Quality financial reporting

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Quality financial reporting

• Why is it important to achieve
• What are the key components
• How many of these are needed and when

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Why is financial reporting important?

• Conceptual framework project at IASB
• Wide range of users of financial information
• Financial information for investment and credit
  decisions
• Assessing future cash flows (or management
  performance)
• Relevant information
• Faithful representation - verifiable, neutral,
  complete
• Comparable

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Why is financial reporting important?

• Financial information for decision-making
• Allocation of resources
• Performance of projects, enterprises, management
• Importance of financial reports stock markets,
  owner-managers
• Part of the economic infrastructure
• Reporting on the public record alternative
  models

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Financial reporting - key quality components

• Financial reporting supply chain
• Businesses - preparers
• Users owners, lenders, business partners,
  employees
• Auditors
• Clear rules
• Monitoring systems

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Key components - businesses

• Financial managers to directors
• Audit Committee
• Rules accounting standards and policies of the
  organisation
• Monitoring systems internal control systems
  including scrutiny and internal audit

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Key components companies to users

• Rules accounting standards and corporate
  governance codes
• Monitoring systems
• Auditors
• Enforcement mechanism review panel, regulator
• Other commentators analysts, press

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Key components auditors

• Rules auditing standards
• Monitoring systems
• firms quality control systems
• audit regulator, professional bodies
• oversight bodies

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Key components professionalism

• Access to the standards, support for
  implementation, knowledge and understanding
• Pace of change and complexity in the standards
• Qualifications, CPD
• Ethics conflicts of interest, competence etc.
• Rules and monitoring systems for these

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How many of these components are needed?

• Cost/benefits of regulation and of failure
• Different priorities for different places
• For different cases
• Demand from interested parties
• International expectations
• Build on experience elsewhere or imposition of
  over-elaborate models?

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Evolution in UK as an example

• Audit 19th century
• Professional institutes 19th century
• Accounting standards 1970, 1990, 2005
• Corporate governance codes 1992
• Enforcement of standards 1990
• Auditing standards 1975
• Audit monitoring 1980
• Oversight 2000, 2004

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Summary

• It is important
• A number of parties involved financial
  reporting supply chain
• Clear rules/standards at each stage
• Monitoring mechanisms
• Quality of the people involved in the process
• How much regulation and when flexibility,
  cost/benefit