and a contractor providing translation services took place in 2004, some 10 years ago, and the facts of that case are a matter of public record. Matters related to that case were investigated thoroughly at the time.”

Those events may have occurred 10 years ago but Europe’s politicians want answers now. In a letter dated 12 February to the EU’s internal market’s commissioner, Michel Barnier, MEPs Sharon Bowles and Dumitru Stolojan wrote: “Recent reports in the UK press indicate that there are serious concerns about the governance of the IFRS Foundation itself.”

Barnier replied: “In respect of the IFRS Foundation, I share your concern about the matters recently reported in the press. I note the IFRS Foundation has responded publicly to these allegations. However, I have also asked my services to further investigate the issues.”

One detail overlooked in those press reports is the fact Bowles and Stolojan did not confine their concerns to corporate filing matters but also pointed to both the High Court judgment and the US litigation referred to by the judge.

Bowles and Stolojan were on a roll, especially because Barnier confirmed in the same letter to them that he had pulled the plug on a contract awarded to the Institute of Chartered Accountants in England and Wales, and the audit firm Mazars. The duo was supposed to mount a review of the implementation of IFRS within the European Union since 2005, but MEPs argued they were now conflicted.

Bowles and Stolojan had complained: “It has recently come to light that a key pledge made by the European Commission during the trialogues on this file has not been met. Your officials assured European Parliament negotiators that a study of the costs and benefits of the use of IFRS in the EU would be conducted by independent and objective parties.”

On 12 March, the European Parliament debated EU financing for its accountancy interests and activities. On the table was a proposal to stump up €43m of public money over six years to fund the London-based IASB, the Public Interest Oversight Board, which oversees international audit, ethics and education standards for the accounting professions, and the EU’s own adviser on accountancy issues, the European Financial Reporting Advisory Group (EFRAG).

Though the funding proposal cleared its parliamentary hurdles, Bowles warned on the 13 March that the IASB and EFRAG were in the last-chance saloon. “My parliamentary colleagues have done a great job in highlighting the much-needed reform of these accounting quangos, which will improve public confidence in how accounting standards are implemented in Europe,” she said.

This May’s elections to the European Parliament are tipped to bring only temporary respite. Sources familiar with the issues told IPE that the IFRS Foundation can expect difficulties on the new IAS Regulation, funding and the endorsement of IFRS9 financial instruments. The Delaware corporate bastion is also under assault – Europe wants its standard setter back.

Two corporate governance experts who spoke to IPE agree there are real concerns. Sarah Wilson, chief executive of Manifest, the proxy voting adviser, says: “Accounting standards are an investor’s first line of corporate governance defence. It goes without saying the standards setters themselves have to be focused on that primary mission. Regulatory capture is a serious concern and since the crash we have, unfortunately, seen what can happen when vested interests take priority.”

Tim Bush, head of governance and financial analysis at shareholder pressure group PIRC, adds: “Despite the establishment of a monitoring board in 2009 to oversee the discharge of trustees’ responsibilities, there appears in practical terms to be no real accountability. We should be asking the age-old political questions about government: who gave you the power, why do you have it, who can get rid of you?

“We see the relevance of this thinking come into play now as politicians at the European Parliament show a growing interest in the activities of both the standard setter and its parent body. Far from interfering in the operation of the IFRS Foundation, the politicians are merely applying the standards by which an electorate judges them.”